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- Concerns about a US recession ease off.
- All eyes on US consumer price data due out on Wednesday
- Kamala Harris gained ground in polls in battleground states.
- Brent Crude rises above $80 a barrel amid heightened tensions.
- US retail results in focus this week
Susanah Streeter, head of money and markets, Hargreaves Lansdown:
“A sense of calm has resumed across financial markets, helping to reverse the tumultuous trajectory of stocks witnessed over the past week. In sharp contrast to last Monday’s slide, the FTSE 100 has a spring in its step, easing into the green helped by gains in Asia and on Wall Street on Friday.
The stabilisation of sentiment is continuing, following the sell off a week ago, as concerns about an American recession ease off a little. But with light trade volumes expected to continue due to the holidays, any whiff of unease could whip up fresh volatility.
The latest inflation data in the US will be in sharp focus this week. With producer price numbers out on Tuesday and the headline consumer figure due Wednesday, investors will be keen for fresh clues about how deep interest rate cuts will be this year. There is an expectation that the Fed won’t just cut in September, but at each of the meetings this year, and that a half per cent reduction could be on the cards. The headline consumer rate is expected to be unchanged at 3% on Wednesday but if core inflation proves even stickier and doesn’t fall as expected, there could be another revision of interest rate expectations, which could prompt fresh volatility.
Inflationary concerns still loom large for many Americans and a stubborn reading could play into the presidential election polls. The latest polls from the weekend indicate that Kamala Harris now leads Donald Trump in three battleground states, but continued price pressures on consumers could dampen her recent apparent advantage. However, if Harris succeeds in maintaining her resurgence, more of the so-called ‘Trump trade’ could continue to unwind, potentially putting pressure on oil and gas producers, financial stocks, and tech and industrials, which gained under his presidency.
For the moment, oil prices are rising, offering immediate support to energy giants, with BP and Shell on the front foot in early trade. The benchmark Brent Crude has risen back above $80 a barrel, sparked by fresh supply concerns, driven by rising tensions in the Middle East and between Russia and Ukraine. This flurry of upwards momentum follows a considerable decline since the start of July, partly driven by concerns over the US economy. But more positive US jobs data released last week eased concerns about an American recession
Results from big retail giants Walmart and Home Depot, are expected to shine a light on US consumer behaviour, amid a tougher economic climate. There are already signals that consumers are clutching their purse strings tighter and spending less in fast food joints and theme parks, and goods which are ‘nice to have’ but not essential can be a much harder sell. Walmart has been highly resilient, thanks to its broad mix of product ranges but any sign that electronics or clothing are coming under pressure could cause fresh jitters. Amid a high interest rate environment, there’s been less appetite for big renovations, with larger discretionary items harder to shift at Home Depot, but with interest rate cuts eyed on the horizon, the company’s guidance for sales will be closely watched.’’
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