Today sees several UK companies reporting with the focus being on Tesco and a couple of other retailers joining the fun in the shape of Game Group and Topps Tiles. We also have figures from Taylor Wimpey and from the food sector both Northern Foods and Premier Foods report.
As predicted Tesco have announced their worst Christmas since 1990 and the market was preparing for bad news yesterday. The stock had lost 3.5%, so the stock may have priced in the bad news and at least there is a glimmer of hope from their overseas sales, which increased over 30% helped by a weakening pound. What also comes as a surprise is their strong performance in electrical sales, assisted by a good rise in online sales.
Game Group has come in with better than expected full year profits, particularly helped by a strong Christmas period. However they issued a cautious outlook for 2009.
Taylor Wimpey’s update offers no further news on how their debt refinancing is progressing where a decision is due to be made by the end of March.
Both Premier Foods and Northern Foods have reported good figures this morning with bullish statements about their outlooks and seem to be one of the few sectors who actually are looking forward to the rest of 2009!
Ben Bernanke makes a speech at the London School of Economics, his first since slashing the US benchmark rate near to zero, in a bid to explain the long term strategy of the US Federal Reserve for getting the economy moving again. The market would also like to see some indication of their exit strategy, although not on the priority list for now. But you have to ask the question how will they sell their billion dollar portfolio of toxic (I mean mortgage backed) assets. The second reason for the US Federal Reserve Chairman’s visit to the UK is to give our intrepid leaders some ideas about how to get the money markets flowing again as so far the actions taken by the UK government have done little to instil confidence.
Sterling suffered heavy losses yesterday giving up over 2% to the dollar and 1.5% against the euro. The euro/sterling rate returned to the 0.9000 level putting an end to the pound’s 7 day winning streak against the single currency. The trend is still up for the euro and in order to break it the rate has to revisit at least 0.8000. For those who are greatly affected by a weak pound it doesn’t look good and the unfortunate situation is that every time there’s concern over the global economy it’s sterling that gets whacked the most at the moment. The selling was compounded by the National Institute of Economic and Social Research data showing that the UK’s output fell the most since 1980. Thursday will be a test of sentiment towards the euro as the ECB makes their interest rate decision with a cut of 0.5% to 2% expected, but with the euro zone experiencing similar troubles to the UK more drastic action may be required.
Gold suffered its biggest daily fall in 6 weeks as it once again rejects an effort to test the $900 mark. The inability of the yellow metal to take out $900 and push on through the highs of September is negative from a technical point of view and until this happens the trend is still bearish. Dollar strength also contributed to gold’s fall.
The weakness in gold also led to a sell of in oil with prices tumbling 5% as concerns over the global economy and demand for oil carrying over from last week’s US employment data gave bears good reason to drive prices lower.
