Trump triumphs in Iowa, UK job data and Ocado’s festive fortunes
- Hopes for early interest rate cuts have been dialled back after comments from ECB member.
- UK jobs data still indicates tight labour market, despite slowing of wage growth.
- Brent crude hovers around $78 a barrel as Middle East situation remains tense.
- Trump triumphs in Iowa, a boost to his White House hopes, adding to uncertainty about geopolitics and global trade.
- Supermarkets cut baby milk prices, offering relief to families.
- Ocado’s festive fortunes help it deliver some robust numbers.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “More cautious sentiment has descended as the glow of hope for early interest rate cuts fades, while the latest jobs data for the UK shows potentially fresh fragility for the economy. Wage growth came down more quickly than forecast, indicating that employers are more wary of succumbing to big pay demands given the uncertain climate. However, the labour market still remains quite tight, with the employment rate up slightly on the quarter. With unemployment steady, Bank of England policymakers are still expected to repeat the mantra that interest rates will have to stay elevated for an extended period of time. Robert Holzmann, who suggested current upwards price pressures could mean policymakers hold off rate cuts this year.
The realisation that central banks could still be facing the foe of stubborn inflation has been dampening spirits, especially with the potential for geopolitical risk to widen. A fresh attack in the Red Sea, adding to tensions, with Brent crude is hovering around US$78 a barrel. A more risk-averse mood saw markets in Asia move lower. With enthusiasm low, there is little momentum for the FTSE 100 or the S&P 500″
Trump triumphs in Iowa
Uncertainty about the political landscape in the United States is looming large, with Donald Trump triumphing in the Iowa caucus. Although he refrained from repeating some of his fierier recent rhetoric, there is still nervousness about what a new Trump term would mean for NATO, support for Ukraine and potentially fresh fracture in global trade. Ears will be trained later for any more optimistic notes about US economic prospects from Christopher Waller, a member of the Federal Reserve’s board of governors who is due to speak later. He illuminated a path for rate cuts by the Fed in November, helping the stock rally and if he remains confident, it should help inject more positive sentiment into trading.
Supermarkets pass on baby milk price falls to struggling families.
There will be relief for cash-strapped families grappling with the high cost of baby formula, with major supermarkets passing on manufacturer price cuts. After Danone cut the prices charged to retailers by around 7%, Asda, Tesco and Sainsbury’s have reduced the price of Aptamil formula. The problem is there is a very limited availability of cheaper own-brand alternatives, although clearly with retailers starting price cuts, its clear others saw the need to follow, to stay competitive. The price of powdered milk had shot up by more than 25%, in the last two years, having a devastating impact on family finances, particularly for the poorest households who have to pay a larger proportion of their income on essentials. The HL Savings and Resilience Barometer, released this week, showed that the debt position of the lowest fifth of earners has deteriorated since the onset of the pandemic, but improved for everyone else. Price reductions like this on essentials are a start to ease the onerous financial burden on the poorest families, but baby milk prices still remain highly elevated.
Robust results from Ocado helped by impressive festive trading
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Ocado retail has delivered a robust end to its financial year. The instantly-recognisable delivery vans have been scurrying all over the country, delivering a higher volume of items than last year as the number of active customers brushes one million. Keeping the top of the revenue funnel filled with more customers is crucial because shoppers are buying less per-shop on average. This could be a function of pressure on incomes. Price growth is also slowing as inflation comes off the boil, which is another reason volumes need to stay propped up overall.
Christmas trading was impressive, echoing the performance of its physical store-estate peers, including Tesco and Sainsburys. The proof will very much be in the M&S pudding though, as the next quarter unfolds, we’ll get a better idea of how intense the discounting atmosphere is. Ocado has further to fall here, given it’s not exactly a value option. There’s hope its customers might be more resilient, meaning the sale stickers can be kept at bay a little more, but given the intense nature of price wars elsewhere, there may well be margin challenges over the horizon.”
