The arrest of an executive at Chinese technology firm Huawei has reignited trade tensions and sent stocks careering lower on Thursday (6 December). By the close the FTSE 100 was down 3.6% at 6,674.01. This represented its lowest level in more than two years.
Beyond the continuing fall out from the US and China trade war, next week is likely to be dominated by Brexit with MPs set to vote on a draft Brexit deal on Tuesday (11 December). Most expect the deal to be rejected (see Economic update). Ahead of the vote monthly UK GDP figures out on Monday (10 December) may reveal the impact the uncertainty created by Brexit is having on the economy. US inflation figures are released on Wednesday (12 December) and the European Central Bank is poised to deliver its latest decision on interest rates next Thursday (13 December). Friday sees the release of US retail sales encompassing the Black Friday sales event last month.
Two relatively upmarket British brands were in the spotlight for different reasons this week. On Wednesday (5 December) Joules (JOUL:AIM) was in investors good books on news first half profit would be ahead of expectations. The clothing, accessories and homeware brand established by Tom Joule nearly three decades ago, said it expected underlying pre-tax profit to come in ‘slightly ahead of initial expectations’ for the half to 25 November. Market Harborough-headquartered Joules operates 123 stores in the UK and Republic of Ireland, boasts a significant online arm and has a wholesale business with over 2,000 stockists worldwide, John Lewis and Nordstrom among them.
The lead up to Thursday’s (6 December) third quarter update from Ted Baker (TED) was unhelpfully dominated by reports over the conduct of chief executive and founder Ray Kelvin and an independent probe has now been launched. The update itself revealed slightly lower sales for the 16 weeks to the beginning of December. Wholesale sales were down as expected while retail sales were higher helped by store openings and a strong online performance up 18%. On a positive note sales growth improved in the last eight weeks as the weather turned colder.
If MPs, as expected, reject the draft Brexit deal put in front of them next Tuesday (11 December) then UK assets and sterling could come under severe pressure as politicians will presumably scramble to avoid a no-deal Brexit. There is even a prospect that Prime Minister Theresa May’s Government might fall in the wake of a defeat, with Labour pushing for a no-confidence vote to trigger a General Election.
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11 December – Ashtead’s (AHT) main business is leasing construction and industrial equipment. The US accounts for almost 85% of sales with another 4% coming from Canada and the balance from the UK where it operates the A-Plant brand. As such its fortunes are heavily tied to the US economy, where some cracks in a broadly positive picture might be reflected in the company’s second quarter results.
12 December – First half results from high street fashion brand Superdry (SDRY) come ahead of the key festive trading period, where investors may be looking for some guidance, and with founder Julian Dunkerton looking to regain control of the business. The current management therefore need a strong set of results, after a patchy year, if they are to bat off this attempt.
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