Must read: China data, oil price, H&M, ARM Holdings, BP

GLOBAL MARKETS

Risk-on sentiment has gripped European equity markets, following the European Central Bank’s rate hike yesterday when the central bank suggested it could be at the end of its tightening cycle.

The FTSE 100 is extending gains after hitting six-week highs on Thursday. Interest rate sensitive stocks are outperforming like Persimmon (LSE:PSN) and Barratt Developments (LSE:BDEV). Plus Burberry Group (LSE:BRBY) is trading near the top of the UK blue-chip index following better-than-expected economic data from China overnight, with industrial production, retail sales and fixed asset investment outpacing analysts’ expectations, which helped to spur gains for equities in Asia.

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Oil prices continue their upward climb with Brent crude trading above $94 a barrel driven by constrained supply rather than strong demand.

H&M

Hennes & Mauritz AB Class B (OMX:HM B) reported flattish third-quarter sales growth, falling short of analysts’ expectations for an increase of 5%. Net sales rose 6% to 60.9 billion Swedish crowns, missing forecasts for 63.5 billion. The fashion retailer said it has been prioritising profitability and inventory levels and its 10% operating margin goal for next year is going in the right direction. 

H&M has been cutting costs to adapt to its cost inflation headwinds from wages, energy, and materials. However, the retailer has struggled to keep up with Zara, its biggest rival as well as other fast-fashion cheaper e-commerce competitors. Zara has a competitive advantage over H&M partly because it owns its factories, meaning it has a stronger ability to deliver the latest fashion trends to consumers and can adapt more quickly to changing demand.

Shares in H&M are trading lower, reflecting its disappointing sales, reversing some of this year’s rally. But so far, both H&M and Zara have enjoyed strong year-to-date share price performances.

ARM Holdings 

The hotly anticipated tech stock market flotation of semiconductor company ARM Holdings ADR (NASDAQ:ARM) got off to a flying start on Thursday. Shares rallied sharply during their stock market debut up 25% on the Nasdaq. 

Shares initially began trading at $51 a share, rallying to a market cap of over $65 billion. The flotation raised nearly $5 billion for SoftBank, making the biggest US listing in nearly two years. Although London was initially on the shortlist of its potential IPO destinations, SoftBank opted for New York, in a blow to the City of London and its ambitions to become a tech hub. 

Excitement around the flotation has been driven by the fact that Arm’s computer chip design instructions are instrumental in smartphone chip production, with the potential for wider penetration into other markets such as automotive chips. Its ability to maintain such a lofty valuation will depend on whether it can successfully harness artificial intelligence and expand into other areas. 

The IPO market has been in the doldrums lately as rising interest rates and volatile financial markets have reduced demand for public listings, weighing on investment banking fees too. However, the blockbuster day one performance for Arm could potentially pave the way for a rebound in investor appetite for flotations ahead.

BP 

Helge Lund, the current chairman of BP (LSE:BP.), has confirmed he’s not a candidate to become the new CEO after former chief executive Bernard Looney was forced to step down immediately this week over a review into his personal relationships with colleagues. 

There’s significant uncertainty for investors at the moment given that the oil giant is in need of stability at the top through the appointment of Looney’s permanent replacement. However, while shares sold off on Wednesday, BP has since recouped those losses, with the recent rally in oil prices overshadowing the C-suite uncertainty. In fact, oil is rallying again today, with Brent above $94 a barrel, hitting the highest level of the year. This has been driven by constrained supply with output cuts from Saudi Arabia and Russia offsetting weaker demand because the sluggish global growth backdrop.