Must read: Burberry's slump, UK GDP, oil, Chinese inflation, bitcoin

GLOBAL MARKETS

European stocks are ending the week on a positive note, with the French CAC, FTSE 100 and German DAX staging notable gains. Housing related stocks like Rightmove (LSE:RMV), Taylor Wimpey (LSE:TW.) and Barratt Developments (LSE:BDEV) are in the green on the UK blue chip index, partly thanks to Vistry Group (LSE:VTY), which is rallying on an upbeat full-year trading update. 

Oil prices are trading higher with WTI up over 1% following US and British air and sea strikes on Houthi military targets in Yemen in retaliation for attacks on ships in the Red Sea. 

• Learn more: SIPP Portfolio Ideas | How SIPPs Work | Transfer a SIPP

Overnight, China’s consumer prices dropped for a third consecutive month as deflation concerns persist. CPI dropped by 0.3% year-on-year in December, below analyst expectations. The world’s second-largest economy continues to falter despite efforts from Beijing to counteract the weakness by carrying out a series of stimulus measures.

US bitcoin exchange-traded funds (ETFs) enjoyed $4.6 billion in volumes on their first day of trading after the SEC gave the green light to 11 US ETFs. Price action disappointed crypto investors though, with little reaction to the announcement. However, bitcoin investors have enjoyed a 50% surge over the past six months, in a classic case of ‘buy the rumour, sell the fact.’ 

UK GDP

UK monthly GDP hit a five-month high, growing by 0.3% in November month-on-month versus a drop of 0.3% in the previous month and ahead of analyst expectations for a rise of 0.2%. This was driven by services including retail, thanks to strong demand around Black Friday as well as car leasing and computer games companies. However, in the three months to November, the economy contracted by 0.2%, with a drop in production and construction. 

Despite the better-than-expected November growth figure, there are still concerns about the sluggish macroeconomic picture with elevated inflation, higher interest rates and the risk of recession. While inflation has been moving in the right direction, the Red Sea shipping crisis could push prices higher, potentially preventing the Bank of England from cutting rates as much as markets and the economy would ideally like this year. 

The pound is staging modest gains against the US dollar and the euro, while the domestically focussed FTSE 250 and FTSE 100 are both higher partly thanks to the forecast topping economic growth data. 

BURBERRY 

Burberry Group (LSE:BRBY) has issued its second profit warning in three months. It expects full-year adjusted operating profit to come in between £410 million and £460 million, versus November’s expectation that it would come in at the lower end of between £552 million and £668 million. 

Luxury stocks had a strong start to 2023 after China ended its anti-Covid lockdown restrictions. But that post-pandemic Chinese demand has been waning and a weak consumer in the US and Europe has also hurt spending even among higher end, more economically resilient shoppers. Retail sales in the 13 weeks to 30 December plunged by 15% in Americas and 5% in Europe, highlighting how the confluence of macroeconomic pressures are weighing on discretionary spending. The conflict in the Middle East and the Red Sea shipping crisis are headwinds to watch, particularly if they lead to an uptick in inflation. 

Burberry shares have fallen sharply Friday, hitting a near three-year low, leaving the stock down around 40% over the past six months. Other luxury stocks like Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC) and Kering SA (EURONEXT:KER) are also suffering in support of their rival today.