European markets are on the slide, rattled by a 386-point drop in the DJIA and a 2.47% decline in the Nasdaq. Domestic news should have been positive for the London index as the Bank of England started making steps to prepare lenders for a no-deal Brexit but though this has supported the pound against the dollar and the euro it was not enough to help equities. In the US the flight from stocks continues unabated as bond yields remain high but individual companies like Sears are also weighing on the indices.
Burberry leads fallers
Though China/US trade frictions are out of the headlines for the moment the underlying tensions are working their way into the stock markets, hitting particularly hard brands that are popular in China. A slew of economic revisions now forecasts China to grow at around 6% this year rather than in the mid 6% as previously expected, causing fashion and luxury goods names like Burberry (LON:BRBY), Luis Vuitton Moet Hennessey and Gucci owner Kering (PA:PRTP) to trade lower. In recent quarters Burberry in particular has made up for declining demand in Europe with near double digit demand growth in China but with that under threat investors are beginning to reshuffle their portfolios cutting their luxury brand exposure, in particular now that bond yields are looking particularly attractive. Burberry led the FTSE fallers today with an 8.24% decline and in Paris LVMH and Kering dropped 7.9% and 9.9% respectively.
Sears heading for exit
In a sign that maybe all is not as perfect in the US economy as it seems one of the country’s largest retail chains Sears seems to be heading for bankruptcy. US consumer confidence hit its highest level in years this August while the country’s economic growth is moving at a brisk pace of over 4%. But over the coming quarters this is unlikely to be sustained as it is being fuelled by President Trump’s economic boosters which are about to come to an end and a $1.5 trillion tax cut package. The once formidable Sears has been losing money and closing shops for a number of years while its debt toll kept stacking up and the economic outlook is also beginning to make an impact. The company is due to repay $134 million of its debt on Monday and is reportedly in talks with its largest shareholder, Edward Lampert, the company’s hedge-fund manager chief executive about a possible rescue package. However, the markets are highly sceptical that there will be a positive solution and the stock is trading down 35% on the day.
"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."