header
search-icon
mobile-menu-icon search-icon

RESEARCH

Clients can browse and search the Peel Hunt research library and archive.

TRADING

A tool for our clients to submit and manage orders with Peel Hunt. 

REGISTER FOR OUR RESEARCH PORTAL

Thank you, your registration has been received.
We will be in contact with you shortly.

I'm interested in (tick all that apply)

SEARCH

PEOPLE
SERVICES
NEWS

Advisory and broking services to UK mid & small-cap companies

Comprehensive coverage of over 300 companies

Investment ideas and execution for institutional investors

Complete UK pricing coverage and worldwide access

The Early

18 Dec 2018 07:19

Markets: retail breakdown

As long as the bottom-up company news echoes the top-down macro concerns, it will be tough for equity indices to form a reliable base. The thumping profit warning from ASOS -38% started Monday off in ugly fashion and European markets never really recovered, although the worst of the losses were trimmed slightly in the final hour. By the close in the UK the read across for the general retail sector left it lower by -3.6%. Electricity -2.7%, food producers -2.6% and food retail -2.3% were other notable underperformers, with mining +1.5% the only area of resilience. Another grim day for mid/small caps left 11 of our 12 PHySiCS sectors lower, notably retail -3.3%, oil & gas -2.1% and media -1.9%. The PM's confirmation that the delayed vote on the Brexit withdrawal agreement will take place before 18 January helped the pound to firm marginally.

The wider European retail sector also suffered, losing -2.6%, as Zalando -12% and H&M -8% were among those suffering the worst of the negative read-across. The Euro Stoxx financials group also struggled -1.5%.

Overnight. No respite in the US session, which ended with the S&P at a 14-month low and the Russell 2000 small cap benchmark in bear market territory, after a heavy volume session; the VIX jumped to a seven-week high. There were close to 2000 new 52-week lows across the NYSE and NASDAQ exchanges. The consumer discretionary group echoed declines in Europe losing -2.8%, and major health care and financials stocks were also under pressure. Asia again followed the lead lower as tomorrow's Fed statement assumes growing importance; the US dollar eased slightly. US WTI crude touched a 15-month low below $50/bbl. Europe will open down once again.

Early numbers. Dow -2.11%, S&P -2.08%, NASDAQ -2.27%, VIX 24.52; US 10-yr 2.85%; Nikkei -1.82%, Hang Seng -1.14%, Shanghai Comp -0.83%; £=$1.2624, £=€1.1128, Brent $58.56/bbl, Gold $1246.00; FTSE 100 indication -41 (at 6.35 UK).

Macro: feeling the pinch

Markit's UK Household Finance Index for December showed some cracks in previously resilient consumer confidence. The headline reading of 43.9 was at a six-month low due to combination of a faster increase in living costs and a weaker rise in income from employment. Households are also more cautious about the outlook for property prices, and prospects for their own finances over the next 12 months.

The ECB continues to struggle to generate inflation across the Eurozone. The final estimate of regional CPI for November showed the headline rate revised lower to +1.9% YoY, and the key core rate (excluding energy and food) still running at just +1.1% YoY. There was some better news on the Italian budget front as reports emerged suggesting a new fiscal package has been agreed that will be more palatable for the EU, although the details remain elusive.

Ahead of the Fed meeting, some more hints emerged of a softer US economy. The NY Fed's Empire State manufacturing index fell by more than expected to 10.9 in December (from 23.3), an 18-month low reflecting primarily a weaker new orders picture. The NAHB also released its housing market index for December which, at 56 (from 60) was the lowest since May 2015.

Japan cuts its official forecasts for growth and inflation, with GDP now projected to expand by just +0.9% YoY in fiscal 2018 to March, and CPI expected to increase by +1.0% YoY.

Today's events. Germany Dec IFO survey (9.0) 101.8; US Nov housing starts (1.30) 1.23m.

Ian Williams
Economics & Strategy
020 7418 8819
REQUEST THE FULL RESEARCH NOTE

This research material (the "Report") was produced by Peel Hunt LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange. The Peel Hunt LLP analysts that prepare such are stated on the Report. The Report must be treated as a marketing communications for the purposes of Directive 2004/39/EC as these have not been prepared in accordance with legal requirements designed to promote the independence of research; and although Peel Hunt LLP is not subject to any prohibition on dealing ahead of the dissemination of investment research, Peel Hunt LLP applies this prohibition through its internal systems and controls.

The analyst or analysts responsible for the content of the Report certify that:(1) the views expressed and attributed to the research analyst or analysts in the Report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate. Information that is non-factual, interpretive,assumed or based on the analyst's opinion shall not be interpreted as facts and where there is any doubt as to reliability of a particular source, this is indicated; and (2) no part of the research analyst’s or analysts’ compensation will be directly or indirectly related to the specific recommendations or views contained in this research report and, as far as they are aware, there are no relationships or circumstances (including conflicts of interest) that may in any way impair the objectivity of this recommendation, and that where any such relationship, conflict or circumstance exists concerning any financial instrument or issuer to which this recommendation directly or indirectly relates, this has been disclosed. This statement applies equally to any persons closely associated with such analyst.

For all relevant disclosures required by MAR, please visit: http://www.peelhunt.com/regulatory