Retailer Rout Drags FTSE lower

The FTSE plummeted over 1% as a rout in retailers overshadowed strength in the miners. Wall Street diving on the open and a stronger pound weighed further on the FTSE.

The FTSE plummeted over 1% as a rout in retailers overshadowed strength in the miners. Wall Street diving on the open and a stronger pound weighed further on the FTSE. 

A downward revision for sales and a profit warning at ASOS sent the shares price plunging over 40%. Cutting its sales outlook by 5%-10% the e-retailers showed that online retailers are not immune from the challenges facing the high street. Economic uncertainty across several major markets, combined with weakening consumer confidence and unfavourable weather conditions have produced tough trading conditions which have left ASOS trading “significantly behind expectations” in November.

Last winter proved to be brutal for retailers. With Brexit uncertainty still weighing on consumer confidence the outlook if anything has worsened across the year. With e-tailors now being caught in the mix of negativity, ASOS results have showed that there is nowhere to hide.

Euro higher despite disappointing CPI data
The euro climbed higher on Monday despite weaker than forecast CPI data. Eurozone inflation slipped by more than forecast in November to 1.9%, well down from 2.2% the month previous and below the 2% forecast. With fears of an economic slowdown in the eurozone growing, softer than forecast inflation has done little to soother concerns. It was only thanks to a soft dollar story that the euro was able to mov higher.

Dollar drops from 18 month high
The dollar was trading 0.3% lower versus a basket of currencies as investors digested disappointing data and looked ahead to the Fed’s policy announcement on Wednesday. Empire Sate Manufacturing index was lower in December, adding to concerns over the health of the US economy. The index printed at just 10.9, down from 23.3 in November.

Looking ahead to Wednesday, whilst the Fed are broadly expected to raise interest rates on Wednesday for the fourth time this year, investors are anxious about what the Fed have in store for 2019. After some recent dovish comments from the Fed about rates nearing neutral, weak Empire manufacturing data and another round of Fed bashing from Trump investors were seeing few reasons to stay long the dollar.

Gold regains its shine
The weaker dollar helped gold regain its glitter and bounce back from a 2-week low. Gold had dived as the dollar reached an 18-month high. Fed expectations are going to drive the markets over the coming days; more dovish signals on Wednesday from the Fed could keep the gold bulls in control.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.