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Equity markets pause, as central banks loom next week

While US markets have raced ahead this week European markets have undergone a pause with the FTSE100 struggling to build on this month’s early gains, while the DAX has also struggled for momentum this week. 


The early year enthusiasm appears to have given way to a little bit of caution as we look to next week’s trifecta of central bank meetings, and what sort of outlook is painted by the Federal Reserve, ECB and Bank of England, and more importantly how many more rate hikes can we expect to see after next week.  

Sainsburys share price is higher after Bestway Group announced it had taken a 3.45% stake in the business and suggested it could take a larger stake. Understandably this has prompted the inevitable speculation that Bestway might have larger designs on the UK’s second biggest supermarket, and what the future might hold for it going forward. While concerns about a takeover might have some merit one only has to look across the High Street at what’s happened with Morrisons and Asda to realise how any bid if it were to happen might end up becoming a very expensive proposition, in what is an incredibly competitive marketplace.

Bestway would also have the considerable task of convincing Sainsbury’s two largest shareholders, the Qataris and Vesa that they have a credible plan to take the business forward. One upside to today’s announcement is that Bestway’s position as a wholesaler could offer synergies for Sainsbury in any future relationship, given that Tesco already owns Booker.

Superdry shares have plunged after downgrading expectations for full year pre-tax profit to zero, from between £10m to £20m. In today’s H1 results the retailer reported a pre-tax loss of £13.6m, missing expectations of a £2.8m loss. There was an improvement on the revenues front, coming in at £287.2m, however management blamed underperformance in its wholesale division which saw a 57.4% decline in the Christmas trading period.

LVMH shares are trading steadily close to record highs after reporting its full year results for 2022.

Operating margin for the year came out at a very strong 26.6%, which had previously been a weak point, helped by a strong Q4 performance. Selective Retail was strong with Sephora but DFS was still weak due to China where H2 2022 was poor due to covid restrictions.

Management was asked about current trends from China, and confirmed that Macau was very busy in January but that mainland China volumes were still just picking up and were still down -40% from 2019 levels in January, although that is a marked improvement on December which were down -85% from pre covid levels. For 2023 LVMH said it expects further growth with the year starting well as China’s economy continues its reopening process.   

Rolls-Royce shares have slipped back after the new CEO Tufan Erginbilgic said that the company was a “burning platform”. Over the past few months, the share price has gone on a gradual recovery as air travel has improved, and engine flying hours have increased, while the company has slowly managed to improve its cash flow, so today’s pep talk is probably not what many employees would probably want to hear.  While Rolls-Royce has its problems, describing it as a “burning platform” is not the best message to send to shareholders and the markets. Rhetoric and tone are important when describing a business, especially one that is responsible for engine safety. Hopefully it won’t go down as a Gerald Ratner moment.


After such a strong move higher yesterday, US markets initially opened lower after the latest economic numbers pointed to a consumer that is starting to retrench, and personal spending contracted in November and December. The losses proved temporary after the latest University of Michigan inflation expectations survey pointed to a softening outlook on both the 1-year and 5–10-year levels, falling to 3.9% and 2.9% respectively.

There continues to be an expectation that with next week’s Fed rate hike, the US central bank will follow the Bank of Canada in laying out the path to a pause in the rate hiking cycle. This seems like wishful thinking, and could well end in tears on Wednesday evening.     

Intel has been one of the biggest losers today after issuing an ugly forecast for Q1, as well as saying it expected to post a loss in the current quarter. Q4 revenues came in at $14.04bn, sharply below expectations of $14.5bn, however it was the Q1 guidance that prompted the sharpest intake of breath. Intel said it expects to post a loss of $0.15c a share along with a sharp fall in revenues to between $10.5bn and $11.5bn, well below expectations of $13.96bn. Gross margins are also expected to fall to 39%, from an expected 45.5%. The extent of the fall initially dragged on the likes of Nvidia and AMD however they appear to have bounced back.  

Having announced a $75bn share buyback yesterday, Chevron’s latest Q4 numbers has seen profits come in below expectations at $4.09c a share on revenues of $56.47bn, however that still hasn’t stopped them from recording record annual profits of $36.5bn.

Buzzfeed shares have surged after it was reported that ChatGPT would be used to start creating content and generating output on its website. The use of AI in companies’ business models is becoming increasingly popular, with the company already being paid by Meta Platforms to generate content on Facebook and Instagram.       


The pound didn’t get much of an uplift from today’s speech by UK Chancellor of the Exchequer Jeremy Hunt where he pushed back on calls for subsidies to help with the transition towards renewables, and signalled that the tax hikes announced in the Autumn budget would go ahead His main focus he said was in getting inflation down, and outlined his four pillars of economic growth, or the four “e’s”.

He went on to say that optimism in the UK had been in short supply in recent months, completely oblivious to the fact that his tax policies are the reason why.

It’s all very well stressing the importance of making the UK a business-friendly environment, but if you then increase the costs on those businesses don’t be surprised if they then pull back on investment. Going ahead with a corporation tax hike of 6% to 25%, and not extending the super deduction sends a completely different message to businesses than the one he was pushing today.  Ultimately the speech was a word salad, high on rhetoric, and low on detail with the markets reacting accordingly, with the Institute of Directors adding a fifth “e” to the list, “empty”. The British Chamber of Commerce wasn’t particularly complimentary either, bemoaning the lack of focus on energy and exports, another two “e’s”.

The Japanese yen is the biggest gainer after Tokyo CPI jumped sharply in December to a 41 year high of 4.4%, up from 3.9% in November. This unexpectedly big jump in headline inflation may prompt concern in Bank of Japan circles that the inflationary tiger might be at risk of breaking free after being contained for nearly 5 decades and prompt a sharper than expected monetary policy response.

The US dollar has edged higher along with yields on the back of today’s US economic data, with US equities rebounding from early losses, ahead of next week’s Fed rate decision and a likely 25bps rate hike.


Gold prices have slipped back modestly from this week’s 8-month highs, after today’s US PCE inflation numbers came in line with expectations. An annualised decline to 4.4% appears to confirm a 25bps rate hike next week, however the Fed’s biggest problem now will be to ensure that market expectations about rate cuts get pared back

Crude oil prices are on course for their third successive weekly gain on the back of yesterday’s better than expected Q4 GDP numbers and the hope that Chinese demand will continue to come back strongly as it looks to close on the $90 a barrel level for the first time since mid-November.

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