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Welcome back. The festive period, restful for some, proved to be a volatile time for global markets. In America, equities suffered their worst ever Christmas Eve, before the Dow Jones Industrial Average registered its largest one-day point gain in history on Boxing Day. The end of last year was marked by fears over global GDP growth and a general lack of faith in policymakers.
January 2nd, 2019 began with a hangover after a purchasing managers’ index survey suggested that manufacturing activity in China had contracted in December. The pace of economic growth in China, so crucial to global growth, slowed last year, as did its retail and vehicle sales. On the same day last week, Apple shocked investors with a huge profit warning, itself attributing some blame to weak Chinese demand.
Yields on government bonds have fallen as investors have fled to traditional safe-haven assets, leaving global yields at similar levels to a year ago. The US 10-year Treasury yield fell to 2.66% last week, while the equivalent German Bund fell to 0.12%.
Today, however, European equities are rallying amid optimism on US-China trade relations, as US trade negotiators continue talks in Beijing. The FTSE 100 is currently trading over 1% higher, while Asian bourses were broadly positive overnight.
The euro is marginally lower after an unexpected fall in German industrial output but is not the only major currency to have fallen against the US dollar, which has moved off its two-and-a-half-month low despite an ongoing government shutdown that started on December 22nd.
Oil prices swung wildly last year, with Brent crude peaking over $86 in October before touching $50 on Christmas Eve. Since then, prices have rebounded as signs of falling output from Saudi Arabia have improved investor confidence in OPEC’s ability to uphold 2019’s production cuts.
|Share||Closing Values at 7/1/19||Year high||Year low|
|DJ Industrial Average||23,531||26,952||21,713|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||57.33||0.94||1.64|
WM Morrison revealed that like-for-like retail sales grew ahead of analysts’ expectations over the key Christmas period, but its shares have slid this morning after it warned of “changes in consumer behaviour”. Nervousness amongst investors was backed up by confirmation that discounters Aldi and Lidl continue to steal market share.
Aldi, meanwhile, made almost £1bn of sales last month, making it the supermarket’s best-ever performance over the Christmas trading period. It accounts for over 7% of the UK grocery market and said it noticed an influx of new festive customers. Aldi sold around 100m Brussels sprouts in December.
Next unveiled better-than-expected results over Christmas, in spite of further declines in sales from its high-street shops. A 15.2% surge in online sales was enough to produce an overall 1% rise in full-price sales.
There was another positive UK retail in Dunelm, the home furnishings group that has recently streamlined its offering and closed non-core brands. It reported a 2% increase in revenue in the last quarter and expects full-year profit to be “modestly ahead” of analysts’ forecasts.
Apple caused global concern last Wednesday when they kicked off the year with a drastic profit warning that sent its shares plunging 9%. It means the tech giant’s value is now over 35% lower than its peak of last autumn, when Apple reached a market cap of $1.1trn. Apple cited lower sales and economic weakness in China.
Earlier today, Samsung gave a similar warning, saying it expects to report a sharp fall in quarterly profit due to a “stagnant and fiercely competitive” mobile phone market. Tough competition and falling prices have weighed on margins, while marketing spending has had to rise to keep sales volumes flat. Q4 operating profit is now expected to be £7.5bn.
Amid the struggle of some large tech companies, Amazon has become the world’s most valuable public company for the first time, overtaking Microsoft. It makes Jeff Bezos, who founded the ecommerce behemoth 25 years ago, the richest man in the world, worth about $131bn.
|Date||Category||Country||Event||Reuters poll||Prior estimate|
German industrial production - Industrial Output MM
UK house prices rise, broad picture still weak - Halifax - Halifax House Prices MM
|08/01/19||Surveys & Cyclical||Eurozone||
Euro Zone-Sentiment - Business Climate
|08/01/19||Surveys & Cyclical||Eurozone||
Euro Zone-Sentiment - Consumer Confid. Final
|08/01/19||External Sector||United States||
United States-International trade - International Trade $
|USD -54b||USD -55.5b|
|08/01/19||Government Sector||United States||
United States-Consumer Credit - Consumer Credit
|USD 17.5b||USD 25.38b|
Euro Zone-Unemployment - Unemployment Rate
China (Mainland)-Inflation - CPI YY
|10/01/19||Surveys & Cyclical||China (Mainland)||
China (Mainland)-Money and lending - Outstanding Loan Growth
|11/01/19||Industry Sector||United Kingdom||
UK economy slowing ahead of Brexit - official data due for November - Industrial Output YY
United States-CPI - CPI YY, NSA
|14/01/19||External Sector||China (Mainland)||
China (Mainland)-Trade - Trade Balance
|USD 50.73b||USD 44.71b|
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