Must read: FTSE 100, UK government borrowing, Bunzl, Twitter, Nike

While activity in many areas of financial markets is winding down for Christmas, there's plenty still going on to keep equity investors interested. 

GLOBAL MARKETS   

European markets have opened higher, reversing some of yesterday’s losses. Shares in JD Sports Fashion (LSE:JD.) are trading at the top of the FTSE 100 after strong results from Nike Inc Class B (NYSE:NKE) last night that lifted shares in the US sportswear giant up nearly 13% after-hours.

Meanwhile, Bunzl (LSE:BNZL) is trading near the bottom of the UK index despite a relatively upbeat trading statement ahead of its closed period. 

It was a mixed session overnight in Asia with the ASX in Australia outperforming. Experts say Beijing will face a surge in Covid cases over the next two weeks, which will test the Chinese authorities’ resolve to stick to its strict policy unwind. 

Ukrainian President Volodymyr Zelenskyy is expected to meet US President Joe Biden in Washington today in his first visit overseas since Russia’s invasion in February.

UK PUBLIC SECTOR NET BORROWING

UK public sector net borrowing hit £21.2 billion in November up from £13.4 billion month-on-month. Excluding banks, the figure rose to £22 billion, sharply higher than forecasts for £13 billion and October’s reading of £14.2 billion as the public sector spent far more than it received in taxes and other income. This was in fact the highest November figure since monthly records began in 1993. The government faced £7.3 billion in debt interest payments, again the highest November monthly figure on record, rising year-on-year because of a jump in the retail price index (RPI) which affects index-linked gilts. 

The government’s energy support measures created a sharp increase in borrowing. This more than offset a year-on-year rise in tax receipts driven by inflation which has pushed up the price of goods in the UK economy.

However, as the UK economy heads towards a recession, the public purse could suffer a slowdown in tax revenue as businesses and consumers decelerate, which could result in higher public sector borrowing. The Chancellor tried to offset some of these pressures in the Autumn Statement with difficult fiscal choices including spending cuts and tax increases.

BUNZL 

Bunzl said 2022 group revenue is expected to increase by 17% year-on-year at actual exchange rates, while adjusted operating margins are likely to come in slightly ahead of prior guidance, in line with 2021 levels. For 2023, Bunzl said revenue should come in slightly ahead of this year. However, it warned of continued uncertainties relating to the macroeconomic environment, sending shares lower. This week, the distribution business announced plans to sell its UK healthcare division and signed agreements to acquire four businesses, which sent shares down by just over 1% on Tuesday.

Shares in Bunzl have proven to be relatively resilient to the equity market volatility, inflationary pressures and global supply chain bottlenecks with the stock down a modest 2% year-to-date. Bunzl has offset some of these pressures through higher prices as a vendor of essential items that are hard to cut back on during an economic downturn. It has also been pursuing inorganic growth with a series of acquisitions to supplement growth.

TWITTER 

Elon Musk said overnight he will resign as CEO as soon as he finds someone ‘foolish enough to take the job’ after his Twitter poll voted against him this week. Musk said he will just run the software and servers teams after finding a new chief executive. Meanwhile, Musk reportedly said he expects Twitter to be cash flow break even next year. 

Since taking to the helm, he has brought about some drastic and divisive changes including charging users for verified blue tick status, focusing on absolute free speech rather than content moderation, firing top executives, reinstating some controversial accounts and banning links to other social media rival apps. Some of these changes have prompted an exodus among advertisers who have disassociated themselves from the microblogging site. Although the company is expected to replace Musk as CEO, it is likely that the new boss will be largely aligned to Musk in terms of his vision for the business and most importantly his controversial focus as a free-speech absolutist, making this a priority over content moderation and the removal of fake news. 

Meanwhile, one of Musk’s other businesses Tesla Inc (NASDAQ:TSLA) is on track for its worst month and quarter in its history, as the Twitter takeover raises concerns about how dedicated Elon Musk is to the electric vehicle giant.

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Tesla has also been hit by the rising rate environment this year and pressures from inflation as well as global chip shortages, which have contributed to its year-to-date loss of around 65%. Perhaps a new CEO at Twitter will give Musk more time to refocus on the electric vehicle opportunity.

NIKE 

Shares in Nike jumped almost 13% after hours, thanks to better-than-expected earnings and revenue in the fiscal second quarter. Although the environment is difficult, with pressures from rising inventory levels, supply chain issues, a consumer slowdown and cost inflation, Nike has proven that the sheer force of its brand and the strength of its product line are resilient to the challenging macroeconomic headwinds that have plagued US retail this year.

Nike has been offering attractive discounts to lure customers and reduce inventory, however these price reductions have been weighing on margins. It has also been struggling in China, its third biggest market for sales. 

Shares in Nike have had a tough time this year, shedding 37% before the after-hours jump amid the tough backdrop for equities and the consumer.