FTSE 100 suffers worst week since early November and dollar index falls on Trump's inauguration speech

Trump
Credit: Reuters
  • Hong Kong stocks snap three-week winning streak before Trump's inauguration
  • European bourses end the week mixed 
  • FTSE 100 records worst week since early November 
  • Pound rebounds in afternoon trade 
  • Dollar index falls on Trump's inauguration speech
  • Wall Street trims gains as Trump delivers inauguration speech
  • UK retail sales fall sharply in December

                                                                                                    

Market report: Investors check out of supermarkets on cost inflation fears

Investors checked out of supermarket stocks after Exane BNP Paribas warned the outlook for the sector had shifted from “less bad” in 2016 to “worse” this year as it grapples with cost inflation and ongoing headwinds from discounters.

In a decidedly cautious move, which left the bank with no 'buy’ ratings in the UK food retail space, Exane BNP Paribas downgraded Tesco and Sainsbury’s to “underperform” and “neutral”, respectively.

Last year, expectations were low for the sector. However, 2107 is “a different story”, analysts said. “Expectations are high, there’s cost inflation, and the possibility ASDA improves. The long-term labour market and population impact of Brexit could be bad too.”

Risks are building that inflation isn’t fully passed through to the shopper. Although some grocers have nudged up prices, Exane BNP Paribas warns: “Pass through could be far from smooth”.

Tesco has made good progress so far, but as a big box operator that is still about twice the size of its nearest competitor, analysts cautioned: “Consistently growing volume will be a challenge and if volumes go negative as seems quite possible, the de-rating could be sharp.” The bearish note knocked shares, with Tesco closing down 4.3p, or 2.1pc, at 198.3p and Sainsbury’s surrendering 5.3p to finish at 262.7p. Peer Morrisons also lost ground, down 1.1p to 240p.

On the broader market, the FTSE 100 recorded its worst week since before Donald Trump’s US presidential election win. It finished the week down 139.37 points, or 1.9pc, at 7,198.44 - its biggest weekly fall since the week ended November 4.

Pharma giant AstraZeneca also found itself among the laggards after its rival Bristol-Myers Squibb decided not to seek accelerated US approval for a combination of its two immunotherapy drugs as an initial treatment for lung cancer. Shares dropped 150p to £43.19.

Elsewhere, Royal Mail extended its losses a day after it released a disappointing nine month trading update, suffering its worst two-day losing streak since mid-2016. Morgan, Stanley, Investec, Credit Suisse and Jefferies all slashed its price target. Neil Glynn, of Credit Suisse, said: “Any further deterioration in market conditions may require management to dig deeper in cost cutting, with timing potentially unfortunate as the chief financial officer’s exit looms.” Shares fell 8.5p to 414p.

Meanwhile, Costa Coffee and Premier Inn owner Whitbread eked out gains of 49p to £41.20 after Barclays lifted its rating to “equal-weight” from “underweight”. The bank expects a good set of third quarter results next week.

On the mid-cap index, motoring group AA went into reverse, down 16.9p to 254p, following a price target downgrade. Liberum cut its price target to 340p from 375p citing low earnings and higher debt. It also trimmed its 2018 earnings estimate by 3pc.

Chemicals maker Synthomer set a new record high, surging 46.8p to 424.3p, after the company said it sees full-year profits beating estimates, buoyed by stronger-than-expected trading in Asia and Europe.

Over on Aim, Midatech, a specialty pharmaceutical developing cancer drugs, jumped 16p to 142p after it forecast that full-year revenues will come in ahead of expectations.

Finally, shares in SuperGroup dipped 31p to £15.41 after founder Julian Dunkerton offloaded £6m worth of shares. It comes almost a year after he sold £48m of shares to fund his divorce.

With that, it's time to close our blog. Thanks for following our markets coverage this week. 

Wall St trims gains as President Trump speaks

US stocks trimmed gains, shortly after Donald Trump started his inaugural speech during his swearing-in as the 45th US president.

  • The Dow Jones Industrial Average was up 50.88 points, or 0.26pc, at 19,783.28
  • The S&P 500  was up 5.41 points, or 0.24pc, at 2,269.1
  • The Nasdaq Composite was up 10.56 points, or 0.19pc, at 5,550.65.

Dollar index falls as Trump makes his inauguration speech

Here's a quick snapshot of how markets are reacting to Trump's inauguration speech: 

  • Mexico's peso pares gains further as Trump delivers inauguration speech
  • Dollar index falls 
  • US stocks hit session low
  • Dow, S&P 500 and Nasdaq up just about 0.2pc
Dollar and US stocks wobble during Trump's inauguration speech Credit: AP

FTSE 100 suffers worst week since before Trump's election win

The FTSE 100 has recorded its worst week since before Donald Trump's US presidential election win. 

It ended the week off by 0.9pc at 7,198.44, its biggest weekly fall since the week ended November 4 when it tumbled 1.33pc. 

Meanwhile, other European bourses made little movement as investors remained on the sideline as the awaited Trump's inauguration. The DAX rose 0.18pc, the CAC added 0.17pc and the IBEX dipped 0.03pc. 

 Chris Beauchamp, of IG, said: "For now the buyers have the upper hand in most stock markets but enthusiasm is distinctly lacking, with yesterday’s losses barely recovered. It seems highly unlikely that the new president will provide any surprises in his inauguration speech, but it has provided the perfect excuse for most traders to end the week early.

"Investors will come back on Monday ready to see what executive orders Trump has in store for them, and perhaps we  will get a clearer sense then of whether the usually weaker period post-inauguration for stocks will apply this time around." 

Dollar flat as investors look to inauguration speech

 Market uncertainty ahead of the inauguration of US President-elect Donald Trump kept the dollar muted in choppy trading on Friday after a volatile week that underlined the growing uncertainty over how Trump will govern.

The US currency was little changed from its late Thursday levels against a basket of major currencies, but remains 3.5pc higher since Trump's election victory in November. However, it has shed more than 1 percent in value so far in January as concerns grow over Trump's protectionist rhetoric and recent comments about his dissatisfaction with the strong dollar.

Dollar traders largely took bets off the table, analysts said, a reflection of Friday's dearth of US data and investors' anxiety over what the new president will say in his inaugural address.

"Everybody’s waiting for Trump," said Charles St-Arnaud, senior strategist and economist at Nomura Securities International in London.

"Even though traditionally the inauguration speech is not a speech where you lay down details on your policies, Trump is unconventional so he could change the convention on that one."

The dollar index .DXY was flat at 101.130 and was little changed for the week.

Report from Reuters

Pound rebounds in afternoon trade

Another rollercoaster trading session for the pound. After sliding to an intraday low of $1.2261 against the dollar in morning trade following the release of UK retail sales data, the pound has now regained momentum. 

It is currently trading up 0.16pc on the day at $1.2322. 

Credit: Bloomberg

Michael Hewson, of CMC Markets, explains: "The pound took a bit of knock, before bouncing back, after December retail sales showed a sharp decline of 2pc, confounding the optimism that came out of a raft of updates from various retailers about their Christmas trading activity. Over the quarter as a whole, sales were still positive, but there was some evidence that higher prices were starting to weigh on consumption.  

"On an annualised basis sales still rose 4.9pc; however this was well down on Novembers 6.4pc, while this is disappointing this shouldn’t be a surprise given that over the last 15 years the sort of sales growth above 6pc has been very much the exception. If history is any guide annualised sales growth is likely to slow further in the coming months."

What will Trumpism look like in practice?

As the celebrations get underway ahead of Trump's inauguration in Washington, Michael Cembalest, chairman of market and investment strategy at JP Morgan Asset Management, investigates what Trumpism will look like in practice: 

“Here’s one way to look at the current situation in the US: employment, housing and consumer activity are doing OK, but businesses remain cautious, even with all-time lows in real interest rates. The big question for investors now is how will Trump’s policies affect this backdrop in the US?

  1. Financial markets appear to be pricing in a benign “American Enterprise Institute Presidency,” meaning that they anticipate plenty of deregulation, corporate tax cuts and little disruption from some very transformational tax proposals, limited (if any) action on trade, tariffs and deportations of undocumented workers, a large military expansion combined with an isolationist foreign policy, infrastructure financed through taxes on offshore profits and public-private partnerships, a gradual, non-disruptive dismantling of the Affordable Care Act. Given all of the above, markets also seem to be expecting a modestly higher and steeper yield curve that’s great for banks, but not high enough to derail the housing expansion or worsen corporate debtor solvency.
  2. Whether this benign view is accurate or not is an open question. The right mix could be stimulative, adding 0.2pc to 0.4pc to US GDP growth without much damage. But too much emphasis on tax cuts, government spending or tariffs could result in large budget deficits, higher interest rates, a spike in the dollar, rising Federal debt ratios (and a possible ratings downgrade) and higher inflation.
  3. There are a lot of tea leaves to read, since the outcome depends on the President-elect’s intentions, the disposition of House/Senate majority leaders and the degree to which Democrats filibuster Trump policies.
  4. Estimates of the deficit and debt consequences of Trump tax and spending plans vary significantly depending on the extent to which they are enacted. Ultimately it’s likely the US will end up somewhere in between, with a mix of infrastructure spending (in sizes way below figures Trump has cited), corporate tax cuts, small personal tax cuts (if any), some trade restrictions on Mexico, deregulation of healthcare/financials/energy, a modestly higher budget deficit and 3pc+ on the 10-year Treasury by the end of 2017.
  5. While the markets look to us to have already priced in corporate tax reform, the details are not clear yet, and some proposals are quite transformational. In the long run, these policies could eliminate distortions in the tax code, encourage capital spending, reduce excessive leverage and reduce incentives to shelter income or move HQ offshore through tax inversions. However, the adjustment period could be disruptive. There are likely to be winners and losers from such changes, particularly if the dollar does not rally as expected by some economists.

A surging dollar under Trump poses biggest threat to global economy, BlackRock boss warns

A surging dollar under Trump poses biggest threat to global economy, Larry Fink, of BlackRock, has warned. From Davos, Ambrose Evans-Pritchard reports: 

The surging dollar poses the biggest single threat to the global economy and will be extremely difficult to manage under the incoming Trump presidency, the world's largest investment fund has warned. 

Larry Fink, head of the $4 trillion giant BlackRock, said sweeping plans for tax cuts and fiscal stimulus in the US were already causing markets to price in a monetary squeeze by the Federal Reserve, potentially driving an upward spiral in the dollar. "It's going to be very hard to navigate," he told the World Economic Forum in Davos. 

onald Trump has sweeping plans for tax cuts and fiscal stimulus in the US Credit: AFP

One worry is that the stronger dollar undermines the competitiveness of core US manufacturers, the very sector that Donald Trump has vowed to promote. This will make it even more likely that he will turn to trade warfare, or seek to pressure the Fed into weakening the dollar by delaying rate rises.

"There is going to be great tension with the Fed over these issues," he said.

The other is that ballooning fiscal deficits could draw in a flood of foreign capital and yet more US dependence on powerful creditors in Asia, leading to a combustible situation if diplomatic relations deteriorate.  

Continue reading here

Wall Street opens higher ahead of Trump inauguration

US stocks rose at the opening bell ahead of Trump's inauguration as the 45th president of the US. 

Here's a quick snap shot of how markets opened: 

  • Dow Jones: +0.4pc
  • Nasdaq: +0.32pc
  • S&P 500: +0.34pc

US stocks fell during two-thirds of the US presidential swearing-in ceremonies since 1900

Nice chart from Bloomberg, showing opening day ups and (mostly) downs during US presidential inaugurations. 

Wall St set to rise ahead of Trump inauguration

US stocks looked set to advance on Friday, with investors counting down to Donald Trump's inauguration as the 45th president of the United States.

Trump, a New York businessman and former reality TV star, is scheduled to be sworn in around midday by Supreme Court Chief Justice John Roberts in Washington.

Investors will focus on Trump's inaugural speech to get more insight into his economic policies.

"All eyes will be on the content and style of Trump's inauguration speech," Morgan Stanley strategists led by Hans Redeker wrote in a note. "The more 'Presidential' this speech comes across, the better the outcome for markets."

Trump's campaign promises of tax and regulatory reforms and higher infrastructure spending had driven Wall Street to multiple highs post-election. However, the Trump trade has been unraveling in recent weeks as investors wait to see how he will carry out his ambitious plans.

 Report from Reuters

'Chicken King' Boparan receives £350m bid for Fox's biscuits

Food tycoon Ranjit Boparan, known as the "Chicken King" due to his 2Sisters poultry business, has received an approach for Party-Ring maker Fox's Biscuits from a mystery bidder.

Mr Boparan owns Fox's Biscuits following the 2011 £300m takeover of Northern Foods, which also handed him control of Goodfella's frozen pizzas.

Fox's biscuits were fronted by a campaign including Vinnie, the Panda

His company, Boparan Holdings, disclosed that it had received a "preliminary approach for Fox's Biscuits, the trading name of Northern Foods" without revealing the bidder's identity.

Sources believe that it is the Ontario Teacher's Pension Fund, the owner of Burton's Biscuits, as the two firms were in discussions last year about a deal. 

"The group’s expectation is that any formal offer for Fox’s Biscuits would be at a valuation in the region of £350m," the company said in a statement to the Luxembourg Stock Exchange, where debt is listed.

Report by Ashley Armstrong (Read more here)

Outcome of Trump inauguration could be 'brutal' for markets

As  we await Trump's inauguration speech later today, Naeem Aslam, of Think Markets, highlights the two things that are at the peak for investors: 

  1. Anxiety; and
  2. Expectations. 

"During his press conference, stocks reacted negatively due to the absence of vital information such as trade tariff and fiscal spending but we are hoping that today he will address them at his first opportunity because if he fails to conscience the market, the outcome could be brutal."

Aslam says thinks brings the risk of "bigger disappointment" which could derail the massive rally which equity markets have enjoyed since Trump's victory. 

It's also worth noting that precious metals are rising today as traders look to "hedge their bets". 

He adds: "The dollar index which had assurance from the Fed president and economic data is trading cautiously as Donald Trump has indicated that he is not happy with a stronger dollar." 

Chemicals group Synthomer soars after 'reverse profit warning'

Shares in Synthomer set a record high, up by more than 11pc, after the mid-cap group said it sees its full-year profits coming in ahead of expectations. Alan Tovey reports: 

Chemicals maker Synthomer jumped to the top of the FTSE 250 leaderboard after it reported better-than-expected performances in Europe and Asia and a boost from the pound’s weakness.

Reporting on fourth quarter and full-year trading, the company - which makes polymers used in construction, textiles, paper and surgical gloves - forecast annual profits of £120m.

This beat City expectations of profits between £92m and £104m and sent the shares up 11pc to 419p, their highest level ever.

The slump in sterling since the EU referendum in June compounded Synthomer’s profit gains, with the company saying it expected foreign exchange movements to deliver a £12m boost to profits.

Operational and product improvements also contributed to the strong performance, the company said.

Looking ahead, Synthomer cautioned that while it expected material prices and macroeconomics to be “volatile” in the coming year, it still believed trading would be resilient in Europe in 2017.

Continue reading here

Trump enters office with highest debt to GDP ratio of any president since Truman

Interesting fact: Donald Trump enters office with the highest debt to GDP ratio of any president since Truman in 1948. 

Danske Bank does not expect 'any surprises' from Trump's inauguration speech

This evening will be day one of the President Trump era.

Danske Bank does not expect his inauguration speech to include any surprises but from now on Trump will take his business from Twitter to the Oval office (while arguably keeping his strong presence on Twitter).

Sverre Holbek, of Danske Bank, says: "The first 100 days of the Presidency are usually the most productive, so it will be interesting to see how quick Trump will be off the bat."

Credit: Fivethirtyeight.com

Half-time update: European bourses mixed as nerves kick in ahead of Trump inauguration

It's a mixed bag in Europe this afternoon as a mood of caution swept trading floors ahead of Donald Trump's inauguration. 

Here's a look at the current state of play: 

Credit: Reuters

Connor Campbell, of SpreadEx, said: "It appears that Trump’s inauguration has drawn all focus this Friday, leaving little for the market to actually work with; perhaps investors should enjoy this moment of relative calm, however, given that things could be a lot more choppy once Trump is officially in charge."

Bonmarché sales rise despite dismal Christmas

Shares in retailer Bonmarché have jumped 4.4pc today after it stuck to its full-year profit outlook despite a disappointing trading period. Our retail editor Ashley Armstrong reports: 

Bonmarché has reassured its investors with a rise in quarterly sales, despite a poor performance online over Christmas.

The value womenswear retailer posted a 3.3pc lift in sales for the 13 weeks to December 24, with like-for-like sales at stores open more than a year rising by 0.8pc.

However Bonmarché failed to enjoy any festive boost as like-for-like sales in the five weeks to Christmas Eve fell 3.4pc, while online sales plunged by 14.3pc.

The dismal Christmas performance weighed on its performance in the first three-quarters of its financial year, dragging sales across the 39 weeks down 5.3pc. 

Shares in Bonmarché took a battering in September after the retail chain issued its second profit warning of the year, blaming an Indian summer for putting people off buying its autumnwear.

Helen Connolly, who replaced Beth Butterwick as boss over the summer, has ruled out a radical strategy overhaul but said that the company's poor online performance "continues to be a key area of focus". 

Continue reading here

'Uncertainty and volatility ahead' as markets await Trump inauguration

Markets remain subdued in mid-morning trade  amid concern Trump may struggle to deliver on his stimulus promises.

Ahead of his inauguration, Michael Hewson, of CMC Markets, said: "European markets tread carefully ahead of controversial US president-elect’s inauguration. With his distinct lack of political prowess but seemingly clear vision for his time in office, we look set for a roller-coaster ride of political events.

"This coupled with mixed data from China which looks to bring a day of uncertainty and volatility ahead. With solid GDP figures but declines in Industrial production and fixed asset investment, it paints an uncertain picture." 

Meanwhile, Mike van Dulken, of Accendo Markets, questions which Trump will turn up tonight - the calm statesman-like figure or the outspoken and unscripted figure. 

“Equities are positive this morning, but only just as fresh USD weakness from a now slightly less hawkish Yellen hinders equities via reciprocal - albeit waning - strength in GBP and EUR. This while markets wait to see who turns up to this evening's Trump inauguration. The calm statesman-like figure from election night, who could reassure markets about his policies. Or the outspoken, unscripted, media scolding mega-tweeter we have had to deal with since November."

 Donald Trump's inauguration live: Countdown to swearing in the new President

Follow the latest on the countdown to Trump's inauguration on our live politics blog: 

Donald Trump's first speech as US president will be "personal" and "philosophical", his spokesman has said.

The tycoon-turned-politician will deliver his inaugural address to hundreds of thousands of people gathered in Washington DC and millions watching around the world this afternoon.

Mr Trump's incoming press secretary Sean Spicer told reporters on Thursday: "It's going to be a very personal and sincere statement about his vision for the country.

"He will discuss what it means to be an American, the challenges that we face, as members of the middle class, that they face.

"He'll talk about infrastructure and education. Our manufacturing base.

"I think it's going to be less of an agenda and more of a philosophical document, a vision of where he sees the country, the proper role of government, the role of citizens."

Check out our live politics blog:  Donald Trump's inauguration live: Countdown to swearing in the new President

European bourses turn positive but traders remain cautious ahead of Trump inauguration 

European bourses have all turned positive in mid-morning trading as investors remain cautious ahead of Donald Trump's inauguration. 

The FTSE 100 is now up 0.09pc, the DAX has added 0.28pc, the CAC 40 is 0.55pc higher and the Spanish IBEX has climbed 0.41pc. 

Joshua Mahony, of IG, said: "After an incredibly unpredictable 2016, today’s US inauguration looks set to make the once seemingly impossible, become possible. Donald Trump has somehow managed to gain the Presidency without the support of the lobbyists or his own party.

"At a time when people are seeking out change, Trump offers that, and the big question from here on in is whether he will deliver on his promises. Trump’s promise of a major fiscal stimulus plan has come as a welcome respite from the monetary policy led days gone by. Yet, with expectations come the chance of disappointment, and the future of the US stock market seems hugely dependent on Trump delivering on his promises." 

How markets have preformed since the US presidential election

As markets remain subdued and caution prevails before Trump's inauguration, let's take a look at how markets have performed since the US presidential election: 

UK retail sales: Brexit headwinds set to blow a little harder in 2017

Berenberg’s Senior UK Economist, Kallum Pickering, highlights some key points after UK retail sales fell sharply last month: 

  1. The consumer is king: UK consumers are enjoying life, helping the economy to cope with the Brexit shock. Unfortunately, this may not last much longer. The solid growth in retail sales of 1.4pc qoq in Q4 (1.9pc qoq in Q3) suggests the UK economy ended 2016 on a stable footing. The ten year average quarterly growth rate is 0.5pc. Retail sales provide the timeliest official indicator of household demand and spending which makes up two-thirds of GDP.  The modest slowdown in the quarterly growth rate supports our call that GDP growth slowed to around its trend rate of 0.5pc qoq in the final quarter of last year from 0.6pc qoq in the third quarter. 
  2. Broad based correction on a monthly basis but annual growth remained strong: On a monthly basis, retail sales ex. fuels declined by 2.0pc following gains in the previous two months. Keep in mind, monthly data is volatile. We should not look too much into the larger-than-expected monthly correction.  On a monthly basis the correction was broad based across all major categories with the largest declines occurring in household goods (7.3pc mom) and textiles, clothing and footwear (-3.7pc mom). According to the Office of National Statistics, the strong Black Friday sales in November may have exacerbated the drop in December.
  3. Brexit headwinds set to blow a little harder in 2017: In the long-run, the major drivers of real spending are employment, real wages and households’ appetite for debt. During the past two years, solid gains in real incomes and rising employment have led to above-trend growth in real consumption. Looking ahead, headwinds from the Brexit vote may begin to blow a little harder. We expect real consumption growth to slow from an average rate of 2.6pc yoy in 2015 and 2016 to 1.7pc in 2017 and 2018 as real wage gains are eroded by rising inflation (2.5pc in 2017 and 2.4pc in 2018). Slowing job gains now that the labour market has reached full employment could further reduce demand momentum.
  4. Risks tilted to the upside: The recent surge in consumer credit growth to a decade high – in part induced by the aggressive BoE easing in August – shows that households’ appetite for debt is rising again. While the return to old habits of excess borrowing may herald a return of the cyclical dynamics of boom-bust, it creates upside risk to our calls for growth over the medium-term. 

Retail sales disappoint in December as prices begin to climb

Here's our full report on retail sales by Jon Yeomans: 

Retail sales fell short of expectations in December, despite a surge in shopping ahead of Christmas, as prices on the high street began to creep up.

The quantity of goods bought fell 1.9pc between November and December, far in excess of the 0.4pc pencilled in by forecasters. The amount of money spent fell 1.3pc, according to the Official for National Statistics.

Compared with December 2015, sales were ahead.

On a quarterly basis - for the three months to the end of December - volumes rose 5.6pc compared to the same period a year ago, while total sales rose 5.9pc, largely thanks to a stronger performance from the sector in October and November.

Kate Davies, a senior statistician at the ONS Senior Statistician, said retailers enjoyed “a strong end to 2016”.

“Sales in the final quarter [were] up 5.6pc on the same period last year, although the amount bought fell between November and December once the effects of Christmas are removed,” she said.

“There were some notably strong figures from smaller retailers, in particular butchers, who reported a significant boost in sales in the run-up to Christmas."

Analysts react: Rising inflation and falling employment start to take their toll

Samuel Tombs, of Pantheon Macroeconomics, highlights that rising inflation and falling employment is starting to take their tolls after UK retail sales missed expectations. 

"The sharp decline in retail sales in December is the first sign that rising inflation and slowing job gains are forcing shoppers to curb their consumption. Admittedly, unusually mild weather probably was the main driver of the 3.7pc month-to-month drop in clothing sales.

"But sales fell across the board, with food, department store, household goods and non-store sales dropping by 0.6pc, 1.2pc, 7.3pc and 5.3pc month-to-month respectively. The strength in retail sales in prior months therefore appears to have reflected consumers bringing forward purchases in order to avoid impending price rises."

Credit: Pantheon Macroeconomics

Meanwhile, Neil Wilson, of ETX Capital, notes that sterling is taking a "pasting after a pretty shoddy set of retail sales figures" for December.

He adds: "Hopefully this is a blip and not a sign of a slowdown in consumer spending. We must note that the ONS said the estimates for December 2016 do not include “Black Friday”. It rarely does to read too much into a single month-on-month set of figures, and we prefer instead to consider quarterly figures for a more even view of the market.

"But the worry is that consumer sentiment is fickle and based largely on ballooning unsecured debt. Consumer spending has been frothy since Brexit but it’s liable to correct itself once the full impact of leaving the single market is factored in." 

UK retail sales reaction: Q4 - the 'last hurrah' for shoppers? 

Here's some reaction to the torrid retail sales figures: 

Pound drops below $1.23 after UK retail sales suffer sharpest fall since April 2012

The pound slipped below $1.23 against the dollar after UK retail sales missed forecasts. 

UK retail sales volumes fell by 1.9pc year-on-year in December - its biggest drop since April 2012. 

In its wake, sterling skidded to a day low of $1.2290 against the US dollar. 

Credit: Bloomberg

UK retail sales fall sharply in December

Ouch! Forecasters weren't expecting that! 

British retail sales volumes dropped sharply in December, by 1.9pc year-on-year, far below economists forecasts which pointed to a decline of just 0.1pc. 

The slide marks its biggest fall since April 2012. 

 However, data from the ONS showed retail sales growth in the fourth quarter overall stood at 1.2pc, enough to make a 0.1 percentage point contribution to economic growth over the period.

The weak December figures, which can be volatile month-to-month, contrast with trading reports from major retailers who mostly reported a strong Christmas season

 "Retailers saw a strong end to 2016," ONS statistician Kate Davies said.

Inauguration days are rarely good for stock markets

Here's an interest table showing how the S&P 500 has performed on previous inauguration days: 

FTSE 100 heads for worst week since before Trump's election win

The FTSE 100 is on track for its worst week since before Trump triumphed in the US presidential election. 

So far this week it has lost 1.94pc, that's its biggest weekly fall since the week ended November 4 (the week before the US presidential election) when the UK's leading index fell 4.33pc. 

 Michael Hewson, of CMC Markets, said: "It feels like it’s been a long time coming and while financial markets have had a while to get used to it the day has finally arrived. It’s been 73 days since Donald Trump won the US election and the phoney war is about to come to an end as the world gets ready for the inauguration of the 45th President of the United States.

"Financial markets, having rallied strongly since November 8th are now showing the first signs of some nervousness as investors now adjust to the reality and immediacy of a Trump Presidency, with the Dow declining for five days in succession.

"Having overdosed on the expectations of significant tax cuts and infrastructure investment the question now moves to whether the new President will be able to deliver on his campaign promises now that the time has come for action to replace all of the words." 

Davos 2017: Philip Hammond on centre stage as World Economic Forum draws to a close

Jes Staley, the boss of Barclays, suggests cities on the Continent can't steal London's crown as a global financial centre because it doesn't have the "ecosystem" to do so.

From Davos, Szu Ping Chan reports:

He says it would be "incredibly simple and wrong" to say London's status as the "capital of capital markets" is because there are a couple of banks based in London.

If some move jobs overseas, this is unlikely to be a game changer, he adds.

Jes Staley, the boss of Barclays Credit: Bloomberg

Britain's legal system has helped to underpin the efficient operation of capital markets in a way that is not matched by the rest of Europe. The rest of the EU knows this, he says.

Follow all the action from Davos on our live blog: Davos 2017: Philip Hammond on centre stage as World Economic Forum draws to a close

Dollar skids on Yellen comments and as markets await Trump inauguration

The dollar dipped this morning after Fed chair Janet Yellen spoke of gradual rate hikes, in a speech that was less hawkish than expected, while investors remained cautious ahead of Trump's inauguration later today. 

The dollar index slipped 0.2pc against a basket of major currencies to 100.97.

Yesterday, the dollar index had hit a high of 101.73 on upbeat US job and housing data.

Analysts eye UK retail sales data

UK retail sales data will be released at 9.30am this morning. Forecasts suggest there will be a dip in the headline figure. 

Previewing the data release, Michael Hewson, of CMC Markets, said: 

"Some of the recent trading updates from various retailers would appear to suggest that December saw a decent expansion in retail sales, though you wouldn’t know it to see what expectations are for the monthly numbers. A decline of -0.3pc excluding fuel is expected, though the annualised number is expected to 7.6pc from 6.6pc." 

European bourses in retreat ahead of Trump inauguration

A cautious mood swept European trading floors this morning as investors remained on the sidelines ahead of Trump's inauguration later today. 

Interestingly, European bourses are on track for their worst weekly performance since before Trump's US presidential election win in early November. 

Here's a look at the current state of play: 

  • FTSE 100: -0.07pc
  • DAX: -0.07pc
  • CAC: Flat
  • IBEX: +0.25pc

 Mike van Dulken, of Accendo Markets, said: "Calls for a flat open come after small losses on Wall St last night and a mixed picture in Asia overnight. Investors are looking ahead to this afternoon’s inauguration of the 45th US President, even solid overnight Chinese GDP failing to provide any meaningful positive impetus overnight. If anything, it is a weaker USD having most impact, after a slightly less hawkish tone from Yellen, the stronger resulting GBP and EUR hindering FTSE and DAX sentiment." 

Hong Kong stocks snap 3-week winning streak before Trump's inauguration

Hong Kong stocks ended a thinly-traded week down and snapped three weeks of gains on Friday, as investors were wary ahead of Donald Trump's inauguration as the 45th U.S. president later in the day.

The benchmark Hang Seng index fell 0.7pc, to 22,885.91 points at the close, while the China Enterprises Index lost 0.8pc, to 9,715.72 points.

The benchmark index lost a modest 0.2pc this week.

"The key risk is Trump's trade policy. The external risk of China is obviously heightened, at the same time how Fed will move policy rates in the U.S," said Raymond Yeung, chief economist of Greater China for ANZ in Hong Kong.

There was little reaction to late afternoon news that China's five biggest banks have been approved to temporarily lower the amount of cash that they must hold as reserves, to ease seasonal liquidity tightness ahead of the Lunar New Year holiday. 

Interest-sensitive stocks including property developers  and utilities firms retreated more than 0.8pc on Friday, after Federal Reserve Chair Janet Yellen said that the US central bank should continue to raise interest rates gradually to keep jobs plentiful and inflation low.  The city's interest rates usually follow the United States, thanks to a currency peg to the greenback.

Report from Reuters 

China GDP beats expectations

Overnight, data from China showed the economy enjoyed faster-than-expected growth of 6.8pc in the fourth quarter, buoyed by higher government spending and record bank lending. 

The economy expanded 6.7pc in 2016, the National Bureau of Statistics said on Friday, near the middle of the government's 6.5-7pc growth target but still the slowest pace in 26 years.

Forecasts pointed to growth of 6.7pc for both Q4 and the full year. 

World's top bankers excited over Trump presidency

While markets are decidedly cautious about Trump's inauguration later today, the world's top bankers are rather excited about a Trump presidency. From Davos, Ben Marlow reports: 

The bosses of some of the world’s biggest financial institutions have spoken in glowing terms about Donald Trump’s presidency ahead of his inauguration in Washington DC.

Speaking in Davos, a panel of bank chief executives said that Trump could herald the start of a new era of economic growth driven by a booming banking industry for the first time in nearly a decade.

Mary Callahan Erdoes, chief executive of JP Morgan Asset Management, almost struggled to contain her excitement at the prospect of a Trump administration: “The US economy will take off in a way that it hasn’t for many years. There has been a pendulum switch that will be very positive for US companies and should cascade to other businesses outside the US. It will be great for the next couple of years.”

The bosses of some of the world’s biggest financial institutions have spoken in glowing terms about Donald Trump’s presidency ahead of his inauguration in Washington DC.

Speaking in Davos, a panel of bank chief executives said that Trump could herald the start of a new era of economic growth driven by a booming banking industry for the first time in nearly a decade.

Mary Callahan Erdoes, chief executive of JP Morgan Asset Management, almost struggled to contain her excitement at the prospect of a Trump administration: “The US economy will take off in a way that it hasn’t for many years. There has been a pendulum switch that will be very positive for US companies and should cascade to other businesses outside the US. It will be great for the next couple of years.”

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Fed's Yellen says 'reasonable' for Congress to want explanations

For those who missed Yellen's speech yesterday, here's what the Fed chair had to say: 

Federal Reserve Chair Janet Yellen on Thursday said it is "reasonable" for Congress to ask questions about Fed policy and why certain decisions deviate from recommendations from well-known monetary policy rules.

But in response to a question from Stanford professor John Taylor, Yellen reiterated her opposition to a proposed law that would require the Fed to stick to Taylor's well-known policy rule and to submit to an audit should it deviate. Such a law, she said, opens the Fed to short-term political pressures.

Report from Reuters

Agenda: Caution prevails in financial markets ahead of Trump inauguration

Good morning and welcome to our live markets coverage. 

 Caution prevailed in financial markets on Friday ahead of US President-elect Donald Trump's inauguration, even as China's economic growth beat expectations and Federal Reserve Chair Janet Yellen toned down her earlier hawkish policy stance.

China's fourth-quarter gross domestic product growth came in at 6.8 pc, versus forecasts of 6.7pc, supported by higher government spending and record bank lending.

The dollar inched down after Federal Reserve Chair Janet Yellen said that gradual monetary adjustments were prudent, although she warned against letting the economy run hot.

Meanwhile, back at home, we've got UK retail sales due for release at 9.30am. 

Also on the agenda today: 

Trading update: Close Brothers, Record, Bonmarche Holdings

Economics: retail sales m/m (UK), PPI m/m (GER) consumer confidence (EU)

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