- Energy stocks make gains as Brent Crude rises by more than 2% to over $76 a barrel.
- US unemployment claims fall to 211,000, the lowest level since March.
- Marks and Spencer up more than 3% as investors bet on a cracker of a Christmas.
- Tesla loses shine as delivery numbers fall short of expectations.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’A pulse of positivity has propelled the FTSE 100 higher on the first trading day of the new year. London’s blue-chip index initially got off to a shaky start, but gains in the oil prices boosted energy majors and mining stocks rose amid expectations that Chinese authorities will come forth with more stimulus to boost the world’s second largest economy. A big drawdown of US crude stocks last week also put upwards pressure on oil prices and highlighted the ongoing strength of demand for energy in a buoyant US economy. There’s a glass half full attitude taking hold, despite the threat of tariffs looming over the global economy, and the potential for inflation to stay stubborn in the US. For now, the focus is on what appears to be the enduring resilience of the American economy, with jobless claims falling sharply, underlying the buoyant labour market. There are hopes that companies will continue to shrug off the effect of high interest rates, while benefitting from lower taxes and expected de-regulation policies under a fresh Trump presidency.
Marks and Spencer is among the biggest risers in the FTSE 100, as investors expect a cracker of results for the crucial Christmas trading period. The prospects for the golden quarter for M&S looked shiny after the retailer beat first-half profit expectations in November, partly thanks to strong food volume growth and continued progress on the cost-cutting programme. Clothing may remain more of a challenge, given the ongoing pressures across the wider retail sector, but high-profile collaborations may still help the company gain an edge against the competition. Efficiencies made across the business are also helping the M&S value proposition which is likely to have helped lure in more grocery spend, during a highly competitive time of the year.
The shine has come off Tesla, after its delivery numbers for the final quarter of 2024 fell well short of expectations. Trump’s victory in the US elections sent Tesla stock soaring, given the staunch support provided by Elon Musk during his campaign and his subsequent appointment in the administration. There are hopes policies would be pro-Tesla in the coming years, with a potential acceleration of regulatory approval for Tesla’s self-drive technology being eyed. Although Tesla wants to be seen as a robotics company at its core, it’s underlying performance as a carmaker is closely watched, and these numbers demonstrate how tough the industry is right now. Chinese rival BYD is nipping at its heels, with a jump in sales for December. Tesla still may have reached a milestone by hitting a new quarterly record for deliveries, but this has only been achieved amid sharp discounting and incentive schemes. Nevertheless, Tesla still has pulling power when it comes to EV purchase decisions, and with a more affordable model expected to be launched in the first half of 2025, it should open up the wider market. A dip in demand for EVs has been tricky to navigate and cost-cutting efforts are a core part of the near-term margin recovery strategy. Tesla has balance sheet strength to head on its next chapter of growth but given its hot valuation, and the longer-term nature of its innovative technologies, patience will need to be the name of the game.
