Must read: China downgraded, UK inflation, retail sales, Marston's, Moonpig

GLOBAL MARKETS

The FTSE 100 has opened lower, down by around 0.5%, at odds with the DAX and CAC which are trading higher. Ashtead Group (LSE:AHT) has plunged to the bottom of the UK index after its latest financial update fails to impress investors. Barclays (LSE:BARC) is also underperforming after the Qatar Investment Authority, the lender’s second biggest shareholder, sold shares worth around £510 million. 

Shares in Ericsson are trading sharply higher thanks to a five-year network building deal with AT&T Inc (NYSE:T). The announcement sent shares in rival Nokia sharply lower. 

Overnight, the Reserve Bank of Australia kept interest rates unchanged at 4.35%.

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MOODY’S DOWNGRADES CHINA 

Moody’s has cut China’s government credit rating to negative from stable. The ratings agency says this reflects the risks related to its persistently lower medium-term economic growth and ongoing downsizing of the property sector. It expects China’s annual GDP to come in at 4% in 2024 and 2025 and average 3.8% between 2026 and 2030. China’s finance ministry said it is disappointed by the downgrade and said Moody’s concerns are unnecessary. 

China has struggled with a bumpier than expected post Covid recovery. It has been grappling with weak demand, an embattled property sector, declining imports and exports, and heavy debts from long-term infrastructure spending. The government has stopped publishing youth unemployment figures after they hit a record high in the summer. While the authorities have been attempting to bolster demand through stimulus measures, more needs to be done to support the world’s second largest economy particularly amid the backdrop of sluggish global demand.

KANTAR GROCERY INFLATION 

According to Kantar, UK grocery inflation fell to 9.1% in November versus 9.7% in October. That’s down sharply from the peak in March at 17.5%. Grocery sales increased by 6.3% with almost one in three sales made on promotion, the highest in over two years. The average cost of a Christmas dinner for four increased by 1.3% to £31.71. And eggs, sweets and frozen potatoes were among the products that saw the steepest price increases. 

Grocery inflation is easing in the UK, alongside the headline rate of inflation. However, supermarket prices are still rising more quickly than average prices and although inflation is coming down, most prices aren’t falling. However, supermarkets have been trying to reduce some of their prices of essential items and have been offering a slew of promotions. This is to try to lure customers into their stores amid the weak consumer backdrop combined with intense competition from the German discounters. Aldi and Lidl continue to enjoy very strong sales growth up 11.1% and 14.2% respectively, snapping at the heels of the UK market leaders.

UK RETAIL SALES 

The BRC said UK retail sales rose by 2.7% in November year-on-year up from 2.5% in October. However, this marks a significant slowdown in retail spending versus the same period last year when the figure hit 4.2%. 

While the run up to Christmas typically sees a seasonal boost to shopping, this year’s Golden Quarter may not shine as bright for the retailer sector. Macroeconomic pressures from elevated inflation and higher interest rates are clearly weighing on consumers’ propensity to spend. 

Many households are preparing for a slimmed down Christmas this year, aiming to spend less on food, drinks, decorations, and gifts amid the cost-of-living pressures. Shoppers have been capitalising on the discounted offers over Black Friday and Cyber Monday, but these cut prices could put pressure on retail margins and could potentially weaken December’s spending if more shopping was carried out earlier in November instead. Looking further ahead, there are concerns about what happens to consumer spending early next year once the Christmas cheer is over. 

MARSTON’S 

Marston's (LSE:MARS) reported full-year like-for-like sales up 10.1% versus last year and an 8% increase in underlying pub operating profit to £124.8 million versus £115.4 million in 2022. The pub group said Christmas bookings are tracking well and ahead of last year. It also said it continues to manage inflationary challenges by hedging out its energy costs and offsetting other cost pressures through efficiencies and pricing strategies. 

Although the stock is rebounding slightly today, shares in Marston’s have had a tough time this year, shedding over 20%, caught up in the pressures of a weak consumer backdrop, and cost inflation pressures. However, the company insists that despite the economic pressures, people still want to go out and celebrate in a pub. 

Incoming CEO Justin Platt who will take to the helm on 10 January has a major task at hand, to try to revitalise Marston’s share price, boost sales and reduce borrowing.

MOONPIG 

Moonpig Group Ordinary Shares (LSE:MOON) said current trading remains in line with its overall expectations. Six-month pre-tax profit surged 107.8% to £18.9 million, with adjusted pre-tax profit up 9.7% to £20.8 million and group revenue up 6.5% to £152.1 million. Greetz, the Dutch market leader which it acquired in 2018, struggled with an 9.8% drop in revenue. 

Moonpig has been trying to focus on its Moonpig Plus subscription to generate more stable, recurring revenues. The company said progress on this had been ‘encouraging’. It is also trying more innovative ways to drum up business such as audio and video messages and AI-generated text suggestions. 

Shares in Moonpig have been bouncing back this year, rallying by over 50% thanks to the rebound in tech. However, since its flotation in February 2021, the stock has suffered around a 60% slide, highlighting the pain for its longer-term investors.