- FTSE 100 opens slightly higher after disappointing start to the week.
- Trump-inspired rally pauses on Wall Street, with S&P 500 falling 0.29%.
- Marks and Spencer shows impressive growth in grocery market.
- Tesla shares fall on Elon Musk’s controversial appointment as ‘Doge department’ co-chief.
- US inflation snapshot in focus with CPI data set to be revealed.
- Shopify moves Canadian stock market with share surge.
- Spotify looks set to turn profitable just as it comes of age.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
“There’s some relief for the FTSE 100, with the index making gains in early trade after a disappointing start to the week. However, it’s still hovering around three-month lows as concerns linger about global growth. China’s economy continues to be a worry, with the authorities’ attempts to inject the economy with stimulus seen as underwhelming. The impact of a second Trump term and its implications for global trade is also being mulled over. Brent Crude is trading close to two-week lows, as investors digest OPEC’s re-assessment of demand for energy across the world next year. The hot enthusiasm which powered Wall Street higher following Trump’s re-election has cooled off. Investors are assessing the realities of governing for Trump’s second term, while the control of the House of Representatives is yet to be decided, with critical votes still being counted.
The Christmas bun fight for market share has intensified, just as shoppers have grown more cautious in their spending patterns. The latest industry data from NIQ showed that grocery spend per visit is down 6% on last year. As shoppers sniff out bargains, it’s not surprising that Lidl was among the fastest growing retailers over the past 12 weeks, growing 11.9%. However, it’s Marks and Spencer’s achievement which really stands out. It has a grocery tie-up with Ocado, which saw growth of 16.1%, while its own performance improved by 11.4%. The retailer continues to make remarkable progress with its ranges which have tickled the fancy of shoppers. It appears to be stealing a march on Waitrose, and is grabbing a bigger share of the grocery market than its ‘middle-class’ rival. Marks and Spencer’s core customers have been more insulated from cost-of-living headwinds, but they’ll still have an eye on their purse strings. M&S offers highly curated, pared down ranges, compared to the Aladdin’s cave of a Waitrose store but it also has a sharper focus on offering value, for example through numerous multi-buy deals. M&S has given shareholders plenty to be happy about this year, breathing new life into the business, growing market share and margins while implementing a significant cost-cutting programme. The company is intent on capturing more middle-class enthusiasm for its ranges, with management focusing on opening new locations in high-growth areas.
Elon Musk is well-known for having a finger in many pies, but now he’s also at Trump’s top table there will be renewed concern about the potential for messy decision-making at his companies. He’s taking multi-tasking to a whole new level, and these worries are showing up in Tesla’s share price, which has fallen back, erasing some recent gains on news of his appointment. However, it’s likely that he will have sharp appetite in his new position for making ‘efficiencies’ which benefit his business interests. Even the name Department of Government Efficiency, ‘Doge’ for short, is a marketing ploy for his Dogecoin crypto token venture.
The relationship between Musk and Vivek Ramaswamy, the politician and billionaire pharma and finance tycoon, who will co-lead the Doge department, will be crucial. It’s likely that Ramaswamy will do more of the heavy lifting in terms of management. But by putting two highly ambitious entrepreneurs together to lead a department with such influence is likely to end up in a round of highly competitive combat.
As an ‘efficiency Czar’ Musk is likely to see his new role as an opportunity to sweep away red tape and streamline regulations, which could potentially benefit Tesla, given it’s at the forefront of technological innovation. One area of focus for Musk is likely to be ensuring there’s an acceleration of regulatory approval for its self-drive technology. The company’s Autopilot feature is being probed by NHTSA (the National Highway Traffic Safety Administration) after a number of accidents. These could come to a swifter and amenable conclusion for Musk, under the incoming Trump administration, which could put more pressure on regulatory bodies. With Musk set to wield a lot more influence inside the Trump administration, he’s likely to want to pursuefederal approval for future developments in autonomous technology, rather than the state-by-state process.
SpaceX has already benefited from Federal contracts, and with Musk already vying to place his employees in senior government positions, he’s clearly angling to get preferential treatment. Musk has claimed that they can build rockets from scratch faster than they can get approval to launch, so any speeding up of the regulatory process could super-charge development. Starlink could also benefit from broadband contracts, especially given that Biden’s rural expansion plan has been so slow and criticised for being highly efficient, providing potentially ripe opportunity for Musk’s firm to sweep in with an alternative service.
Claims of preferential treatment have the potential to end up in court, but the litigation road is notoriously long and difficult, giving Musk’s business empire plenty of time to benefit.
The latest inflation snapshot in the US will be closely watched later, especially given how disgruntlement about rising prices appeared to be such a key vote driver in the Presidential election. The CPI report is expected to show an uptick in price pressures, bumping the annual rate back to 2.6% for October. Although the Fed’s preferred measure of inflation is the Core PCE reading, from the Personal Consumption Expenditures report, todays data is still expected to indicate how stubborn inflation might prove to be. It’s particularly pertinent given concerns that Trump’s tariff policies will be inflationary, increasing costs for American consumers, so if prices are already looking unruly, expectations will rise for Trump’s threats to be watered down.
Canada’s stock market has had a major boost from a rocketing ride of Shopify shares. The tech darling gained 21% after posting results which surprised the markets on the upside, with revenue shooting up by 23%. More e-commerce firms are lapping up its services, which provide essential internet infrastructure. Offering easy to build and maintain transactional websites has been a winning formula and Shopify is providing the backbone for their growth.
Spotify is to music artists, what Shopify is for e-commerce traders. As a showcase for musicians’ work, the Swedish music streamer is fending off the competition, and growing its subscriber base fast. Volumes are being turned up right across the business and its now in reach of turning profitable this year, marking a real coming of age given it launched 18 years ago. Users of Spotify Premium, which offers ad-free selective streaming, increased 12% year on year, to more than 252 million, ahead of forecasts. Revenues also were sharply higher coming in at 19%. The popularity of the service which is impressing the market and shares jumped 6% in after-hours trading. Given how well Spotify’s business is spinning right now, it is likely to fuel publishers attempts to extract more fees from the service. Its currently facing a legal action brought the US Mechanical Licensing Collective over the way it calculates its premium subscription as a bundle and pays lower royalties.’
