- FTSE 100 struggles for direction in early trade in London.
- Wall Street set to open higher, but investors are likely to remain more cautious.
- Oil prices hover around 8-month highs with Brent Crude trading near $76 barrel.
- The British Retail Consortium (BRC)-Sensormatic Footfall Monitor shows visits were down 2.5% over the ‘golden quarter’ and 2.2% lower over the year.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Stocks are struggling for a sense of direction in early trade in London, with the New Year rally losing steam. Oil prices have stabilised at two-month highs, while the outlook for UK retailers looks challenging.
The pound has gained a little ground but remains at eight-month lows against the dollar. Given the strength of the US economy, the Fed looks set to be more reticent about cutting rates than the Bank of England. The lower pound has been benefitting multinationals with big overseas earnings like miners, but as sterling has clawed back a little higher, it’s being reflected in valuations. Mining stocks have given up some of yesterday’s gains, but BP and Shell have headed up again off the back of higher oil prices.
Wall Street looks set for a higher open, but it may end up being a replica of yesterday’s performance, with early optimism fading. With the US economy showing so much resilience, the hopes for successive interest rate cuts this year have fizzled out, with only two now expected, at the most. Given the super-stellar year for US stocks in 2024, it’s not surprising a bit more caution has crept in amid uncertainty about monetary policy, especially with unpredictable changes from the White House expected.
Prices at the pumps are set to creep up again after oil prices reached two-month highs. Brent Crude is hovering around $76 a barrel, having gained around 5% in a week. The rise is set to filter through to forecourts and will be another penny pincher on already squeezed household budgets. A bigger than expected drawdown of oil stocks in the US and hopes for a fresh stimulus boost for the energy hungry Chinese economy are behind the push higher in crude prices. However, the outlook for the year ahead isn’t certain, especially given the threat of fresh tariffs from Trump which could affect global trade, and potentially demand for energy.
There was a distinct lack of lustre for UK retailers in what was meant to be a golden quarter for retailers. Consumer caution and the convenience of online shopping saw shopper visits down 2.5% compared to 2023 according to the BRC, wrapping up a year of decline. Higher energy and housing costs are forcing people to be more wary about their budgets and big shopping sprees were fewer and further between. Without the Christmas markets trend, helping to lure in visitors, the picture could have been even bleaker. Consumers are demanding better experiences and are becoming much choosier about where they shop. It looks set to be a highly challenging year ahead for retailers who will be faced with the double whammy of shoppers increasingly focused on getting value for money, while their own costs rise due to the increase in employer National Insurance taxes.
