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Resurgent Investment Markets and an eventful January

Resurgent Investment MarketsWhilst January ended predictably with no resolution to the Brexit conundrum, the markets for the most part have shrugged of the on-going uncertainty with a strong start to the New Year. The FTSE 100 Index rose by 3.6% during January, while the FTSE 250 Index climbed by 6.9%.

In America over January as a whole, the S&P 500 Index rose by 7.9% and the Dow Jones Industrial Average Index climbed by 7.2%, while the Nasdaq Index rose by 9.7%. This occurred despite the background of a partial shutdown of the federal Government and the on-going issues of the trade war with China.

In the UK Prime Minister Theresa May finally held the “meaningful vote” on the Brexit deal agreed with the EU; however, the deal was resoundingly rejected by the House of Commons as MPs voted it down by 432 to 202 – an unprecedented defeat.

The Government subsequently survived its first no-confidence vote since 1979. Following votes on a range of amendments, including the seemingly intractable issue of the Irish backstop, Mrs May confirmed that she would attempt to reopen negotiations with Brussels.

The Confederation of British Industry (CBI) described the move as “a real throw of the dice” and, far from prompting UK businesses to halt their no-deal planning, it might even have accelerated it. Meanwhile, the EU’s chief Brexit negotiator Michel Barnier stated: “The backstop is part and parcel of the Withdrawal Agreement and it will not be renegotiated”. Indeed, Europe has shown no sign of weakening in their position whilst Theresa May has been travelling trying to find a workable compromise and has been looking for cross party support in the Commons.

Whilst markets have performed strongly reflecting their international composition, UK retailers in fact suffered their worst December for ten years, according to the BRC, which reported zero annualised growth in retail sales. Motoring and cycling retailer Halfords issued a profit warning in January, while fashion retailer Quiz issued its second profit warning in three months.

Sales also dropped at M&S over Christmas; the company blamed deteriorating consumer confidence, mild weather, Black Friday, and widespread discounting by competitors for the decline, amongst other factors. Supermarket retailer Sainsbury’s also reported a decline in sales over the Christmas period; however, Tesco bucked the trend, revealing “strong” Christmas trading.

In America markets were encouraged by the Federal Reserve suggesting that they would moderate future interest rate rises. In addition, there were a number of encouraging corporate earnings releases, although as in the UK trading has proved challenging for a number of high-profile companies including Apple.

As indicated earlier trade discussions between America and China continued slowly during January. In an interview with the New York Times, President Trump confirmed that the US was “getting closer” and negotiations were “going very well”. Insufficient progress has taken place since however, but if agreement were to be reached this would be positive from a market perspective.

If you or your clients would like further information please contact Shaun Bell, on 01548 856444 or email shaun@sabrefinancial.co.uk .

 

Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.


 

 

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