Investors succumbed to a bout of nervousness ahead of the Jackson Hole symposium after a week of several record highs across markets.
The jury remains out on whether Federal Reserve Chairman Powell will specifically address the taper timetable, especially ahead of next week’s non-farm payroll numbers.
However, hawkish comments from other Fed members ahead of the event suggested that the time had come for a wind down of stimulus, which would be announced at the September meeting if not at the symposium.
At the same time, investors were initially rattled by a terrorist attack at Kabul airport, although some stronger corporate earnings mitigated the impact as the day wore on. With volumes remaining light during the summer period, and with some investors choosing to remain on the sidelines ahead of Jackson Hole, there was limited buying impetus.
Even so, the major US indices remain strongly ahead in the year to date, with the Dow Jones up 15%, the S&P500 19% and the Nasdaq 16%.
On this side of the pond investors also remain skittish, with the global persistence of the Delta variant and uncertainty in Asia both threatening to derail what was becoming a strong recovery. With blockages still remaining in general supply chains and a stuttering return to international travel, there remains some light between the current backdrop and a return to relative normality.
Geopolitical tensions have also pushed the oil price higher, which has given a fillip to the oil majors in early trade, with both BP and Shell marginally ahead. Elsewhere, some strength in mining stocks has offset the sectors under pressure as the economic fog fails to clear, such as the banks, housebuilders and the retailers.
Nonetheless, there are also positive underlying factors underpinning markets at the moment, such as the brisk amount of M&A activity, coupled with the UK market generally still being regarded as attractive on valuation grounds. A more settled environment may be required for the main indices to build on their gains in the year to date, where the FTSE100 has added 10.3% and the FTSE250 16.9%.
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