Steady recovery across equities

Volatility has subsided across markets, as dip buyers return, although the FTSE 100 is so far unchanged in mid-morning trading.

-  Surge off the lows helps equities recover their poise
-  UK retail sales rise unexpectedly
-  US learns to live with tax reform malaise.

Stocks have continued the rebound that began late yesterday, when buyers came in to lift European and UK markets off their lows. The sudden outburst of volatility certainly caught many on the hop, with the slow, steady grind higher over the past few months lulling people into a false sense of security. This kind of shakeout is healthy, but already it looks like the bargain hunters have seized their opportunity. UK retail sales might be down year-on-year, but the 0.3% growth defied forecasts and helped give a lift to sterling as a result. While this week’s data has suggested a weakening of the wage squeeze, UK consumers are not out of the woods yet, but this morning’s data will provide some hope that Christmas won’t be as bad as feared for the retail sector. Sainsbury’s and Morrisons were both seeing solid gains in mid-morning trading, suggesting investors had been cheered by the general trend in UK data this week.

Given how well US equities have held up this week, and it may well be that, having gone through some initial disappointment about the lack of progress on tax reform, the market is learning to live with the situation in the same way that it adjusted to North Korea and a host of other problems this year. At least US earnings season was strong, and this matters more than any carrot of tax reform. In any case, equities appear to be recovering once again, with the Dow expected to open at 23,344, 73 points higher from last night’s close.