US markets lead the recovery as jobless claims decline

Ongoing inflation fears remain, yet improved jobless claims help lift spirits in the US. Meanwhile, UK reopening stocks have been dealt a blow after SAGE claimed that a rise in the Indian Covid strain could slow the pace of lockdown easing. 

• US markets regain ground despite ongoing inflation fears 
• UK reopening stocks suffer as rise in Indian strain heightens risk of delay 
• US jobless claims highlight how NFP weakness could be fleeting  

A strong US jobless claims reading has settled some of the nerves evident within markets today, as US markets regain ground in the wake of sharp inflation-fuelled losses this week. The FTSE 100 remains stuck in the quagmire of higher inflation-higher rates thinking, which looks likely to remain an ongoing issue in the coming months. Chinese PPI data on Tuesday highlighted how higher commodity prices are feeding into factory costs, and today’s 6.2% reading for the US PPI brought confirmation of that worldwide trend. From a market perspective the notion that a lasting surge in inflation could cause the withdrawal of stimulus brings plenty of fear over market valuations. However, it we are only just recently seeing inflation really pick up steam, and thus it leaves traders asking the question of just how long this needs to persist for the central banks to believe it is more that just a transitory post-lockdown adjustment. 

Questions around the reopening of the UK economy have dealt a blow to the lies of Hammerson, Cineworld, and Card Factory. A rise in the spread of the Indian variant in the UK does raise questions over whether that strain could bypass vaccines and cause issues for the health care system if unchecked. Undoubtably the strain evident within India has wreaked havoc across that nation, yet the difference in vaccination levels compared to the UK should ease concerns that the reopening plans should be adjusted. Despite the vaccines clearly unable to fully protect against particular rogue strains, the ability to avoid hospitalisations and reduce the severity of the condition does provide greater hope that the UK recovery can go ahead as planned. 

US jobless claims tumbled below the 500k mark for the first time since the onset of the crisis. Today’s unemployment claims figure of 473,000 highlights how the US jobs trajectory remains on a positive pathway despite the recent collapse in payrolls. Nonetheless, with continuing claims and jobless claims both on the slide, today’s data provides confidence that payrolls will rise and unemployment will decline as we move forward.