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Mainland European markets are edging higher once again, with the FTSE 100 taking a breather, following on from a US session that saw a fight back for big tech amid cooling demand for the more defensive sectors such as healthcare and consumer staples.
Coming off the back of the recent commodity volatility, the recovery for the likes of gold, silver, copper, and aluminium appear to be losing momentum, driving FTSE 100 miners lower.
However, perhaps the biggest drag on the index has come from BP, after the oil & gas giant opted to suspend their share buyback scheme as weak oil prices sparked a decline in profits.
On the political-front, Kier Starmer appears to be hanging on to his job despite calls for his resignation, with the PM increasingly under pressure after appointing Peter Mandelson despite the links and ongoing relationship with Jeffrey Epstein.
While the declines seen in the pound are likely a reflection of the increasingly dovish BoE outlook, there will be an element that also reflects the political instability in play this week.
Yesterday’s US session saw a notable resurgence for the tech space, with the Nasdaq managing to push back above 25,000 as it attempts to regain the losses seen last week. Concerns around the software sector remain prevalent, with Salesforce and ServiceNow remaining in the doldrums after recent declines.
However, we have seen dip buyers enter the fray, with the Mag7 names gaining ground alongside the likes of Palantir, Broadcom, AMD and alike. Investors should grow accustomed to these jitters as we pass through the proof-of-concept stage where we are yet to see evidence that the huge boom in CapEx ultimately pays off.
However, the past week has undoubtedly highlighted the fact that there will be both winners and losers from AI, and those dealing with software, digital services, and professional services need to either embrace it or face demand and margin destruction.
Tomorrow brings the first major data release of the week, with the belated jobs report providing the basis for a potential dovish shift in sentiment for the Fed. While markets are waking up to the dovish potential of Kevin Warsh, the potential for a repricing of additional cuts on top of the single 25bp move expected for the remainder of 2026 does highlight possible USD downside form here.
Notably, Kevin Hassett’s warning that we should expect slightly lower jobs numbers does appear to be another case of preparing the market for another dour figure tomorrow. Set against a backdrop of strong GDP, the combination of weak jobs and inflation figures could provide a goldilocks scenario where the Fed ease into an environment of strong economic growth.
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