Equities in London have largely continued their positive start to the year with the FTSE100 up a further 0.6 per cent at midday today and the FTSE 250 up by 0.9 per cent. European bourses are even more buoyant with the DAX bouncing 1.6 per cent this morning and the CAC 1.9 per cent to the good. Positive sentiment this side of the Atlantic was not mirrored overnight in New York where US equities struggled for positive momentum yesterday, weighed down by yet more disappointing news from Tesla (TSLA), whose shares fell more than 10 per cent after it said it had delivered less cars than expected in the final quarter of 2022. Apple (AAPL), meanwhile, dipped by almost 4 per cent yesterday on reports it has signaled slower demand to its suppliers in Asia – this sent its valuation back below the $2trn level.
Latest figures from the UK arm of German discount supermarket group Aldi confirm assumptions over what the consumer scramble for value means for market share and profitability. Sales topped £1.4bn in December for the first time, as punters turned to supermarkets for their butchery and dairy supplies over the festive season. The Football World Cup did no harm where volumes are concerned, leading to a surge in sales for crisps and other snacks.
Unsurprisingly, the German discounters have benefitted due to the cost-of-living crisis, forcing their big UK high street rivals to place ever greater emphasis on keeping a lid on prices. Intensified competition means that net margins across the industry are under severe pressure, and it should be remembered that Aldi and its stablemate Lidl are still in expansionary mode in the UK. Tesco (TSCO) and Sainsbury’s (SBRY) are scheduled to update on Christmas trading next week.
The British Retail Consortium (BRC) said that annual UK food inflation rose to 13.3 per cent in December, a 90-basis point jump from the rate in November and the highest level in the trade association’s records. Fresh food and ambient food inflation hit 15 and 11 per cent respectively in December, said the BRC, which highlights the challenges that consumers face at supermarket tills. On the other hand, shop price and non-food inflation rates fell.
Shore Capital Markets analyst Clive Black said that “continuing upward pressure from food can be expected to feed into the wider and more important ONS CPI figures at a time when many observers are seeking to call the top of the present inflationary cycle”. CA
In the run-up to Christmas, it was reported that several big-name tech stocks were winding down their production activities in China. The prospective departure of the likes of Apple (US: AAPL), Samsung (KO: 005930), and Amazon (US: AMZN) would have done little to burnish the reputation of the Chinese economy and it may have hastened the decision by the CCP to loosen the various restrictions put in place as part of the benighted zero-Covid strategy. Unfortunately, the country is witnessing a resurgence in infection rates, possibly brought about by the endless lockdowns and their impact on the nation’s collective immune system.
If that wasn’t enough, Brompton Bicycle is planning to shift parts of its supply chain out of China and Taiwan, citing the precarious diplomatic situation and the possibility of armed conflict in the region. Obviously, Beijing won’t be overly concerned about the departure of the UK’s biggest bicycle manufacturer, but the decision could well form part of a trend that will see the People’s Republic increasingly shut out of global supply chains. We shall see.
Activity in the UK’s manufacturing sector fell for the sixth successive month in December, with output, new orders and employment all declining at faster rates.
The UK Manufacturing purchasing managers’ index slid to a 31-month low of 45.3 in December, down from 46.5 in November and well below the neutral 50 level that separates economic contraction from expansion.
Production declined at its fastest rate for 14 years and was more reliant on companies working through backlogs, with the fall in new orders described as “worryingly steep” by Rob Dobson, director at data compiler S&P Global Market Intelligence.
Manufacturers also reported cutting jobs for the third successive month.
“The further step down in the manufacturing PMI in December all but confirms the sector now is in recession,” said Pantheon Macroeconomics senior UK economist Gabriella Dickens.
The sector’s decline “looks set to continue” into 2023 given the rate at which manufacturers are ploughing through backlogs, she added. Domestic demand is set to weaken as incomes are squeezed once government measures designed to help businesses and consumers with higher energy bills are cut, Dickens said.
Last month, the Confederation of British Industry and other business groups called for clarity on what support would be made available to industry once current support measures run out at the end of March.
On Wednesday, chancellor Jeremy Hunt was due to tell business groups that the level of subsidies available to offset higher energy bills would be halved, according to the BBC. MF
Aside from the threat posed by its bolshie near neighbour, the Taiwanese stock market has had to contend with tightened US Federal Reserve rate policies in 2022. Rising US interest rates have had a detrimental impact on the region’s capital markets. Reuters reports that overseas investors withdrew more capital from emerging Asian equities in 2022 than they had done in any year since the global financial crisis, an outflow amounting to $57bn (£47bn). If US inflation continues to trail off, it raises the chance that the Fed will pursue a more accommodative rates policy in 2023. If that were the case, investors may be tempted to boost exposure to the region as the tide will eventually roll back in.
See this week’s in depth feature: The case for emerging markets.
Also our in depth Christmas special collection of features on numerous regions and asset classes: Where to invest in 2023.
Home Reit’s (HOME) investment advisor Alvarium has sold the part of its business responsible for managing the homeless accommodation landlord for £24mn following a tumultuous couple of months for the company. Alvarium said that Alvarium Home REIT Advisors Limited (AHRA) has been sold to “a newly formed entity owned by the management of AHRA funded by way of a promissory note”.
Alvarium, which has made the sale prior to its planned listing on the New York Stock Exchange today, added that “the sale also includes specific terms allowing [Alvarium] to re-acquire AHRA in the future for a purchase price equal to the promissory note outstanding”.
The news comes after Home Reit suspended its shares yesterday due its failure to publish its financial results on time following months of criticism from short sellers, charities and politicians over the ethics and financial stability of its business model. ML
Read more:
Broken Home? Investigating the controversy surrounding Home Reit.
Home Reit investor demands leadership overhaul after short seller attack
Home Reit hits back at ‘misleading’ short seller report
Shares in Cumbrian agricultural and engineering group Carr’s (CARR) have been suspended pending publication of its annual accounts.
The company flagged in November that a delay to publishing accounts for the year to 3 September was likely until mid-January, given that its new auditor, Grant Thornton, said it could not rely on a separate audit of associate company Carr’s Billing Agriculture (Operations). A second audit of CBAO, in which Carr’s has a 49 per cent stake, is currently being carried out. The company said it would report full-year results “as soon as possible in January” and then seek permission for trading in its shares to recommence.
Carr’s board said its unaudited accounts showed results “in line with expectations” and ahead of the prior year. MF
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