US tech stocks lead the way higher

US and European markets are gaining ground as tech stocks enjoy a welcome rise ahead of Microsoft, Alphabet, and Twitter earnings. In the UK, energy names are on the back foot, while domestically-focused stocks rise on easing fears around ‘Plan B’ restrictions.

• US tech stocks lead the push higher.

• Energy names to weaken as volatility persists.

• Travel and services names outperform as UK covid cases ease back.

US tech stocks are leading the push higher today, with a pullback in the US 10-year yield coming as traders await fresh Q3 numbers from the likes of Twitter, Microsoft, and Alphabet after the close. Coming off the back of a well-received set of Facebook numbers, there is a clear feeling of optimism that has pushed the Nasdaq back within touching distance of record highs. While many have been fearful of a shift from growth to value as treasury yields push higher, it is likely that today’s forthcoming earnings data provides a timely reminder of the reliability of tech stocks.

Energy stocks are suffering a pullback after a period of outperformance, with the likes of Petrofac, Harbour Energy, and Tullow Oil losing traction in the UK. Natural gas has been a big mover today, with prices down 4% as uncertainty around supply brings continued volatility. On the crude front, we have seen Brent largely tread water since hitting the $85, although further upside looks likely given the tightening supply-and-demand dynamic. While Cathie Woods has talked down the prospect of further price increases, she appears to be an outlier as a lack of fresh investment and depleted inventories signal the potential for an energy crunch this winter. BlackRock CEO Larry Fink is one major player calling for $100 oil, and that looks to be increasingly likely as the world reopens.

Travel and services sector names are outperforming in the UK, as fears of a five-month ‘plan B’ period of restrictions have been allayed by the government. The recent rise in Covid cases had brought increased anxiety over the potential for fresh limits on travel and movement. However, we have started to see cases decline of late, raising hopes that transmission will ease without the need for further limits. Meanwhile, Andrew Pollard (head of the Oxford Vaccine Group) noted that the relatively high rate of UK Covid testing means it was always likely that UK figures would be elevated in comparison to those with a less comprehensive testing approach.