New Year Hangover Slowly Subsides


Wednesday, 2nd January: The cliched “New Year, New Me” failed to be reflected in equity markets and if investors’ hangovers hadn’t subsided fully, the first day of 2019 will have only added to sore heads. Weak Chinese manufacturing data further compounded global growth fears, reflective in an additional sell off in global indices throughout the day. Despite US indices ending 2018 on a high, Wall Street suffered their steepest annual declines since the financial crisis in 2018. The sentiment looked to be the same as 2019 surfaced, but heavier intra-day declines were eroded to declines of 0.53% and 0.41% for the Dow Jones and S&P respectively at the time of writing. A similar recovery was demonstrated in London as both the FTSE 100 and 250 recovered from earlier losses to close +0.09% and +0.48%. Retailer Next (+4.66%) sat atop the blue chip, buoyed by John Lewis’ strong Christmas reporting, sending optimism through the sector.

Closer to home, UK manufacturing data rose in December to 54.2 as factory stockpiling swayed data ahead of potential border blocks and Brexit uncertainty. The rise follows a revised upward reading of 53.6 in November, continuing the above 50 figure, reflective of expansion in the sector. Despite the highest reading in 6 months, the outlook for UK manufacturing remains unchanged, with the figure reflective of factories holding finished goods as manufactories build up inventories ahead of the March 29 Brexit deadline.

Sterling continued to be influenced by Brexit woes, despite UK Parliament still being on their festive holiday. They are set to resume next week, with the impending EU vote expected mid-January. The pound dropped back below $1.26 at the time of writing, its lowest level since mid-December. Brent oil recovered from earlier losses to sit back above $55.90/bbl at the time of writing.

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