Market report – UK warned on economic slowdown, Apple dips on consumer outlook
- Apple warns on demand over Christmas as earnings top estimates
- Bank of England warns of recession risk as rates are held
- Brent crude set for second weekly decline amid uncertain global outlook
- Hybrid Ferraris have outsold purely petrol-powered models for the first time
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“Apple has sounded the alarm over Christmas demand, in what could be taken as a sign of creaking consumer resilience. Expectations for the crucial festive trading season were lower than analysts had hoped for, following a lacklustre performance for iPads and wearables. The results for the quarter just gone were better than expected, helped by a strong iPhone performance, but the market is heavily invested in what the next few months will look like. Uncertain economic conditions, higher-for-longer narratives and a slump in China have created a potent force, and not a good one for the likes of Apple. Convincing people to upgrade a loftily-priced iPhone at a time of year that’s already tough on wallets in the current climate, just became a much harder task indeed. An area of strength is the growing services division, where margins are a lot more robust and where future growth aspirations are hinged.
Stamping out the remaining flames of inflation is the Bank of England’s top priority. This comes despite the renewed warning that the economy is likely to teeter on the edge of recession during an election year. Keeping interest rates elevated is the tactic the script has suggested all along, but this fresh warning is a reminder that a protracted economic slump is on the cards. The UK’s entrenched productivity and labour problem makes it more susceptible to stagnation too, and policymakers are locked in on the 2% inflation target, which remains too far away for rates to be softened. There is growing hope that rates have peaked, but that’s very different to being able to say they’re retreating.
Despite concerns about broader conflict in the Middle East, Brent crude is set for its second weekly loss. A barrel of the black stuff will set you back around $86, as an uncertain global outlook weighs on demand. This week has seen weaker-than-expected manufacturing activity data from the US and China, which has muddied the demand outlook for two of oil’s thirstiest consumers.
In another reminder that electric is the direction of travel for auto-makers, hybrid Ferraris have outsold pure-play petrol models for the first time. This is a significant milestone as a lingering grumble about the green shift has been whether supercars and their fans would be prepared to come along for the ride. The answer seems to be a resounding yes, which piles on the pressure for other names in the camp to take their electrification strategies seriously. Aston Martin’s not expected to roll out its first hybrid models for a little while. The broader auto market continues to face challenges in the face of consumer nervousness, but those at the luxury end of the spectrum continue to have a lot more wiggle room.”
