Must read: oil, Argentina, UK GDP, Inditex, Entain

GLOBAL MARKETS

European markets have opened higher across the board. Entain (LSE:ENT) is trading at the top of the FTSE 100 after its CEO stepped down. At the other end, B&M European Value Retail SA (LSE:BME) is at the bottom of the index, shedding around 6% after SSA Investments sold 2.8% of the company’s shares through a placing of shares at a discount of nearly 3%.

• Invest with ii: Top UK Shares | How to Start Trading Stocks | Open a Trading Account

Oil prices are under pressure, extending losses having shed over 3% on Tuesday to a six-month low after US inflation unexpectedly increased slightly in November. The controversial COP28 climate summit in Dubai concluded with a deal agreed by nearly 200 countries to start reducing global fossil fuel consumption, although over 100 countries wanted more forceful language but faced pushback from Saudi Arabia and OPEC more broadly.

Argentina’s newly elected president, Javier Milei, said he will devalue its currency, the peso by more than 50% against the US dollar as part of his new plans for “economic shock therapy”, a drastic move that has been welcomed by the IMF.

Focus shifts to the Fed’s rate decision tonight when the central bank is expected to keep rates on hold after US inflation inched down to 3.1% in November, while month-on-month prices rose 0.1%. Core prices increased by 0.3%, while year-on-year the core rate was unchanged at 4%, highlighting the difficulty of the final stretch to get inflation back down to the central bank’s 2% target.

UK GDP

UK GDP fell by 0.3% in October, falling short of expectations for 0% growth driven by weakness in the services sector with drops in IT, legal firms, and film production. The poor weather also contributed to weakness in manufacturing and construction. In the three months to October, GDP came in flat, also below forecasts for growth of 0.1% with increases in services offset by declines in manufacturing and housebuilding.

The disappointing growth figures pushed sterling lower against the US dollar and the euro. Chancellor Jeremy Hunt said it is inevitable that GDP will be subdued while interest rates are doing their job.

Today’s figures point to a growing risk of a shallow recession in the UK ahead. All eyes turn to the Bank of England’s rate decision tomorrow with today’s GDP weakness strengthening the case for the third straight hold at 5.25%. And looking ahead, markets are now pricing in 95 basis points of rate cuts in 2024.

• Rolls-Royce and BAE expected to star again in 2024
• Top share picks for 2024: FTSE 100 stocks among nine to own

INDITEX

Inditex reported nine-month net profit of 4.1 billion euros, meeting analysts’ expectations, while in store and online sales slowed to 11% from 19% in the same period last year. Third-quarter sales growth also more than halved to 7% versus 16% in the second quarter. Nonetheless the fashion conglomerate behind Zara said Christmas trading had been strong so far with sales up 14% in the six weeks to 11 December and it raised its 2023 profit margin outlook.

This is a mixed set of results from Inditex, which has struggled with slower sales driven by unseasonably warm weather. However, the group is currently enjoying a pick-up in demand during the all-important golden quarter for retail, thanks to strong demand for Christmas presents which should help to support its full-year profit margin.

Inditex has been successfully navigating the pressures from a weak consumer and sluggish economic backdrop, outperforming rival Hennes & Mauritz AB Class B (OMX:HM B). But despite its intelligent pricing and inventory strategy, it is not immune  to these headwinds which are starting to show up in terms of weaker revenues.

Shares in Inditex are up around 50% so far this year, with a gain of more than 12% over the past month.

ENTAIN

Entain said CEO Jette Nygaard-Andersen is stepping down immediately, with Stella Davis, a non-executive director at the company, taking over the top role on an interim basis. Investors are cheering the news with the stock trading higher by over 4%.

Nygaard-Andersen has been steering the betting and gambling business through a turbulent time including an HMRC investigation launched back in 2019 relating to a Turkish-facing business it owned between 2011 and 2017, which ultimately resulted in a settlement of £585 million. She has also been battling against a struggling share price which is down almost 40% this year, making it a major underperformer on the FTSE 100, as well as pressure from activist shareholders, slowing revenue and regulatory headwinds. Although no reason was given for her departure, following the recent underperformance at Entain, ultimately the buck stops with the CEO.