Must read: Chinese data, UK house prices, Asos

GLOBAL MARKETS

European equities have attempted to kick off November on a more positive note after a dismal performance in October. Defence stocks outperformed across the month on the back of the Israel-Hamas war while banks took a hit amid the slew of earnings. Next (LSE:NXT) has jumped to the top of the FTSE 100 this morning thanks to another profit upgrade, with shares in Marks & Spencer Group (LSE:MKS) rallying in support.  

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Focus turns to the Federal Reserve’s rate decision at the conclusion of its two-day policy meeting today when the central bank is expected to carry out a hawkish pause, keeping rates on hold but keeping the door open for another hike. 

Overnight, China’s Caixin manufacturing PMI dropped to 49.5 in October, slipping below the 50 boom-bust divide from 50.6 in September as factory activity contracts. Markets in Asia staged gains led by a rally in Japan with the Nikkei gaining over 2%.

UK NATIONWIDE HOUSE PRICE INDEX  

According to Nationwide, UK house prices rose by 0.9% in October versus 0.1% growth in the previous month to log the steepest monthly rise since August 2022. Year-on-year house prices fell by 3.3% decelerating from a drop of 5.3% in September. Both the annual figure and the monthly reading were higher than analysts had pencilled in. 

Today’s better-than-expected figures have been supported by a shortage of supply in the housing market, and mask a sluggish demand picture that has been weighed down by the Bank of England’s aggressive stream of rate hikes, sharply weighing on mortgage affordability. Sellers are less incentivised to list their properties in the weakening house price market, adding to the strain on supply. 

Shortages of labour in the UK mean that the unemployment rate remains low, and therefore paid workers are generally able to meet their higher monthly mortgage repayments rather than being forced to sell their properties. Mortgage providers have also been reducing some of their offers lately in response to weak demand, as would-be buyers hold off from purchasing a property, holding out hopes that prices ease further and borrowing costs come down next year.

ASOS 

ASOS (LSE:ASC) reported a full-year adjusted EBIT loss of £29 million, below expectations for a loss of £24 million, while revenue slumped 11% to £3.54 billion. In the current year, the e-commerce fashion retailer expects sales to drop by between 5% and 15%. When asked about media reports of its possible sale of Topshop, Asos said ‘it is our policy not to comment on rumours’. 

Asos has been struggling with a difficult summer for sales amid the wet weather, weak consumer demand during the cost-of-living crisis, problems with inventory management that has forced the company to rely on heavy discounting to shift stock, and intense competition from other fast fashion brands. New CEO José Antonio Ramos Calamonte has been attempting to drive a turnaround since he took to the helm in June, but clearly needs more time for it to bear fruit.

In a bearish tilt, analysts at JPMorgan and Berenberg have cut their price targets on Asos today in light of full-year loss and disappointing sales outlook. Once a star stay-at-home stock market winner during the pandemic, Asos has struggled since the highs in 2021 with shares falling sharply. The stock is down over 40% in the past year including a more than 9% slide in today’s trade.