US government opens; Sterling rises despite Brexit uncertainty; High street retailers under pressure.

29 January 2019

US government opens; Sterling rises despite Brexit uncertainty; High street retailers under pressure.

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Market news

The FTSE 100 is trading over 100 points higher this morning, up 1.5% and more than reversing yesterday’s sharp losses. European equity markets are also mostly higher, despite losses in Asia and on Wall Street overnight.

There is global focus on high-level trade talks between the US and China taking place tomorrow. Trump is under pressure to strike a deal, but the White House filed criminal charges against Huawei, the Chinese technology giant, for stealing trade secrets and violating sanctions against Iran. Investors hope the talks can still turn a temporary truce into a permanent agreement.

Despite official figures showing that China’s GDP slowdown is being carefully controlled as promised, sentiment soured yesterday after two American companies with significant business in China warned of deteriorating outlooks for its economy.

Last week, equity markets were mixed. The US government reopened after its longest-ever shutdown and there was a strong start to Q4 earnings, with three-quarters of US companies surprising to the upside, but disappointing global data relating to growth, trade and sentiment.

Sterling rose against the dollar last week in spite of the uncertainty surrounding Brexit progress, as speculators deemed that Prime Minister Theresa May’s waning authority might lead to a softer Brexit and a potential extension of the negotiating timeframe. Yesterday, the European Research Group refused to back an amendment that could have saved May’s deal and failure in the vote tonight could lead to parliament effectively taking control of Brexit.

It has emerged this morning that hard-line Brexit and Remain supporters within the Conservative party have privately reached a compromise. Leaks suggest that it includes a longer transition period and replaces the Irish backstop with a “safety net” that is more palatable to Brexiteers.

Oil, meanwhile, has benefitted this month from a weaker dollar and the prospect of Chinese fiscal stimulus, leaving Brent crude oil back above $60 a barrel today. Sanctions placed on Venezuela have also applied supply-side pressure.

 
 

Economic data*

Share Closing Values at 14/1/19 Year high Year low
FTSE 100 6,747 7,904 6,537
FTSEurofirst 1,391 1,575 1,291
DAX 11,210 13,370 10,279
DJ Industrial Average 24,528 26,952 21,713
S&P 500 2,644 2,931 2,351
NASDAQ 7,086 8,133 6,190
Hang Seng 27,5 33,054 24,541

 

UK Gifts % Yield Price
10 Year 1.32 102.74
2 Year 0.79 101.80
5 Year 0.95 99.10
30 Year 1.83 92.62

 

FOREX versus US Dollar Last % Change**
British Pound 1.29 0.04
Euro 1.14 0.08
Japanese Yen 109.34 0.05
Canadian Dollar 1.33 -0.04

 

Commodities Price (USD) Change** % Change**
Brent Crude Oil 59.93 -0.44 0.73
Light Crude 51.99 -0.39 0.75
Gold LBMA 1,303.46 4.02 0.31
* Source: Thomson Reuters
** From previous day close

 

Stock focus

A bleak few days for the UK retail industry have put thousands of jobs at risk. Yesterday, Tesco confirmed that it is cutting 9,000 jobs in its stores, with fresh food counters being removed from some locations. The supermarket said that customers are visiting the counters less frequently because they have less time to shop.

It also emerged yesterday that the owner of the Oddbins off-licence chain is on the verge of collapse. Oddbins has collapsed once already, under previous ownership in 2011. European Food Brokers, the parent company, has blamed tough high-street conditions and Brexit uncertainty.

Meanwhile Paperchase is being offered to potential buyers as its owner holds talks with landlords. Paperchase has suffered as high-street footfall has declined and The Times reports that, for a number of its stores, it has sent a restructuring proposal suggesting a new rental agreement linked to turnover.

Domino’s Pizza Group, on the other hand, enjoyed strong performance in the UK over Christmas, but had to cut its profit guidance due to weaker performance overseas. UK sales during the Christmas period rose by 5.5% helped by a record day when it sold 12 pizzas a second. International sales fell by 2% in the same period.

Hargreaves Lansdown suffered a 24% drop in new business during the second half of last year, while total assets fell 6% to £85.9bn. Its shares are down c.5% at time of writing, the worst performing in the FTSE 100. It blamed weak investor confidence and market volatility for the downturn.

Ocado’s shares rose yesterday after reports emerged that Marks & Spencer could take over its food delivery services. Shares in M&S also rose, but other rival supermarkets saw prices move in the other direction. M&S currently lacks the delivery network that its major rivals possess.

 

Financial calendar

Date Category Country Event Reuters poll Prior estimate
29/01/19 Surveys & Cyclical France

France-Consumer confidence - Consumer Confidence

88 86
29/01/19 Surveys & Cyclical United States

United States-Consumer confidence - Consumer Confidence

124.7 128.1
29/01/19 Consumer Sector Japan

Japan-Retail Sales - Retail Sales YY

0.80% 1.40%
30/01/19 Prices Germany

Germany-Import Prices - Import Prices YY

2.10% 3.10%
30/01/19 Government Sector United Kingdom

United Kingdom-Consumer Credit - Mortgage Approvals

63K 63.73K
30/01/19 Surveys & Cyclical Eurozone

Euro Zone-Sentiment - Consumer Confid. Final

-7.9 -8.3
30/01/19 Prices Germany

Germany-Inflation Prelim - CPI Prelim YY

1.60% 1.70%
30/01/19 Prices United States

United States-GDP Advance - Core PCE Prices

1.60% 1.60%
31/01/19 Surveys & Cyclical United Kingdom

United Kingdom-GfK consumer confidence - GfK Consumer Confidence

-15 -14
31/01/19 Labour Market Eurozone

Euro Zone-Unemployment - Unemployment Rate

7.90% 7.90%
01/02/19 Surveys & Cyclical United Kingdom

United Kingdom-PMI Manuf - Markit/CIPS Mfg PMI

53.5 54.2
01/02/19 Labour Market United States

United States-Employment - Unemployment Rate

3.90% 3.90%
Source: Thomson Reuters

 

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Old Change House
128 Queen Victoria Street
London EC4V 4BJ

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www.wcgplc.co.uk
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US government opens; Sterling rises despite Brexit uncertainty; High street retailers under pressure.

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