Emma Wall, Chief Investment Strategist, Hargreaves Lansdown: “European markets have continued their winning streak this morning, opening up thanks to a smattering of positive macro and company news. French stocks received a boost from rumours about a Chinese expansion for luxury label Louis Vuitton, and healthcare stocks across Europe boosted gains too thanks to a positive note from JPMorgan on Novo Nordisk. These are areas of the market which have been overlooked year to date – with much of European gains coming from defence and banking thanks to government spending and a supportive rate environment, leaving sectors such as consumer staples, healthcare, and utilities behind.
Macro news has also provided a tailwind for markets – with the US shutdown nearing resolution after a record 43 day run. Somewhat surprisingly given the recent successes in the odd-year elections, Democrats appear to have conceded some of their demands for healthcare funding and the prospect of an approved US Budget has lifted markets globally. Add to that, poor jobs data in the UK yesterday meaning that the markets are now pricing in a near cert of a December rate cut – sending both UK equities and bonds up.
This morning’s results from house builder Taylor Wimpey are indicative of the potential hurdle ahead for UK equities however, as Hargreaves Lansdown equity analyst Aarin Chiekrie outlined in his notes this morning:
“Taylor Wimpey’s sales momentum slowed in the third quarter, as uncertainty ahead of Rachel Reeves’ Budget later this month has been weighing on the housebuilding market. Unsurprisingly, buyers are holding off from signing on the dotted line in case the Chancellor’s announcement brings beneficial tax changes to property buying. With Christmas hot on the heels of this delayed Budget, disincentivising people to move during the festive period, there’s unlikely to be much of a pick-up in sales activity until the new year.”
While the FTSE 100 is lucky enough to benefit from global revenues – near 75% of company earnings are ex-UK – sentiment will potentially weigh on the index should the Budget announcements later this year include measures the market concludes are not supportive of growth.”
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