On the first day back for UK investors following the Christmas break, there's plenty going on to keep everyone busy. Our head of investment rounds up the action.
UK markets have reopened higher, playing catch up after the FTSE 100 was closed for a public holiday on Tuesday. The UK index could end the year in positive territory despite the broad pressures on global equity markets, weighed down by rising interest rates, inflation, and the threat of recession.
US markets closed mixed, with the Dow Jones finishing the session modestly higher, while the Nasdaq fell more than 1% as tech stocks underperformed. Hong Kong bucked the negativity overnight in Asia after it announced fresh Covid easing measures.
Russian President Vladimir Putin has banned oil exports from 1 February for five months in retaliation to the West’s punitive price cap of $60 a barrel on Russian seaborne crude. Sales of oil and oil products have helped Russia fund its war against Ukraine this year. However, its economy has crumbled with the mass exodus of international businesses, the raft of sanctions imposed by the West and the substantial cost of its military efforts.
Oil prices are trading lower, with WTI below $80 a barrel having rallied yesterday after the news was announced. Hopes of a rebound in Chinese demand have been supporting oil prices recently as the world’s second-largest economy looks to reopen its borders next month and relax its zero-tolerance to Covid approach. However, Brent crude is still down by more than a third since the peak in March.
BOXING DAY SALES
According to new data from Springboard, there was a 38.8% uptick in shoppers’ footfall on Boxing Day over the first festive period without pandemic restrictions in three years. Central London, in particular, enjoyed a surge of 66%, with shoppers flocking to make the most of the post-Christmas sales. However, UK footfall remains 18.2% below pre-pandemic levels in 2019.
The retail sector had a tough time this year, weighed down by the cost-of-living crisis squeezing sales and increased business costs as a result of inflation putting pressure on margins. Recent Office for National Statistics figures suggested that most adults were planning to cut back on Christmas spending this year. Given the pressures on the consumer, discount days like Boxing Day and Black Friday are more significant than previous years as shoppers wait for key sales and bargain opportunities before they spend.
RYANAIR/WIZZ AIR / EASYJET
Italy’s competition regulator has launched an inquiry into potential price-fixing of flights to and from Sicily by airlines following a complaint from consumer group Codacons. The inquiry is expected to conclude on 31 December 2023. Ryanair, Wizz Air Holdings (LSE:WIZZ) and easyJet (LSE:EZJ) are among the airlines potentially involved as well as state owned ITA Airways.
This investigation could be another potential headwind for some of the big airlines after an extremely difficult year. 2022 was meant to be the year of the comeback for international travel, with a major pick-up in demand post pandemic. However, there have been serious challenges with baggage handling, cancellations, the war in Ukraine, strikes and general disruption which have prompted these stocks to slide year-to-date, resulting in another difficult year for the airline industry.
Shares in Tesla Inc (NASDAQ:TSLA) fell by more than 11% on Tuesday, the worst day in eight months, hitting a more than two-year low. It follows a report that Tesla was looking at reducing its production in January at the Shanghai plant amid rising Covid infections. There are also understood to be worries about a weakening demand outlook as well as stiff competition from electric vehicle rival NIO Inc ADR (NYSE:NIO) in China.
Investors have been extremely cautious towards Tesla since Elon Musk’s acquisition of Twitter as well, after he sold billions of dollars’ worth of shares and amid concerns he could be distracted from the electric vehicle company. Having enjoyed a meteoric surge during the pandemic, Tesla has seen its stock shed more than 70% of its value this year, underperforming the wider embattled Big Tech space, which has fallen out of favour this year as investors shun growth stocks amid the rising inflation and interest rate environment.
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