- European markets broadly in positive territory
- FTSE opens up 0.9%
- UK December retail sales decline 0.3% vs consensus of 0.4% growth
- Mining sector consolidation back in focus
- Brent crude flat at around $81.8 per barrel
Derren Nathan, head of equity research, Hargreaves Lansdown:
“European stock markets have added a touch to yesterday’s gains as investors digested the latest dishes that earnings season on the continent had to offer. There was mixed news from car manufacturers, with Fiat and Maserati owner Stellantis reporting a 9% drop in fourth-quarter shipments. Renault’s 2024 results painted a brighter picture and, in contrast, saw a pick-up in volumes towards the end of the year. On the consumer front, Cartier’s parent Richemont posted gains of 15% after a Q3 beat. E-tailer Zalando’s shares were also up strongly as it revealed that it expected 2024 numbers to beat guidance.
The FTSE 100 has followed suit, despite weaker-than-expected retail sales figures, for the vital month of December. Analysts had been hoping for growth of 0.4%, but a stagnant economy is resulting in a tightening of Joe Public’s purse strings. Food sales had the worst of it, with volume declining 1.9%, but there was a strong rebound for clothing retailers, which saw the largest growth of any category, up 4.4% compared to a 3.5% decline in November. Both Next and Marks & Spencer’s recent updates to the market reflect this strength with the latter also bucking the trend when it comes to food, showing the importance of delivering quality and variety for those wanting to indulge over the festive period. But the miss will do little to shore up wider business confidence in the UK which is at the lowest level since Liz Truss’s mini-budget.
The data adds to the picture of a stagnating UK economy, adding to concerns it may have gone into reverse in the final quarter of the year. Poor weather won’t have helped persuade shoppers out to spend, but there are also inclement economic winds blowing, with shoppers clearly becoming more cautious. Given how reliant the economy is on consumer spending to propel growth, the contraction of 0.8% for the sector, in what is meant to be the ‘golden quarter’ for retail bodes ill for growth.
Glencore is one of London’s most traded stocks this morning following speculation of a tie-up with Rio Tinto. Trading volumes for fellow miner, Anglo American, which rejected a bid from BHP last year, are also strong. British American Tobacco shares are also changing hands at pace. The stocks had a strong recovery, up 26% over 12-months and, for income investors, the dividend yield of around 8% looks pretty solid despite a declining tobacco market.
Brent crude is closing in on the $82 level. The prospect of a ceasefire between Israel and terror group Hamas has done little to quell supply concerns, and inventory in the US remains tight. All eyes turn to Donald Trump’s arrival in the White House next week and what that might mean both for sanctions on Russia and drilling activity in the shale basins and offshore.
