This is exactly what the market wanted
9th July 2018 11:39
by Rebecca O'Keeffe from interactive investor
Rebecca O'Keeffe, head of investment at interactive investor, comments on the state of equity markets and on prospects for high street struggler Mothercare.
Markets are proving remarkably resilient and continue to rally after Friday's US employment report gave the market just what it wanted - strong jobs data, but higher unemployment due to a rise in the participation rate, hence limited upward pressure on wages.
This report has raised the question of whether the Federal Reserve may have to raise rates as aggressively as feared, which is being taken as very good news for investors.
In Asia, Chinese equities bounced back after huge weakness over the past month, giving mining companies a boost, and this is feeding through to robust performance in Europe.
In the UK, the departure of David Davis has barely registered on the markets, with the pound slightly stronger and the main indices untroubled by his exit. The Brexit secretary may be a bit disappointed that far from the market being devastated by the news, investors have shrugged off his departure.
However, Theresa May still has a mountain to climb in terms of surviving any threats to her position and getting the white paper through parliament. And even if she succeeds in getting her own house in order, there is still the small matter of trying to get Europe to support her plan.
Whether Michel Barnier will be so impressed with May's attempt to cherry-pick what bits of the single market to keep and what to abandon remains to be seen. However, despite all the hurdles, the chances of a soft Brexit are rising, and, if it can be done, some UK-focused sectors, as well as the pound itself, could become a lot more attractive.
Mothercare's latest troubles demonstrate how difficult life is for high street retailers. Transforming legacy businesses, making them relevant, and generating enough footfall that goes on to buy your product instore, rather than testing it out and then going home to get a better deal online, is incredibly tough.
Many investors have given up on the high street retail sector altogether and others are wondering just how long they will have to wait for management to deliver their turnaround strategies, or if it is worth the wait at all.
Source: interactive investor Past performance is not a guide to future performance
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