Market report: China’s economic woes, Metro Bank cuts and Dr Martens gets a kicking
- FTSE 100 on back foot in early trade and is trailing other indices in November.
- Activity shrinks at China’s factories according to November PMI data due to weak demand.
- Brent crude hovers around $83 as OPEC meeting begins.
- Hopes for early diplomatic results at COP28 for funding for climate damage.
- Dr Martens kicks hopes of revenue goals into touch.
- Lloyds Bank axes more branches and Metro makes cost cuts.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
“The FTSE 100 has had a lacklustre start in the last session of what’s been a largely disappointing month compared to global peers. Concerns about China’s struggling economy have pulled down mining stocks, while utilities are also high on the list of fallers.
There’s been a quite a party in November for global equities, with the MSCI world stock index up around 9%, Britain’s blue-chip index has been stuck like a wallflower in the corner. It’s spilled out gains of just over 1% over the month, largely shut out from the revelry sparked by hopes that peak interest rates have been reached. The UK’s stagnating growth prospects appear to part of the problem, putting an unappetising sheen over the index, despite its multinational flavour.
Rampant enthusiasm on Wall Street might have dimmed a little as we head towards the end of the month, but the S&P 500 has gained 8.5% since the end of October. The sugar rush rally has been fuelled by hopes that interest rate cuts could be on the horizon while the US economy has stayed super-resilient. But the lag effects of high borrowing costs are set to be felt next year, so this pre-Christmas power trip might be as good as it gets for a while.
Oil gains ahead amid OPEC and COP28
Energy giants on the FTSE 100 are higher in early trade, pushed up by gains in oil prices. Brent crude is hovering at $83 dollars a barrel, following climbs sparked by anticipation of what the OPEC meeting will bring. There is speculation that addition cuts of up to one million barrels a day could be on the cards to help put a floor under crude prices. Saudi Arabia has been pushing for reductions to quotas but has met with some resistance from other members particularly in Africa. The meeting of oil rich nations collides sharply with the start of COP28, where there are calls for the climate conference to aim for a complete phasing out of fossil fuels. Although there are hopes that the final statement will include a reduction in fossil fuel consumption, UN Secretary-General Antonio Guterres is calling for a phaseout and a time frame to be included. Finding agreement on this is likely to be fraught but there are hopes of an early win to agree on a on a new fund to pay for climate-caused damage.
China woes return.
Concerns about China’s struggling economy are bubbling in the background and now the heat’s been turned up again given data showing factory activity shrank again in November, at the fastest pace for months. Weak demand at home and abroad has sparked this contraction, according to closely watched PMI data, despite hopes that the situation would improve slightly. Stimulus measures haven’t done the trick and confidence in further meaningful support appears to be ebbing away. The Chinese economy is facing a multitude of problems, from an imploding property sector with contagion leaking into financial firms, to its exposure to global markets where growth is slowing. Easy fixes will be hard to find.
Dr Martens gets a kicking.
Investors have put the boot into Dr Martens after it kicked hopes of revenue growth into touch. They’d already been disappointed by the bootmakers lack of progress this year but now shares have had another kicking, falling around 20% in early trade to a record low. It’s been a dismal year for the company and investors are highly unimpressed with the lack of detail on a turnaround.
Fashion followers are fickle and although Dr Martens has had a strong following, appetite has waned for the distinctive chunky black boots. The company is blaming a maelstrom of problems, from unseasonably warm weather and economic headwinds to unpredictable ordering from wholesalers. There has always seems to be a stone in the shoe for Dr Martens ever since its IPO 2021. Earlier this year the company was beset by operational problems at its Los Angeles distribution centre. Once again, hopes of a rebound in sale have been booted away and long-term growth for the brand looks highly uncertain.
Bank branch networks shrink.
Finding a bank branch which is open is set to become even harder in the UK. As the digital banking revolution unfolds, and big lenders are searching for ways to cut costs, more outlets are being shuttered, leaving those customers who have little access to devices out in the cold. Lloyds Banking Group is closing another 45 branches across its network, just a week after NatWest announced it would close 19 branches next year. Barclays is also downsizing its branch footprint. Metro Bank has prided itself on its outlets with an ‘open all hours’ approach but now after facing some fierce financial headwinds, it’s now had to seriously re-think this strategy. It’s already been a troubling time for staff given concerns about whether the bank would secure a financial lifeline. Even though it’s managed to shore up its finances, it’s clear the staffing bill was far too high, prompting the decision to cut headcount by 20%.”
