In investment as well as literal terms, the UK remains an island and the added to its strong recent gains with another sprightly start. The premier index is currently trading just over 1% away from the record closing high it reached in late August, with growing interest from global investors seeking a perceived haven helping to underpin a rally which has lifted the index by 12.8% so far this year.
Early movers included the likes of BP (LON:) and Shell (AS:), which saw the benefit of a brief rebound in the following lower-than-expected OPEC production rises. Shell (LON:) topped the leaderboard with a 2% rise after a broker upgrade and some tentative buying interest, although its previous cyber hack travails and the subsequent effect on sales leaves the stock drifting by just over 10% this year.
Meanwhile, positive momentum stopped in its tracks as the latest labour market reading posed new questions on the strength of the US economy.
The reading of just 22000 jobs having been added in August was well shy of the 75000 estimate and, coupled with a downward revision to the June number and an expected increase in to 4.3%, the labour market is all of a sudden in need of support.
Indeed, the reading was a little close for comfort as it raised recessionary concerns. As a result, the scale of the from the Federal Reserve next week is now open to debate. The likelihood of a 0.25% reduction is now apparently nailed on, while the possibility of a 0.5% cut is now in play.
A fly in the ointment could come later this week with the release of the latest inflation number, with the expected to rise to 2.9% from a previous 2.7% at the headline level, with the unchanged at 3.1%. Should the print be any stronger than expected, it would cast fresh doubt not only on the scale of a Fed cut but also introduce the chance that a stagflation mix is emerging, which would depress investor sentiment further.
The new doubts were enough to leave markets in the red at the close of the week, having hit fresh intraday highs earlier in the session. The stalled momentum did little to alter the general direction of travel, however, and gains of 6.7%, 10.2% and 12.4% for the , and respectively so far this year represent general investor enthusiasm.
Asian markets crept higher overnight, even as the main economies continue to battle with the spectre of tariffs emanating from the US. Chinese exports rose by 4.4% last month amid the turmoil, below expectations for a 5.5% increase. Similarly, imports grew by just 1.3% against an estimated 3.4%, which taken together pose more questions than answers as the economy continues to navigate a perilous tariff path.
Despite its own issues, the also edged ahead. The economy grew by 0.5% in the latest quarter, up from a previous 0.1% and beating 0.3% estimates. The more pressing issues are that uncertainties remain. While tariff negotiations on the auto sector seem to have neared a conclusion, the Prime Minister announced he would be stepping down to introduce some political uncertainty on top of an economy which is battling inflation both in terms of car and food prices.