Investors largely kept their powder dry amid the usual contradictory noises emanating from the parties involved in the Middle East conflict and arguably the largest economic release which is due later today.
The opened in cautiously positive territory, helped along by a pop in the gold price which lifted Endeavour Mining and Fresnillo, while index heavyweight AstraZeneca recouped some of its recent share price decline as the concerning likelihood of any merger with Bristol-Myers Squibb of the US receded. There was some weakness in the housebuilding sector despite a relatively pleasing update from Persimmon yesterday, while International Consolidated Airlines fell foul of the rising oil price.
Even so, the FTSE 100 remains ahead by a healthy 9.7% in the year to date, and is just 0.3% away from the record closing high which it set in February and tested earlier this week, without being able to finish the day above that level. The index has nonetheless seen the benefit of renewed global attention given its reputation as a reliable if unexciting investment destination.
Creeping up on the rails and almost unnoticed, the hit a record closing high. The secondary index is often seen as a barometer of the UK economy given the focus of many of its constituents. The surprising resilience of the domestic economy alongside a slew of takeover activity has lit something of a fire under an index which is dominated by sectors which have themselves been performing well of late, such as financials and industrials, the latter of which contains the likes of engineering and aerospace. The FTSE 250 has added 9.9% in the year to date and an additional average dividend yield of 3% boosts total returns for this underappreciated corner of the UK market.
The US number is expected to show that 80000 jobs were added in July, versus 57000 the previous month, although the range of forecasts is unusually wide. Given the wider concerns around inflation and the Federal Reserve’s apparently hidden reaction function, any signs of wage growth strength and the will potentially be market-moving. The current consensus is almost equally split between a hike from the and a no-change decision in September and this report has the potential to move the dial in terms of Fed thinking.
Meanwhile, the rose by 1% to around $83 per barrel despite rumours that some kind of resolution concerning the Strait of Hormuz was nearing. However, investors remained cynical on the basis of the many false dawns which have been experienced over recent months, while separate reports suggested that Iran was preparing a plan which would ban US and Israeli vessels from passing through the waterway, which itself could prompt more attacks and further destabilisation in the region.
Elsewhere, the quarterly reporting season is entering its final leg, with most companies having reported their earnings. The season in general has been a resounding success, with an estimated 85% of corporates having beaten expectations, which in turn has lessened concerns on overvaluation since earnings are keeping up with the heightened levels. The fly in the ointment has been certain of the outlook and guidance comments, which have not always lived up to increasing expectations given the strength of US corporate profitability this year.
Despite a relatively flat day, the main indices nonetheless remain close to record highs which were variously exceeded earlier this week. In the year to date, the has added 12.1%, while there have been equally impressive performances from the and , which have spiked by 12.6% and 13.4% respectively.