Interactive Investor

Must read: Air France, oil, UK house prices, Frasers Group

Our head of investment rounds up the morning's big news.

7th December 2023 09:08

Victoria Scholar from interactive investor

      GLOBAL MARKETS

      European markets are under pressure, taking their cues from a softer session on Wall Street with the S&P 500 logging three straight negative sessions. 

      Air France-KLM (EURONEXT:AF) shares have fallen sharply after JPMorgan cut the stock from 'overweight' to 'underweight', drastically reducing its price target from €21.50 to €9.50. This has dragged British Airways’ parent company International Consolidated Airlines Group SA (LSE:IAG) to the bottom of the FTSE 100. 

      China sensitive stocks like Burberry Group (LSE:BRBY) and Prudential (LSE:PRU) are also trading near the bottom of the UK blue chip index after key China trade data pointed to weak domestic demand from the world’s second-largest economy. China’s exports increased for the first time in six months, up by 0.5% in November, defying forecasts for a decline and swinging from a fall of 6.4% in October. However, imports dropped by 0.6%, missing estimates for growth of 3.3%. 

      Oil prices are rebounding this morning after sliding nearly 4% on Wednesday, with Brent crude tumbling to the lowest level since June. A stronger US dollar and concerns about a weak demand outlook, particularly from China, have been weighing on oil prices.

      UK HALIFAX HOUSE PRICE INDEX

      According to Halifax, UK house prices rose by 0.5% in November, the second straight monthly increase following a rise of 1.2% in October, which snapped a six-month losing streak. The average UK house price hit £283,615, down 1% year-on-year. 

      The sluggish economic backdrop, elevated inflation and higher mortgage rates have dampened demand in the UK property market. And the full effect of the Bank of England’s 14 straight rate rises is yet to filter through. However, that weakness is being partly offset by the chronic shortage of housing supply that has stemmed an even steeper downturn in property prices. 

      While house prices look set to weaken further next year, the pace of decline is likely to moderate, with the Bank of England now either at or close to the peak of the rate hiking cycle. There's also growing expectations that the central bank will actually loosen monetary policy in 2024, making borrowing rates more attractive, potentially stimulating demand.

      FRASERS GROUP 

      Frasers Group (LSE:FRAS) reported a 12.6% increase in first-half earnings to £303.8 million and said it is on track to achieve full-year adjusted pre-tax profit of between £500 million and £550 million. Half-year revenue also increased by 4.4% to £2.77 billion. 

      Frasers is trying to position itself as a world leading retail ecosystem through acquisitions, equity stake building and tie ups with bigger brands like Nike Inc Class B (NYSE:NKE) and adidas AG (XETRA:ADS). In this ‘sink or swim’ environment for retail, Frasers has emerged as a winner in the sector despite, successfully navigating pressures from the cost-of-living crisis. Marks & Spencer Group (LSE:MKS) is another retailer that has emerged victorious while several others have fallen to the wayside. No doubt Frasers will be pinning its hopes on a bountiful Christmas season during the all-important Golden Quarter for retail. 

      Shares in Frasers Group are trading higher today, extending recent gains with the stock up by around 30% in the past six months. However, its one-year performance is less impressive, up around 2%.

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