Thursday, 25 October: A late afternoon sell-off in the US last night made for an interesting read this morning. The S&P 500 fell more than 3% at the close while the Dow Jones seemingly gave up all its 2018 gains and the NASDAQ fell back more than 12% from late August highs. Moving on to Wednesday and Asian markets overnight failed to ignore the tone; the Nikkei falling more than 3.5% while the Hang Seng in Hong Kong pared back bigger falls in the session to close -1.1%. Rolling in to Europe, the FTSE 100 looked set to open lower, which it did, falling more than 1% in the opening 10%. These falls were soon reversed however and aided through a weaker pound, the main index closed +0.59%. The pound fell despite rumoured support for PM May from MPs.
Major news this morning was that Debenhams are set to close five times as many stores as the UK highstreet continues to take its toll. Up to 50 stores are to be shut over the next 3-5 years, with around 4,000 jobs set to be at risk, as future investment looks to focus on Debenhams Redesigned principles on up to 100 of the stores. The department store also reported losses of nearly £500m (vs 2017’s £59m profit) through write downs on its goodwill and stores. In positive news, despite like-for-like sales decline of 2.3%, digital growth in the second half of the year grew 16%, faster than the overall market. Gross margins slipped through heavier discounts as customers were lured in to purchases. In a final kick to shareholders, the dividend has been scrapped. Shares ended +7%.
The world’s biggest advertising company WPP was by far the biggest loser on the main London index, shedding more than a fifth of its value during the morning following a weaker than expected third quarter performance while cutting its full year guidance at the same time. The multinational advertisers has had a turbulent year with its former boss leaving in April and the new boss already having to find ways to further compete with Google and Facebook. Q3 revenues fell 0.8% and announced it is to sell its stake in Kantar. Shares ended -13.75%.
The European Central Bank (ECB) today announced it is maintaining its benchmark rate at 0% as the region continues to deal with Italian budget uncertainty and its relationship with the departing UK weighs on sentiment. President Mario Draghi reiterated plans to end the region’s stimulus programme by the end of the year (currently €2.6trn asset purchase programme), while suggesting that interest rates could rise next year. The euro rose against the pound over the course of the afternoon, now at €1.1273.