As stock markets attempt to achieve a Santa rally, our head of investment Victoria Scholar shares the morning's top stories.
European markets have opened higher with China-sensitive Prudential (LSE:PRU) at the top of the FTSE 100 after the Hang Seng surged overnight while defensive stocks like United Utilities (LSE:UU.) and British American Tobacco (LSE:BATS) languish at the bottom of the UK index.
Markets are attempting a last-ditch effort to achieve a Santa rally with Wall Street closing significantly higher last night. Better-than-expected US corporate earnings helped to spur a pick-up in risk appetite which when combined with lighter-than-normal volumes around the holidays resulted in US averages posting their best session since November and the Hang Seng jumping over 2.5%.
UK final Q3 GDP fell to -0.3% versus the preliminary estimate of -0.2% and expectations for -0.2%, negatively impacted by the additional bank holiday day for Queen Elizabeth’s funeral. The services sector grew by 0.1% but the production sector shrank by 2.5% with real GDP now 0.8% below its pre-pandemic levels, revised down from a previous estimate of 0.4%. Real household disposable income suffered the fourth consecutive quarter of negative growth falling 0.5% in Q3. However, the household saving ratio increased to 9% versus 6.7% in the previous quarter.
The data confirms expectations that the UK economy is heading towards a recession given the downward revision to the latest quarterly GDP figure. While service sector output was revised slightly higher, construction swung into negative territory and manufacturing was revised lower. All three sectors have been trending lower recently, underscoring the widespread impact from the broad-based macroeconomic headwinds.
Households’ savings jumped during the quarter because of soaring gilt yields after the mini-budget turmoil which had an impact on pension entitlements. Consumer spending was the weakest since Q1 2021 during Covid lockdowns because of softer expenditure abroad by UK residents. The pressures from inflation, in particular rising energy bills and rent which added to cost-of-living pressures meant less money was available for other expenditure during the quarter.
Cable (GBPUSD) is trading higher, sitting above $1.21. However, this is being driven by higher risk appetite which lifted stocks on Wall Street last night, putting pressure on the greenback against most major currencies including the euro, the Swiss franc, the Japanese yen and the Aussie dollar.
Made.com Group (LSE:MADE) has proposed that it enters into a members voluntary liquidation (MVL) which will allow the company to wind up its operations and any residual value will be distributed to shareholders. On 9 November, Made.com announced its intentions to appoint the administrators while agreeing to sell its brand, domain names and intellectual property to Next and the suspension of shares from trading on the LSE.
Made.com is among the latest victims of the demise of the high street as rising cost inflation and the consumer slowdown damages the retail sector. The furniture company benefitted from a pandemic DIY boom, prompting the business to float on the LSE last June. However, since then it has been dealing with headwinds from the fading post-pandemic interior design boom, problems with the global supply chain that negatively impacted delivery times and the cost-of-living crisis which is squeezing households budgets.
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