- NZ dollar largely shrugs off Jacinda Ardern’s shock resignation
- Investors focus on recession fears with falls on Wall Street and FTSE 100 opening lower.
- Microsoft the latest tech giant to announce big tech lay offs
- Japanese exports to China fall indicating weak demand in the world’s second largest economy
- Orders slip at Deliveroo, but prices rise helping the company adjust profit forecasts upwards
- Demand for thermal curtains and heaters push up sales 18% at Dunelm
Global Recession Fears Rise
The resignation of Jacinda Ardern has sent ripples of surprise through global political circles, but it did not significantly rattle the New Zealand dollar, which only slipped slightly. There may be some short-term uncertainty ahead as her party elects a new leader and heads towards a general election in the Autumn, but the NZX 50 index largely brushed off the news.
It ended a five-day upwards streak, but traders seem more focused on growing concerns about the slowing global economy.
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US recession fears are resurfacing as Federal Reserve policymakers flagged that more rate rises are ahead, even though inflation is coming down from dizzying heights and slowing activity is taking a toll on big companies. U.S. manufacturing output dropped in December and retail sales are now on the slide, falling at the sharpest rate in a year.
Remarks from Cleveland Fed President Loretta Mester crushed hopes that the hiking cycle may be shorter, with officials still largely indicating that rates are set to rise to 5.00%-5.25% in the months to come. Risks of a harder landing for the US economy are rising and big tech is bracing for impact.
Microsoft Announces Big Lay Offs
Microsoft Corp (NASDAQ:MSFT) is the latest tech giant to announce big lay offs as the company fastens its seat belt ready for a potentially rocky ride ahead. Amid the uncertainty it appears that potential Cloud customers are holding off from signing on the dotted line.
At the same time Microsoft wants to reserve more financial power to plough funding into AI development, so that it stays at the front of the pack when it comes to the tech which will increasingly shape our lives in the future.
China’s recovery still looks a considerable way off, with Japanese exports reliant on the huge market falling by 6.2% from year ago, and down 24% by volume. Chinese officials are attempting to ramp up production of Covid drugs to aid the creaking healthcare system trying to cope with an influx of patients.
It’s clear the pandemic is still taking a big toll on the economy, and hospitals are on alert for a spiralling of cases as travel surges during the Lunar New Year holiday season. Across Asia stocks struggled to gain ground, with the Nikkei falling 1.4% and the Hang Seng in Hong Kong down by 0.2%, following on from falls on Wall Street which saw the S&P 500 ending down 1.6%. European indices are also set for a downbeat start to trading, with the FTSE 100 has opened 0.4% lower.
Deliveroo And Dunelm Show Resilience
As consumers tighten the purse strings, appetite is waning for expensive takeaways and the trend has taken a slice of orders from Deliveroo PLC (LON:ROO)’s business. Orders were down 2% year on year in the fourth quarter, but the company has managed to offset this by putting up prices, and it’s forecasting that full year profitability will be ahead of previous guidance.
Gross transactional value was up 8%, as higher costs were passed on in terms of meal prices and the company charged more in fees. Deliveroo is bullish in its ability to stay flexible financially but at some point, customers will find it hard to stomach further prices rises, particularly given their budgets are facing a big squeeze elsewhere.
Dunelm Group plc (LON:DNLM) has shown hardiness amid the cost-of-living headwinds, with clever marketing of bedding and heaters to keep customers warm during the cold snap. Total sales rose 18% to 478 million for the 13 weeks to the end of December. The retailer has also been adeptly controlling costs which has kept prices competitive.
The range of goods sold at its vast stores in retail parks and online, cater for differing budgets while still offering value. People may not have been able to buy big items to freshen or refurbish the home, but they’ve been making do with cheaper makeovers to hunker down for the winter., closing their new thermal curtains on darkening skies.
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
