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Andrew Gillham, of Team Asset Management, offers this week’s market round-up
IN a busy week for news, stocks moved higher as an encouraging US inflation report suggested that the Federal Reserve will be able to cut interest rates sooner rather than later.
The blue-chip S&P 500 index gained 1.1%, hitting a new record high, and the technology-focused Nasdaq index returned 0.4%.
The Bureau of Labor Statistics reported that annual US consumer price inflation slowed more than expected to 3% in June, the lowest level for a year. The report came just a day after Federal Reserve chair Jerome Powell told Congress that “more good data” are needed before interest rates can be lowered. In the wake of the inflation report, money market futures are now pricing in a 99% probability that the Fed will start cutting rates in September.
In corporate news there was a mixed start to the second-quarter earnings season. Shares in the Wall Street investment banks, JPMorgan Chase and Citigroup, tumbled on Friday despite their earnings exceeding analysts’ forecasts.
Both banks warned that some account holders are feeling the pinch of the higher cost of living and are becoming more cautious with spending.
Citi’s consumer lending business, including its credit cards, fell 74% from a year earlier and JPMorgan increased its provision for credit losses to $3.05 billion.
Goldman Sachs reported on Monday and its shares gained 3% after it revealed that profits had more than doubled to $3 billion in the second quarter as dealmaking picked up and trading activity in bonds and equities increased. Goldman advised on ExxonMobil’s $60 billion acquisition of Pioneer Natural Resources during the quarter and chief executive David Solomon told analysts that he believed “we are in the early innings of a capital markets and M&A recovery”.
An upgrade by Morgan Stanley helped to push shares in Apple to a new all-time high, increasing its market valuation to $3.6 trillion. Analysts at the broker anticipate that Apple’s suite of artificial intelligence services will trigger a record rush among its 1.3 billion users to upgrade their iPhones, iPads and iMacs.
Apple also revealed that annual sales in India rose 33% to almost $8 billion in the year to the end of March. The record performance in the world’s most populous country is important at a time it faces more challenging conditions in China, including trade tensions with the US.
The attempted assassination of Donald Trump on Saturday evening shocked the world but didn’t have too much impact on the markets. However, the expectation that it will provide more momentum in his election campaign, shares in the former president’s media company, Trump Media & Technology Group, surged by more than 30% in Monday’s trading.
Closer to home, shares in Burberry plunged 16% on Monday after it warned that annual profits would fall short of expectations, prompting it to replace its chief executive and suspend its dividend. The British fashion group has struggled to revitalise its brand since the departure of Christopher Bailey in 2017 and hopes that its new chief executive, Joshua Schulman, can drive a turnaround that his predecessors have failed to achieve.
In commodity markets, brent crude edged back below $85 a barrel after China’s second-quarter GDP report fell short of expectations. China’s National Bureau of Statistics reported that the economy had grown 4.7% year-on-year, down from 5.3% in the first quarter, impacted by weaker consumer spending and the downturn in its property sector. China is the world’s largest importer of crude oil.
