Markets dipped slightly on Tuesday morning, despite what appeared to be a warming up of good sentiments between the US and China, and the expected passing of the first phase of a trade deal. Progress was largely priced in by markets, and thus the news didn’t have quite the impact it would have done a few months ago.
The good news stories this morning came from the FTSE, which was able to outperform its counterparts following a disheartening GDP reading on Monday, which pushed Sterling down.
Elsewhere, Boohoo (LON: BOO) saw its revenues bounce 44% during the final four months of 2019, which saw the online fashion retailer buck the cheerless trend set by its peers.
Elsewhere in retail and the highstreet, Christmas proved costly; Marks and Spencer (LON:MKS) issued an underwhelming update, Tesco (LON: TSCO) suffered in Europe though it reported a potential sale of its Asian business, and Sainsbury’s (LON:SBRY) saw a drop in quarterly sales.
Speaking on trade deal progress and the morning’s updates, Spreadex Financial Analyst Connor Campbell stated,
“The markets didn’t really get anything from the newly revealed details of the US-China trade deal, instead drifting lower after the bell.”
“With the agreement all ready to be signed tomorrow, Washington removed the ‘currency manipulator’ label from China – a symbolic gesture rather than tangible one, but nevertheless another example of thawing relationships between the two superpowers.”
“This helped send the yuan to a 5-month high, but did little for the Western indices. Instead the DAX and CAC fell 0.5% apiece, with the Dow Jones set to drop 0.4% later this afternoon. The FTSE avoided the same kind of losses, though was still down a handful of points.”
“The trouble is, the positive aspects of the trade deal are pretty thoroughly priced in. In contrast, any rogue comments from Donald Trump in the coming days – especially those related to ‘phase two’, if the US and China ever get to that point – may then have a disproportionate impact on the markets, good or bad.”
“The reason the FTSE was able to outperform its peers was the continued weakening of sterling. The pound lost another 0.2% against dollar and euro alike, the ongoing speculation of an incoming interest rate cut, heightened by Monday’s dreadful GDP reading, weighing on the currency.”
“It was, broadly, a terrible Christmas for UK retailers. However, as is often the case, boohoo managed to buck the trends that have afflicted its high street peers, crying tears of joy after a record quarter. For the 4 months to the end of 2019 revenue jumped 44%, causing it to lift its forecast growth for the year to 40-42% against previous estimates of 33-39%. That increase was enough to send the stock to a fresh all-time high, the fashion brand rising 3.3% to strike £3.28.”