Market Report: European markets set to open lower, failing to match US gains
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “UK markets look set to open on the back foot, marrying expected moves across Europe as investors prepared for the release of key economic data, including the December Eurozone inflation report and November unemployment figures.
Back at home, UK retail sales bounced back in December 2024, jumping 3.2% after November’s slump, thanks to a Black Friday splurge that defied expectations of a 0.2% drop. Despite the festive cheer, the year ended on a subdued note, with the British Retail Consortium calling the “golden quarter” a missed opportunity, as 2024’s total retail sales rose just 0.7% – a modest finish that leaves hopes pinned on real wage growth fuelling stronger consumer spending in 2025.
After a sluggish December, US stocks have kicked off the year in style, with tech and semiconductors stealing the spotlight, buoyed by Nvidia buzz, chatter about Microsoft’s $80bn capex plans, and tariff optimism despite mixed signals from Trump. Nvidia climbed higher on the assumption that a significant portion of Microsoft’s increased infrastructure spending will flow its way, while CEO Jensen Huang delivered a keynote speech at the Consumer Electronics Show, unveiling new gaming cards, autonomous vehicle partnerships, and more. AMD joined the rally with a new chip deal with Dell, while broader markets wrestled with déjà vu over China trade relations and investors remained laser-focused on AI capex and deregulation in the banking sector.
Brent crude oil hovered at $76.3 per barrel on Tuesday, cooling off after five days of gains in what looks like a technical breather. Weak economic data from the US and Germany outweighed bullish signals like higher energy demand, a weaker dollar, and Saudi Arabia hiking prices for Asian buyers. With oversupply fears and demand jitters lingering, the market seems stuck in a balancing act, while traders keep an ear to the ground for geopolitical twists that could stir things up.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Next’s Christmas trading update gave investors plenty to be jolly about. In the nine weeks to 28 December, full-price sales rose 5.7% higher on a comparable basis, well ahead of the group’s previous guidance for 3.5% growth. The better-than-expected finish to 2024 has led the fashion group to upgrade profit guidance once again. Full-year pre-tax profits are now expected to come in £5mn higher at £1,010mn, marking the fourth profit upgrade in a little over five months.
Unwrapping some of the headline figures, revenue growth came entirely from the online channel, where sales growth is accelerating. Overseas sales are growing at an eyewatering double-digit pace, helping to offset a small decline in its retail stores which have come under a bit of pressure given the structural decline of the high street. End-of-season sales have delivered as expected and helped clear surplus stock, and inventory piles are sitting at a comfortable level heading into the new year.
Next also gave a sneak peak into its outlook for the new financial year, with pre-tax profits expected to grow 3.6% to around £1,046mn. This looks a little conservative, especially given Next’s track record of outperforming its own guidance. But overseas growth is forecast to ease, and wage inflation and National Insurance increases are set to bring around £67mn of additional costs to cover, so erring on the side of caution is a smart move, and leaves potential for positive surprises.”
