- Flat open for the FTSE 100 with Santa rally showing little sign of regaining speed.
- US GDP data surprises on the upside and fuels fears that rates may stay higher for longer
- HL clients give UK markets a vote of no confidence
- Hopes for retail on what was forecast to be the busiest shopping day of the year
Q3 2022 hedge fund letters, conferences and more
“The Santa rally looks to be short lived across the pond as US stocks came under pressure from renewed interest rate fears, and the FTSE 100 struggles to regain form. At the close, the S&P 500 lost 1.45% and the tech heavy Nasdaq Composite was off 2.18%, the drops coming as news broke that GDP growth for the third quarter was revised higher.
This positive economic news wasn’t expected and lead many investors to fear interest rate hikes would continue for longer in the absence any real data to suggest the US economy is in distress. It’s worth remembering, interest rate hikes always have a lag before they really take hold, and we’d expect economic growth to face tougher tests to come, as Fed actions work through the economy.
Closer to home, the FTSE 100 opened flat on the last trading day before Christmas, and there isn’t much sign of a Santa rally taking off again with much speed. Yesterday the FTSE 100 ended the session down 0.37% and sterling pulled back a similar amount against the US dollar, after the disappointing GDP data, showing the UK had the worst third quarter growth of any G7 nation.
UK Investor Confidence Falls
UK Investor confidence among HL clients took a fall in December, alongside confidence in economic growth which isn’t far off its lowest levels of the year. Investors are clearly concerned as they see headlines suggesting the UK’s already in a recession and feel the pinch of higher costs in all aspects of day-to day spending. Looking further afield, confidence in overseas markets rose across the board, with the US remaining top of the pile among HL clients.
Emerging markets saw a jump in confidence, likely a result of more positive news from China that Covid restrictions are starting ease and a reopening boom could be round the corner. It’s a double edges sword though, as Covid cases look the be escalating and reports out of the country suggest hospitals are starting to fill up.”
As we enter the busiest day of the shopping year, high streets and shopping centres will be hoping last minute present buying remains on the cards, it’s a much-needed boost to sales for what’s shaping up to be a disappointing festive season for retail. Today was forecast to be the busiest shopping day of the year according to Sensormatic, but there is a chance the peak shopping period may well have passed in the UK, as consumers heeded warning to buy early to avoid disappointment due to strikes.
It’s unlikely bricks and mortar stores will offset the drop in online demand due to Royal Mail walkouts given strikes by rail workers are also disrupting travel into town and city centres. Shoppers are also set to remain cautious given the latest GDP snapshot showed real household incomes falling 0.5% during the third quarter, a trend that is likely to have continued into the final few months of the year.
Article by Matt Britzman, Equity Analyst at Hargreaves Lansdown
