Must read: oil, China, AB Foods, Man Utd, UK banking reform

There's plenty of big news to finish the week off. Our head of investment rounds up the action.

GLOBAL MARKETS

European markets have opened the final trading session of the week mixed with the FTSE 100 underperforming. Oil giants such as BP (LSE:BP.) and Shell (LSE:SHEL) are under pressure after a disappointing weak for crude prices.

However, oil prices are trading higher this morning having settled lower for a fifth straight session on Thursday. The Keystone pipeline was forced to shut in the US after one of the biggest outages of the last decade of over 14,000 barrels of crude in Kansas. Oil and WTI hit the lowest levels of the year this week driven by concerns about slowing demand, but prices have been picking up this morning amid pressures on supply.

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The Hang Seng rallied another 2% to hit a four-month high after China’s inflation rate fell to an eight-month low of 1.6% year-on-year in November with the cost of food rising the least in five months. The producer price index fell by 1.3% year-on-year, below analysts’ expectations as China’s economy continue to cool.”

Wall Street snapped a five-day losing streak with the major averages all closing higher. Focus shifts to US producer price inflation data which is due at lunchtime ahead of the Fed’s rate decision next week.

AB FOODS

In a statement ahead of its AGM, Associated British Foods (LSE:ABF) kept its full-year outlook unchanged for lower earnings year-on-year but significant sales growth. The owner of Primark said it expects further input cost inflation, but the volatility of those costs has diminished. Primark is on track to create 27 new stores this year with six open so far. Last month AB Foods reported a 42% jump in operating profit to £1.44 billion for the full-year and a 10% jump in food sales.

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Shares in AB Foods have been enjoying a pick up since mid-October, lifting by the turn in market mood and increased risk appetite. However the stock is still nursing a loss of around 20% year-to-date weighed down by the pressures from energy bills and other costs, geopolitical uncertainty and a softening consumer outlook. Plus, it has been battling the strong dollar which raised the cost of some of its goods. Primark’s biggest selling point is its ultra-low price point, so passing on additional costs to consumers through higher prices is difficult for the retailer.

MANCHESTER UNITED

Manchester United (NYSE:MANU) raised its 2023 revenue guidance from £580-600 million to £590-610 million. It also raised its full-year EBITDA forecast from £100-110 million to £125-140 million because of lower player wage costs, sending shares higher. However it reported a widening quarterly loss to £26.5 million versus £15.5 million year-on-year while quarterly revenues rose from £143.7 million to £126.5 million. The Glazer family has decided not to take its semi-annual dividend after the owners put the club up for sale in November.

There is a lot of uncertainty for the club with the potential new ownership as well as the departure of Cristiano Ronaldo. However investors are cheering its improved guidance and the fact that its dividend will not be paid at a time when the club is struggling. Before November, this year’s share price performance had been lacklustre but after the news of potential new leadership emerged, shares soared bringing its year-to-date gain above 50%.

UK BANKING REFORM

UK Chancellor Jeremy Hunt is unveiling a major sweep of reforms to the financial sector being described as the second ‘Big Bang’. The UK Treasury said it plans to reform short selling, consult on removing the rules for capital deduction at banks and reform securitisation among other changes. There is expected to be a sweep of more than 30 regulatory reforms as the UK desperately tries to maintain its position as a key global financial hub post Brexit. Last month, Paris overtook London to become the biggest stock market in Europe.

Hunt is trying to prove to the financial sector that he is very much pro-business and in favour of the City of London as a key growth engine to the economy. However, there is a risk that the Treasury is acting myopically, quickly forgetting the pre-2008 excessive risk taking that ultimately led to the global financial crisis and the introduction of new regulation to prevent another similar catastrophe.