- Stocks in Asia largely rebound, setting a more positive tone for the open in Europe.
- Falls on Wall Street as supply chain worries resume and fresh interest rate hikes loom
- Musk spat with Apple on Twitter may backfire for the social platform
- Latest Cyber Monday data shows shopper resilience as they hunt for bargains
- FTSE reshuffle will be based on closing prices at the end of trading today.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
‘’Police in China have quashed mass Covid demonstrations for now, helping stocks regain their footing on indices across Asia, setting the tone for a positive open in Europe. But with the strict Covid policy continuing there is every chance protests will bubble up again, adding another laying of complication for an economic recovery.
Worries about fresh supply chain snarl ups have been weighing on investors’ minds as fresh waves of infections hit cities across China, with stocks on Wall Street falling back. Apple is the example of how lockdowns can disrupt shipments given that iPhone production is reportedly taking another knock as its supplier’s megafactory in Zhengzhou is hit with a lockdowns and a workers’ revolt. Delays to shipments and long wait times for coveted products are inflationary pressures now creeping back despite high hopes we would be well over this bump in the road by now.
There are also fresh warnings that inflation is still not showing transitory characteristics, and is set to stay stubbornly high. They have come from key monetary policymaker, the St. Louis Fed President James Bullard, who cautioned that interest rate hikes would continue and may have to stay elevated in 2024 to rein in the price spiral. This has added to more downbeat sentiment on Wall Street. Although the situation in China has put downward pressure on oil, speculation is swirling once again that recent Crude losses will prompt OPEC+ to cut production to try and put a floor under the price, sending Brent back up to around $85 dollars a barrel.
As Apple battles fresh production hiccups, boss Tim Cook is now coming under fire from another direction. However, Elon Musk’s attempts on Twitter to shame Apple into revealing why it stopped advertising on the platform, are likely to backfire. It’s a tactic that smacks of desperation, and revealing that a company which was once Twitter’s biggest spender is shying away from the site, will do little to restore confidence among advertisers. Accusing the company of hating free speech may galvanise certain extreme populist groups, but it’s unlikely to stop the flow of users with more moderate views from the platform
Consumers are still showing sturdy signs of resilience with numbers pinging in from Cyber Monday beating expectations. In the US an estimate from Adobe Analytics put the total spend at a record $11.6 billion, while in the UK Barclaycard’s numbers show the number of transactions rose 5% on the day compared to last year. However, the detail in these numbers will be crucial. It’s likely total spend has risen due to the inflationary effect, with shelf prices higher than last year. It’s also clear that shoppers have been waiting to pounce on bargains, putting off spending from earlier in the month, and bringing forward purchases from December. Data from the Confederation of British Industry indicated that during the run up to Black Friday, spending across the retail sector was sharply down compared to October. After this big urge to shop it’s likely there will be more of a purge of these spending habits, particularly as January bill shocks start to loom.
The quarterly FTSE review will be based on market capitalisations at the end of trading today ,with changes taking effect after the close of business on Friday 16 December. Volatile markets and concerns about the prospects for global growth are the headwinds driving the re-shuffle this time around. Investor risk appetite appears to be returning despite the uncertainty for the global economy, which is helping the fortunes of Arbdn, which was relegated to the FTSE 250 at the last reshuffle but could soon return to the top flight. Signs of a turnaround may be coming too late for Intermediate Capital Group which looks set to be ejected from the FTSE 100. The lower oil price and worries about the impact of the larger windfall tax in the UK has weighed heavily on Harbour Energy, pushing it into the relegation zone. Opportunities in the cyber world and the burgeoning space race look ripe for the picking for specialist insurer Beazeley, which is set to enter the FTSE 100.’’
