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European markets are holding relatively still this morning after a poor start to the week yesterday for equities, borne out of further concerns over the strength of the global economy and a lacklustre start to the US earnings season. ‘Safe haven’ assets were in demand, strengthening the yen and pushing gold higher.
Last Friday contained similar sentiment but global equities were higher overall last week amid hope of more positive US-China trade talks and in spite of an ongoing government shutdown in Washington.
Focus today is centred on UK parliament’s ‘meaningful vote’ on Theresa May’s Brexit deal. Despite the prime minister’s internal warnings of the potential consequences, namely a Labour government or no Brexit at all, MPs are expected to vote against the deal in large numbers. Parliament is gaining more control of the Brexit process and may try to delay Brexit, while Jeremy Corbyn has threatened a no confidence vote.
Sterling, however, strengthened overnight, rising above $1.29 for the first time in nine weeks. Speculators seem to like the chance of an extension to Article 50. The dollar index meanwhile hit a three-month low last week.
Economic data from China put pressure on equities and commodities, as it was revealed that exports suffered their largest monthly fall in two years, increasing concern over GDP outlook. Global indicators suggest that export weakness will continue this year and that December’s underperformance was not just because of the trade war.
The Organisation for Economic Co-operation and Development also contributed to gloomy sentiment. The intergovernmental organisation noted “easing growth momentum in most major economies” and its well-respected indicators point towards fading growth in the eurozone. It said that growth was more stable in China and Japan.
After a truncated rally last week, crude oil prices slipped over 2% yesterday, while gold, up around 7% since November, ticked further up.
|Share||Closing Values at 14/1/19||Year high||Year low|
|DJ Industrial Average||23,910||26,952||21,713|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||58.99||0.54||0.92|
Boohoo has managed to avoid the troubles on the UK high street, raising its full-year profit guidance after strong Christmas sales. The Aim-listed clothes retailer sells affordable fashion aimed at a young demographic. Sales in the UK grew 33% in the last four months of 2018, contributing to a total revenue of £328.2m.
JD Sports also managed to outperform rivals over Christmas. Four weeks shy of its full year results, the UK’s biggest sportswear retailer has so far seen like-for-like sales rise by more than 5%. The chain said that it had maintained its pricing strategy whilst others had engaged in excessive discounting.
Matalan was one of the many retail companies that engaged in heavy promotions over the Christmas period, a move that increased total revenue but reduced expectations for overall profits. Online sales surged by 33.3% in the last five weeks of the year, but third-quarter earnings fell by 10.9%.
The outsourcing company Capita has warned that it expects to make a significant loss on its contract with the Ministry of Defence to recruit soldiers into the British Army. The chief executive blamed the previous management for unrealistic ambitions. Missed targets have incurred financial penalties from the MoD.
Halfords was forced into another profit warning last week, sending shares lower by around 20%. The British retailer of car parts and bicycles blamed the weather and low consumer confidence for its second warning in a year. Shares now dwell over 12% below the price they were floated at 15 years ago.
Shares of Provident Financial have fallen over 20% this morning after the subprime lender said it expected pre-tax profit to be at the lower end of expectations, owing to fewer new account acquisitions in the last quarter of 2018. It’s on track to be the largest daily fall since its profit warning in August 2017.
|Date||Category||Country||Event||Reuters poll||Prior estimate|
France-Inflation Final - CPI (EU Norm) Final YY
Germany-GDP Calendar - Full Year GDP
United States-PPI demand - PPI Final Demand YY
|15/01/19||Surveys & Cyclical||Japan||
Japan-Machinery orders - Machinery Orders YY
Germany-Inflation Final - CPI Final YY
United Kingdom-PPI - PPI Input Prices YY NSA
|16/01/19||Consumer Sector||United States||
United States-Retail Sales - Retail Sales MM
Euro Zone-Inflation - HICP Final YY
|17/01/19||Labour Market||United States||
United States-Jobless - Initial Jobless Claims
|18/01/19||Consumer Sector||United Kingdom||
United Kingdom-Retail Sales - Retail Sales YY
|21/01/19||Consumer Sector||China (Mainland)||
China (Mainland)-Activity indicators - Retail Sales YY
|21/01/19||National Account||China (Mainland)||
China (Mainland)-GDP - GDP YY
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