Initially it was a very uncomfortable ride on global equity markets yesterday. The FTSE 100 started the session with its nose just above the Plimsoll line, though in response to the nebulous agreement with Merkel and the SDP in Germany and the shock Italian election results, which may produce an anti-EU coalition government, the DAX and MIB shed around 2% each. During the morning the situation improved dramatically with the DAX finishing the session in positive territory and Italy’s MIB pairing losses but leaving the banking sector slightly battered. The FTSE 100 ended the session up 46 at 7115. The seismic movements in New York were even more pronounced than in Europe. The DOW turned around 100+ point deficit to close over 300 points in positive territory, thanks in the main to concerns on a US trade war abating. Asia enjoyed a resurgence in terms of sentiment with the Hang Seng up 1.2% just before the close and the NIKKEI up just above 2%.
Certainly, for the moment, it is political machinations that are driving markets more than economic and financial fundamentals. This morning in London at 9.30am the BRC posted data that confirmed UK retail sales up 0.6% YoY on a like-for-like basis; 1.6% on a total sales basis. There was heavy discounting, which helped to hold up volumes but squeezing retailer margins, according to Panmure’s Chief Economist Simon French. Non-food sales showing signs of stabilising.
At 9.50 am the FTSE 100 was up 66 points at 7181. Banks (Barclays +2.2%, RBS +1%) and miners (BHP +2.2%) were in demand. There was a slew of earnings – Intertek +4%, SDL -2.24%. Investors and analysts vented their spleens on the sub-standard performances of Headlam -7.6%, Aggreko -9.75% and surprisingly JUST EAT – down 10.3%, having been down 15% early doors. Why? JUST EAT'S posted a LOSS of £76m, courtesy of £180m acquisition in Australia was not acceptable, despite revenues +45% to £546mn. Tesco rallied by 3% thanks to a positive note from Barclays. Smurfit Kappa rejected overtures from US’S International Paper. DOW futures look as though they will add 55 points at the opening.