Market report:Glass half-full attitude ahead of interest rate decisions and Frasers sells Missguided with strings attached
- Frasers sells Missguided to Shein for an undisclosed sum, with plans for collaboration ahead.
- FTSE 100 lifts as investors have a glass-half-full attitude.
- Oil prices dip back despite Israeli attack on Gaza, amid concerns about global growth.
- Caution ahead of interest rate decision this week from the Fed, the Bank of England and the Bank of Japan
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 has opened in positive territory as investors look ahead to key interest rate decisions with a glass-half-full attitude, and keen to take advantage of stock prices that have largely fallen back over recent weeks.
The sale of Missguided to Shein, with strings attached, looks set to be aimed at helping Frasers grab onto the coattails of the Chinese fashion giant’s huge success. Streamlining the number of fashion brands on its online platform does make sense and by retaining Missguided’s real estate and employees, the group will be hoping it will provide a deep well of global opportunity going forward. It could mean Frasers will be used as a bricks and mortar hub for the Chinese firm, which is aggressively expanding its footprint across the world. However, Shein has come under significant criticism for the huge volumes of cheap clothes it produces, the lack of transparency in its supply chain and its appropriation of other designers’ work, so this kind of partnership would not come without ESG risk to Frasers Group.
Although the conflict in Israel is a humanitarian crisis, and the risks of regional escalation are still clear and present, the offensive in Gaza was widely expectedly and investors had anticipated this turn of events to some extent. Although supply concerns are still hanging around, keeping a floor on oil prices, concerns about a drag on growth ahead leading to weaker demand have prompted a fall in oil prices, although Brent crude is still hovering around $90 a barrel.
Elevated energy prices will be playing on minds of central bank policymakers when they meet this week. With the US economy still flexing its muscles, any cuts on the horizon have reduced to dim and distant hopes, keeping investors unsettled about how long interest rates will have to stay elevated for. In the UK the economy may be stagnating, but inflation is still considered far too hot. However, the Bank of England’s monetary policy committee is also expected to vote for restraint, and wait for the effects of previous rate hikes to take effect. The weak yen is the focus for the Bank of Japan and although policymakers aren’t expected to end negative interest rates this week, there may well be some tinkering with its government bond-buying policy, which has been aimed at stopping yields shoot too high.
Deep problems within the Chinese property sector have bubbled to the surface again, after a legal move was made to wind up the debt-laden real estate giant Evergrande. Although the request was adjourned, it has once again concentrated minds on the potential for further contagion, particularly into the financial sector. The effects of property woes in China have shown up in HSBC’s results, but although they missed expectations, a doubling of profits helped by higher interest rates provided cheer in early trade.’’
