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18 December 2018
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US stocks fell over 2% during yesterday’s session, plunging American markets further into correction territory. The S&P 500 has now declined 13.3% since its peak in September, with last night’s losses occurring in anticipation of the Federal Reserve raising interest rates tomorrow. Oil prices fell even more sharply owing to concerns about the outlook for global growth and strong production. The major benchmarks have both fallen over 4% so far this week.
Oil prices are weighing on some of the FTSE 100 this morning following a sell-off across European markets on Monday. A surprise profits warning from online retailer Asos intensified fears for the UK high street and Brexit’s effect on consumer spending.
UK politics is in something of an omnishambles. Theresa May survived a vote of no confidence from her own party last week, but then yesterday there was confusion as to whether opposition leader Jeremy Corbyn had called a separate confidence vote on the government. Meanwhile, the cabinet meet today to step up preparations for a no-deal Brexit, showing the lack of confidence in May’s EU exit deal, which MPs are due to vote on in mid-January.
Appetite for risk assets has been further dented by a speech by President Xi of China, who stated his opposition to “bullying” and “interference of others’ internal affairs”, in what is likely to be interpreted as a direct challenge to Washington. Elsewhere in Asia, Japan’s Topix index tumbled to an 18-month low overnight.
A survey of 200 asset allocators by Absolute Strategy Research (ASR) has found that sentiment amongst leading investors is worsening. They have become more convinced that 2019 will bring a deterioration in the global economy, while US equities and the dollar will fall. ASR noted that investors are “fastening their seatbelts” ahead of the coming year.
On which note, have a very Merry Christmas… The Weekly Note will be back in the new year.
| Share | Closing Values at 10/12/18 | Year high | Year low |
|---|---|---|---|
| FTSE 100 | 6,773 | 7,904 | 6,674 |
| FTSEurofirst | 1,356 | 1,588 | 1,337 |
| DAX | 10,772 | 13,597 | 10,586 |
| DJ Industrial Average | 23,593 | 26,952 | 23,345 |
| S&P 500 | 2,546 | 2,931 | 2,546 |
| NASDAQ | 6,754 | 8,133 | 6,631 |
| Hang Seng | 25,814 | 33,484 | 24,541 |
| UK Gifts | % Yield | Price |
|---|---|---|
| 10 Year | 1.3 | 103.3 |
| 2 Year | 0.7 | 102.0 |
| 5 Year | 0.9 | 99.4 |
| 30 Year | 1.8 | 93.3 |
| FOREX versus US Dollar | Last | % Change** |
|---|---|---|
| British Pound | 1.26 | 0.12 |
| Euro | 1.13 | 0.30 |
| Japanese Yen | 112.82 | -0.40 |
| Canadian Dollar | 1.34 | -0.04 |
| Commodities | Price (USD) | Change** | % Change** |
|---|---|---|---|
| Brent Crude Oil | 59.61 | -1.81 | -3.04 |
| Light Crude | 49.88 | -1.59 | -3.19 |
| Gold LBMA | 1,245.82 | 3.90 | 0.31 |
Asos became the latest UK retailer to issue a profits warning yesterday, echoing competitors by lamenting a very poor November for trading. Shares in the online fashion retailer ended yesterday around 35% lower, while sentiment also hit the rest of the sector. Asos still expects sales growth of about 15% for the year, a measure of investors’ previously lofty expectations.
Sports Direct revealed mixed results for its half-year last week, with its takeover of House of Fraser weighing on operating profits, while cash profits rose 14.6%. Controversial boss Mike Ashley had his say on the poor trading in November: “retailers just cannot take that kind of November. It will literally smash them to pieces.”
Ocado, however, is expecting its best ever Christmas despite the uncertain picture faced by consumers. It also reported a “good finish to the year” as fourth quarter revenue increased by 12%, driven by a 13.1% increase in average orders per week.
Bunzl said last week that it still anticipates to deliver revenue growth in 2018, despite currency headwinds against its international performance this year from a strengthening pound. Pre-tax profit improved by 8% compared to last year, marginally ahead of expectations. It also revealed the purchase of a Norwegian catering equipment supplier, Enor.
BT Group has been forced to promise reforms to executive pay after some shareholders objected to a bonus of £2.3m paid out to its former Chief Executive, Gavin Patterson. Patterson’s exit was announced in June following criticism of his strategy.
Shares in J Sainsbury fell by more than 7% last Wednesday amongst growing concerns that its £12bn merger with Asda might be blocked by the regulator. The supermarkets are appealing against the Competition and Markets Authority’s decision not to allow them more time to “respond to a large amount of material”.
| Date | Category | Country | Event | Reuters poll | Prior estimate |
| 8/12/18 | External Sector | Japan | Japan-Trade - Trade Balance Total Yen | JPY -600.3b | JPY -450.1b |
| 19/12/18 | Prices | Germany | Germany-PPI - Producer Prices YY | 3.20% | 3.30% |
| 19/12/18 | Prices | United Kingdom | United Kingdom-Inflation - Core CPI YY | 1.80% | 1.90% |
| 19/12/18 | Prices | United Kingdom | United Kingdom-Inflation - CPI YY | 2.30% | 2.40% |
| 19/12/18 | Surveys & Cyclical | United Kingdom | United Kingdom-CBI trends - orders - CBI Trends - Orders | 6 | 10 |
| 20/12/18 | Consumer Sector | United Kingdom | United Kingdom-Retail Sales - Retail Sales YY | 1.90% | 2.20% |
| 20/12/18 | Surveys & Cyclical | United States | United States-Philly Fed New - Philly Fed Business Indx | 15 | 12.9 |
| 20/12/18 | Prices | Japan | Japan-CPI Nationwide - CPI, Core Nationwide YY | 1% | 1% |
| 21/12/18 | Surveys & Cyclical | United Kingdom | United Kingdom-GfK consumer confidence - GfK Consumer Confidence | -14 | -13 |
| 21/12/18 | National Account | United Kingdom | United Kingdom-GDP Final - GDP YY | 1.50% | 1.20% |
| 21/12/18 | National Account | United States | United States-GDP Final - GDP Final | 3.50% | 4.20% |
| 21/12/18 | Surveys & Cyclical | Eurozone | Euro Zone-Consumer confidence - Consumer Confid. Flash | -4.3 | -3.9 |
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