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Supermarkets Sweep FTSE 100 To New Record Highs

Published 11/01/2017, 05:42
Updated 03/08/2021, 16:15

Europe

It’s been another choppy day for European markets with the FTSE100 once again outperforming and picking up where it left off yesterday by once again making new record highs, and on course for record breaking eleventh day of gains. These gains were once again driven by some initial sterling weakness; a strong Christmas performance from UK supermarkets, as well as a sharp rise in Chinese factory gate inflation pushed the basic resource sector higher led by Anglo American (LON:AAL), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO).

Chinese factory gate prices for December showed a rise of 5.5% well above expectations of 4.8%, marking a net increase in prices of 6.3% since last August, driven by higher commodity prices and drawing a line under any lingering deflationary concerns about the Chinese economy.

The strength of these numbers rounds off a week of global inflation prints that came in higher than expected following on from evidence of higher prices in Germany, the UK and the US, which would appear to reflect the belief that we could see higher inflation globally as we head further into 2017.

Supermarkets have had a decent day today helped by some decent pre-Christmas trading performances with perennial underperformer WM Morrison showing further signs that its turnaround plan appears to be working by posting its best Christmas performance in seven years.

A 2.9% rise in like for like sales and a rise in overall sales of 2% appears to show that the focus on quality and premium lines is starting to bear fruit, as the company cemented its position as the UK’s fourth largest supermarket.

The latest Kantar Worldpanel survey showed that UK shoppers spent an extra £480m over the amounts spent in 2015 as retailers reported record sales over the Christmas period. The latest BRC retail sales numbers for December also reflected this pattern with a 1% increase in December with food sales doing particularly well. Tesco (LON:TSCO) share price has also risen on anticipation of similarly positive numbers when they report later this week, while Sainsbury has lagged behind a little.

The Kantar survey showed little in the way of weakness with Iceland, Waitrose, and the Co-op all reporting improved numbers, while Aldi and Lidl continue to lead the way in terms of sales growth, reinforcing the intense competition in the sector.

Also doing well is Premier Inn owner Whitbread (LON:WTB), buoyed by a broker upgrade over expectations that more staycations within the UK will boost the company’s bottom and top line over the next 12 months.

On the downside utilities have lagged with Centrica (LON:CNA) and National Grid (LON:NG) both lower.

US

US markets appear to be losing some of their recent momentum as investors start to become a little more cautious ahead of a number of key earnings announcements, as well as a speech by President elect Donald Trump in New York tomorrow, where we may get further clues as to the type of President he intends to be when he takes over the reins in ten days’ time from President Obama. The Dow continues to find the 20k mark a difficult nut to crack with some suggestions that we may not see it ahead of next week’s inauguration.

Stocks in focus include Yahoo on reports it will change its name to Altaba following the sale of its internet assets to Verizon. CEO Marissa Mayer will also step down as CEO.

Valeant Pharmaceuticals today announced it would be selling three skincare bands for $1.3bn in cash to L’Oreal as it looks to reduce its $30bn debt pile.

US small business optimism for December showed a massive jump in December jumping from 98.4 in November to 105.80 on expectations that Donald Trump will transform the investment environment when he takes office in ten days’ time. This reinforces the high expectation which has been reflected in equity markets since November 8th. It also suggests that the potential for disappointment is likely to be quite high, which probably explains the recent stalling of momentum in US markets.

FX

The pound initially came under further selling pressure early today, but managed to find a modicum of support just above the lows seen in October at 1.2100 against the US dollar, while it has also managed to recoup some of its recent losses, particularly against the euro, while also making gains against the New Zealand dollar and Norwegian Krone.

Commodities

Oil prices have stabilised somewhat after yesterday’s sharp sell-off ahead of the latest inventory data which is due out later today. The question of output cuts and their efficacy continues to hang over the markets with Nigerian oil minister and OPEC chief Barkindo due to meet 7 other oil ministers in Abu Dhabi on Friday.

US stockpiles are expected to show a rise of 2m barrels, hardly an arbiter of falling production given the continued rise in rig counts.

Copper prices moved close to three week highs after this morning’s better than expected Chinese inflation data suggested that rising demand and higher prices was a reflection of a much healthier outlook.

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