European markets have opened higher after a surge in China overnight. The Shanghai Composite and the Hang Seng rebounded over 3% and 4% respectively thanks to stepped up support efforts from the Chinese authorities.
This has lifted China sensitive stocks on the FTSE 100 such as Prudential which is trading up over 2%. However, BP is still the best performer on the UK blue chip index after annual earnings topped estimates despite halving in 2023 versus the previous year when Russia invaded Ukraine and energy prices skyrocketed.
McDonald's Corp (NYSE:MCD) shares fell almost 4% in the US session after its quarterly sales fell short of forecasts for the first time in almost four years, hurt by the Middle East conflict which the fast-food chain said ‘meaningfully impacted’ performance.
L’Occitane shares surged over 7% in Hong Kong on reports of a potential buyout bid from Blackstone.
BRC RETAIL SALES
According to the British Retail Consortium, retail sales grew by 1.2% in January year-on-year, down from December’s growth of 1.7%. Like-for-like sales growth also fell from 1.9% in December to 1.4% last month.
January was a harsh reality check for the retail sector after the excitement of Christmas quickly faded, with consumers tightening their purse strings to mark the beginning of a new year and the end of the festive splurge.
While 2024 may be the year that interest rate cuts kick in and real incomes grow, consumers are still grappling with much higher prices than they were a few years ago and higher mortgage payments on top. That’s leading to lower consumer confidence and less spending in the economy including on discretionary retail items.
A two-speed retail sector has been emerging, separating the winners from the losers in the UK, with luxury and certain discretionary retailers struggling amid the macroeconomic headwinds while supermarkets like Tesco (LSE:TSCO) continue to thrive despite intense price competition.
Looking ahead, the threat of supply chain disruptions, product delays and shortages following the attacks in the Red Sea is an overhang for the sector worth watching.
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