Market Report: global markets set to rally after epic sell-off, UK retail sales get summer boost
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “What a difference a day makes. The FTSE 100 is up 1.3%, US futures point to a similar rebound, and Japan’s Nikkei 225 almost made it to double-digit gains. Investors shouldn’t assume this relative calm means markets are back to behaving rationally again: the volatility index (vix) is still at elevated levels, suggesting more turbulence to come. The good news for longer-term investors is that no single piece of this puzzle warrants such a massive shift in sentiment, this looks to be more about a perfect storm of factors. Calmer waters should prevail and longer-term growth trends like the AI revolution remains very much intact.
With so much heat running through the markets GSK’s Jury victory in Illinois may go under the radar, but this is another important step for the pharma giant. Illinois may not be where the majority of these cases are being brought against GSK, but it’s a notoriously plaintiff friendly court system. This is the second case in Illinois tried by Jury where they’ve sided with GSK and found no evidence supporting a link between Zantac and cancer, and as each of these dominos fall, the chances of GSK settling cheaply in other states rises.
Gold is still hovering near highs, but even this so-called ‘safe-haven’ asset wasn’t immune to yesterday’s sell-off. Still, the gold bulls have plenty to cling to from rising global tensions to interest rates that look like they may need to come down faster than first thought.
After three consecutive sessions of losses, Brent crude futures are showing some life again. Lingering supply risks from tensions in the Middle East are offering a support level. The US environment will remain a key factor in this story. There was finally a sliver of positive data on that front yesterday, as the US services sector rebounded in July.”
UK retail sales rose 0.5% year-on-year in July, according to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor.
Derren Nathan, head of equity research, Hargreaves Lansdown:“When comparing this year’s growth to last, there’s one glaring difference to be aware of beneath the figures. Inflation. So, while revenue growth could be stalling, it doesn’t mean volumes or profits are. We’ve seen that play out at Ocado’s retail division, where price rises were only a small contributor to the 11.3% rise in first-half sales. Profitability has also improved. Sainsbury’s also called out a volume rise in their first-quarter numbers, and in line with the BRC trends, grocery sales were up 4.8% while general merchandise declined.
The poor weather that drove lower expenditure on backyard BBQs and Hawaiian shirts, could also give rise to strength in leisure travel sales. Both easyJet and IAG (the parent of Iberia and British Airways) are seeing strong demand.
The Euro boost to pub trading is perhaps no surprise but it will certainly be very welcome as like-for-like growth at both JD Wetherspoon and O’Neill’s owner Mitchells & Butlers has slowed from last year. Again, slowing growth is largely due to brakes being applied to the level of price increases, and profits are rising faster than revenues. It’s been a tough few years for the broader sector, with many independent boozers never recovering from the pandemic and exiting the market completely. But the scale of the chains means they’ve not only been able to survive but also mop up market share.”
