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“Ahead of the all-important US jobs numbers, the big story of the day has been the Nikkei’s 2% surge after Prime Minister Yoshihide Suga confirmed he would not run for re-election,” says Russ Mould, Investment Director at AJ Bell.
“He has been an unpopular leader and the country has struggled with the Covid vaccine rollout, leading to low levels of confidence among people in Japan.
“The market’s reaction to his announcement would suggest investors are optimistic that the country will find a stronger leader. Mining, healthcare, real estate and technology stocks all pushed forward on the main Japanese index.
“Today’s market surge has put the Nikkei back on a stronger path, with the index up nearly 7% year to date. That is still streets behind the US Nasdaq’s 21% gain over the same period, but better than the mere 2.3% gain from China’s SSE index.
“Later today investors will be watching like a hawk for the non-farm payroll data in the US which is expected to show employers hired 725,000 people in August.
“There is a fine line to walk for the result in terms of the potential market reaction. Significantly beating the figure could trouble investors as it would strengthen the argument for the Federal Reserve to start tapering its bond buying, thereby going down the path to withdraw support following the pandemic.
“But missing that forecast number could also trouble investors as it would suggest a slowdown in economic growth, which is something that’s been troubling other parts of the world including China.
“On the UK market, the FTSE 100 was flat at 7,170, with Barratt Developments the top riser.”
Berkeley Group
“Raw material cost inflation is a big problem in the housebuilding industry and the sector is on the cusp of potentially seeing profit margins squeezed.
“Berkeley has flagged that strong selling prices have so far offset the higher cost of building materials, but we’re only weeks away from the end of the stamp duty holiday.
“October is likely to be a testing time for the property market as the lack of the money-saving incentive could see housing activity calm down, thereby bringing down prices with it.
“If housebuilders can’t cover the extra costs of building materials through higher prices, then they must stomach lower profit margins.
“In the old days, they might have tried to cut corners to save money but the outrage over build quality in the industry a few years ago means only the foolish would attempt to save a few quid here and there by not doing a proper job.
“Berkeley can afford to stomach lower profit margins as it is swimming in cash, and it may take the view that this is only a temporary risk. After all, it is continuing to invest in land as a way of laying the foundations for future value generation.”
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