Market Report: FTSE 100 awaits US jobs data, Boots records strong Christmas
- FTSE drops gains ahead of US jobs data
- Boots reports a strong Christmas, but Walgreens dividend halves
- Electric cars miss 2023 target and demand stalls in December
- Oil looks unchanged for the week amid ongoing uncertainty
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“The FTSE 100 has shed points today, as a lack of major corporate news means there’s nothing to offset anxiety about core US jobs data published later today. The data will help mould expectations for the Federal Reserve’s next interest rate decision, which has read-across for the fortunes of the UK. If the labour market shows signs of being too hot, it could add weight to the idea that rates will need to be held or raised. Expectations for rate cuts in March have come off the boil compared to a week ago, but this remains the market’s prediction overall. This is by no means guaranteed though – Fed commentary and market expectations aren’t fully on the same page.
High street staple Boots has had a strong Christmas, and saw underlying sales growth of 9.8% in the three months to November. A large reason for the continued upwards movement is thanks to Boots’ ability to capture shoppers who are looking to trade down to cheaper brands in beauty and skincare. The cross-selling opportunities created by offering clinical services, like Covid and flu jabs, are also paying dividends. Although, not quite as many dividends as investors would like. The group’s US parent, Walgreens Boots Alliance, almost halved the dividend yesterday. The company’s embroiled in the very expensive consequences associated with being accused of stoking the US opioid crisis. One way to unlock some value could come in the form of a sale of Boots. A core reason this wasn’t done last year was because of volatile and unattractive market conditions, rather than a rethink of the proposal. A new owner wouldn’t automatically sweep all of Boots’ troubles away though. While online sales are making up a bigger share of the total, Boots still has an enormous physical footprint at a time when digital-only brands are muscling in.
UK electric car sales stalled in December, falling 19% on the previous year. This not only veers away from green targets, but also creates a problem for manufacturers who were banking on a sustained pivot away from traditional engines. Tesla has diverted shipments away in a bid to service areas with better demand. The re-route in demand largely stems from the Prime Minister’s delay in the ban on the sale of combustion engines to 2035 from 2030. The price point of many new electric vehicles is also a sore point, and consumers are adopting a wait-and-see approach before committing to such big ticket items. This is a move likely to be felt in the margins of EV giants, as price wars continue.
The oil price has steadied, looking to end the week broadly unchanged at over $77 a barrel for Brent crude. Investors are balancing signs of weakening US demand against supply disruptions in Libya, as well as news of spiking US inventory levels. As the uncertainty continues in the Middle East, the oil price is likely to maintain an element of reactivity.”
