The rather mediocre start to the year for the stock market continues. Nothing happening really in European trade early doors – major indices are a little in the red for the month so far but not exactly selling off hard. The FTSE 100 is down around 0.2 per cent while the Dax is slightly in the green. In Paris, shares are doing better with the CAC 40 up 0.35 per cent.
Overnight, the S&P 500 declined a touch erasing the Monday bounce. So far it’s been a very lacklustre beginning to 2024. The first trading days of the year have been a pretty good indicator in presidential election years in the past. Futures show New York will open a touch in the green later on today. Elsewhere, Japanese stocks have though jumped to a 33-year high as the yen wobbled on slowing Tokyo inflation and slowing wage growth figures, which somewhat takes the pressure off the Bank of Japan.
Sainsbury’s shed 5 per cent and fell to the bottom of the FTSE 100 despite a 7.4 per cent rise in sales over the Christmas quarter as general merchandise sales fell and expectations were running a bit high after some decent retail sales numbers. Q3 grocery sales were up 9.3 per cent and Christmas grocery sales 8.6 per cent, with better volumes offsetting lower inflation growth. But the big thing was Argos was down 0.6 per cent – maybe some pushback from customers after the pandemic and money being focused on food and booze to celebrate, less on plastic tat. Some read across for Tesco and Marks & Spencer from the fall. More on that and other companies' news here. Jemma Slingo analyses how retailers are doing after Christmas, here
Today, we hear from Bank of England governor Andrew Bailey, with eyes also on a US 10-year auction. Two things to watch this week are the US CPI inflation data and bank earnings. More on what to expect here
Goldman Sachs: “We expect that core PCE inflation declined further in December 2023 and will continue to decline to an even greater extent throughout 2024. We forecast core PCE inflation of 2.9 per cent in December 2023 and 2.2 per cent in December 2024.”
JPMorgan: “This is the first Fed tightening cycle where we saw corporate profits increase and net interest expense decrease. This suggests that profitability will hold up better than in previous cycles and may mean increases in unemployment are more gradual.”
Bank earnings – bad loans are piling up, net interest income struggling and deposit costs are higher...but KBW Nasdaq Bank index has still risen 20 per cent in the past three months because, a) investors think that the sell-off last year on the Silicon Valley Bank fiasco was overdone, and, b) because if the Fed cuts a lot this year then pressure on bond portfolios eases. There is also a lot of cost-cutting going on.
Bitcoin swung wildly after false claims the SEC had approved spot ETFs. The SEC had to admit its Twitter (or X, whatever) account "had been compromised" after a tweet claimed "the SEC grants approval for Bitcoin ETFs". Oops...Bitcoin raced to $48,000 before sharply reversing below $45,000 and has settled a little below $46,000 this morning. Cowboy country.
The Trader is written by Neil Wilson, chief market analyst at Finalto
