European stock markets have ended the day with strong gains
- FTSE 100: up 64 points or 0.85% at 7674
- German DAX: up 94 points or 0.7% at 13,524
- French CAC: up 62 points or 1% at 6,100
So with Wall Street heading for new highs, again, that’s all for today.
Here’s our full story on the Chinese growth report which appears to have lifted stocks today:
With the FTSE holding onto its six-month high, and stocks up around Europe, David Madden of CMC Markets sums up the day:
The largely positive data from China combined with the dip in the pound pushed the FTSE 100 to a level last seen in July. In the final-quarter of 2019 the Chinese economy grew by 6%, meeting forecasts. The growth for the year was 6.1%, which was at the lower end of Beijing’s guidance. The annual growth rate was the lowest in 29 years, but then again it is no secret that China’s economy is slowing down.
The fixed asset investment, industrial output plus retail sales reports from China all topped forecasts. In recent months the Chinese authorises have been introducing measures to spur-on economic activity, such as loosening lending restrictions, and the tactics appear to be working.
Mining stocks like Rio Tinto, BHP Billiton plus Glencore are being helped by the China numbers. While internationally focused firms like GlaxoSmithKline, Diageo and AstraZeneca are benefitting from the slide in the pound – overseas revenues are given a lift.
FTSE 100 hits six-month high
Boom! The FTSE 100 index of top UK-listed shares has just hit a new six-month high.
The Footsie has gained 70 points, or 0.9%, to 7681, its highest level since July.
That’s partly due to the weak pound following the retail sales shocker, and partly due to hopes that China’s economy is turning the corner after a tough 2019.
WEF: Draw up your net-zero plan
Next Monday, the World Economic Forum kicks off in Davos. Climate chance is high on the agenda -- WEF’s agenda-setters and policy-makers say it’s now the top threat to the global economy.
And WEF’s founder, Klaus Schwab, is urging the companies attending to produce plans for achieving net zero carbon emissions, within 30 years.
That might not be ambitious enough for campaigners, such as Greta Thunberg, who will be calling for immediate action on fossil fuels.
This is the full text of Schwab’s letter sent to Davos attendees, called “Acting on Climate Change”.
Dear Participant to the 2020 World Economic Forum Annual Meeting
The opportunity and the need for companies and investors to show leadership on climate change is more eminent than ever before.
Making a commitment to help tackle the urgent issue of climate change is also in line with the stakeholder imperative of the 2020 Davos Manifesto and the theme of the 50th World Economic Forum Annual Meeting: Stakeholders for a Cohesive and Sustainable World.
Consequently, as a leader of one of the world’s foremost global companies and a valued partner of the World Economic Forum, we encourage you to use the opportunity of your upcoming participation to make a commitment to act on climate change.
If you have not done so already, we invite you to set a target to achieve net zero greenhouse gas emissions by 2050 or sooner. A short accompanying note to this letter provides some options to help you in this regard.
This initiative will be addressed at various Community Meetings taking place at the Annual Meeting.
We look forward to the Annual Meeting 2020 being a breakthrough moment for business action on climate change and thank you in advance for your consideration and leadership in helping the world address this urgent global issue. <end>
Something to read on the winding road up the mountain to Davos, or in the private jet.....
Full story: UK high street gloom deepens
Here’s our news story on the retail sales slide:
High street sales in Britain slumped in December as consumers reined in their spending over the key Christmas shopping period, adding to the gloom facing embattled retailers across the country and increasing the likelihood of an interest rate cut later this month.
According to the Office for National Statistics, retail sales failed to rise for a record fifth month in a row in December as household spending in high street shops and online plunged by 0.6% from the previous month.
Sounding the alarm over the health of the economy at the end of last year as Brexit uncertainty weighed on growth, the ONS said that sales had not risen on a monthly basis since July, the longest period since records began in 1996.
Consumer spending over the final three months of the year fell by 1% compared with the previous quarter, while sales growth for the year dropped to 0.9%, below all estimates made by City economists in a Reuters poll....
More here:
The pound has fallen almost half a cent today, back to $1.304, as the retail sales slump worries traders...and makes a rate cut more likely.
The #UK seems to be heading to a rate cut on Jan 30, after retail sales disappoint amid increasingly dovish rhetoric by MPC members. Next week’s #PMI likely to be important, too, though a consensus seems to exist that quick and aggressive action is needed to arrest the slowdown.
— Filip Lipev (@filiplipev) January 17, 2020
If you strip out car sales, then UK retail sales slid by 0.8% last month -- much worse than expected, and the third decline in a row.
Wow! UK retail sales unexpectedly fell in December. Down 0.8%, instead of a gain of 0.8%. UK retail sales negative for three consecutive months. pic.twitter.com/a9IWhURtLl
— jeroen blokland (@jsblokland) January 17, 2020
Here are the key points from today’s healthcheck on the UK retail industry.
- In the three months to December 2019, the quantity bought in retail sales decreased by 1.0% when compared with the previous three months.
- All sectors except household goods stores and fuel saw a decline in the quantity bought for the three-month on three-month movement; driven mainly by non-food stores at negative 1.0%.
- The quantity bought in December 2019 fell by 0.6% when compared with the previous month; the fifth consecutive month of no growth.
- The quantity bought in food stores fell by 1.3% for the monthly growth rate, which was the largest fall since December 2016, also at 1.3%.
- Comparing the three months to December 2019 against the same three months a year ago, growth in the quantity bought increased by 1.6% in December 2019, despite a strong decline of 2.2% for department stores.
- Online sales as a proportion of all retailing was 19.0% in December 2019, compared with the 18.6% reported in November 2019
In detail: Britain's retail crisis
December’s retail sales slump follows a flurry of bad news from the sector
High street stores have struggled particularly badly, with consumers shunning physical stores in favour of web shopping.
Already this year we’re learned that:
- Sir Philip Green’s Arcadia Group has begun closing a fresh wave of stores after suffering a tough Christmas
- Primark, one of retail’s success stories in recent years, saw sales drop over the festive period
- The latest inflation data show that retailers slashed prices last month, particularly clothing, in an attempt to attract customers
- Department store Beales is on the brink of collapse, while SuperDry and Joules have issued profits warnings
- John Lewis has warned that its staff bonus could be axed, after profits tumbled last year
- Mothercare and Links of London have both closed their UK shops, costing over 3,000 jobs, while Debenhams has shuttered 19 stores
Updated
Duncan Weldon of The Economist reckons there’s a real chance that The Bank of England cuts interest rates back to 0.5% at its next meeting (the decision comes on 30th January).
Ouch those retail sales figures are grim.
— Duncan Weldon (@DuncanWeldon) January 17, 2020
Looks like a January rate cut is indeed very much in play.
Ryan Broomfield, partner at business services firm RSM, agrees that the 1.0% drop in UK retail sales in October-December is ‘very disappointing’.
‘This is a particularly poor result given this is meant to be the Golden Quarter where seasonal sales are supposed to provide a revenue boost. In addition, these figures will not show the potential sting in the tail – the impact of consumers returning unwanted gifts after Christmas.
‘This brings to an end what has been a pretty torrid 2019 for many high street operators, described by the British Retail Consortium as the worst for 25 years. Shoppers will have noticed the impact of store vacancies in retail parks and town centres, notably in areas which have lost large department stores and with further closures expected in 2020.
Dismal Christmas for retailers
Britain’s retailers have suffered a grim Christmas, says Ed Monk, associate director for Personal Investing at Fidelity International.
“2019 was miserable for retailers, topped off by a dismal Christmas trading season. Today’s figures will raise further questions around how robust the UK economy really is going into the year ahead.
“The picture we’re seeing from trading figures is that shoppers reined in spending in the months ahead of Christmas, with the December monthly figure showing there was no festive bounce to make up for lost ground. The Government has pledged action to help retailers and calls for action are likely to grow now.
Economists and investors are alarmed by December’s grim retail figures.
The 0.5% slump in retail sales has dashed hopes of a recovery, and a so-called Boris Bounce in confidence.
Paul Kavanagh of investment managers Patronus Partners says the figures are “truly awful”
Looks like UK retail sales for December were truly awful, down 0.6% month on month compared to a consensus forecast of 0.9% growth. Year on year was 0.9% v 2.1% expected.
— Paul Kavanagh (@PaulJKavanagh1) January 17, 2020
Ranko Berich of Monex Europe says there’s no silver lining in the report -- which could force the Bank of England to cut interest rates in two weeks.
So I'll admit my bias going into UK retail sales was to find some kind of silver cloud, and so far I'm seeing nothing. Retail sales are volatile but in context this looks v bad. Unless PMIs feature mass oaths to increase production by 25% in time for Brexit MPC will cut
— Ranko Berich (@rankoberich) January 17, 2020
UK retail sales tumbled in December
NEWSFLASH: UK retail sales fell unexpectedly in December, as Britain’s high street crisis escalates.
Retail sales volumes fell by 0.6% in December, the fifth monthly decline in a row. Economists has expected a rise to 0.5%.
It means that retail sales fell by 1.0% in the October-December period compared to the previous quarter, despite Black Friday, Christmas and the Boxing Day sales all falling in the final two months of 2019.
Food and clothing sales both fell over the last three months, with department stores continuing to struggle badly.
The Office for National Statistics says:
Food stores quantity bought fell by 0.6% in the three-month on three-month measure, with a strong monthly decline of 1.3% in December. This was the joint largest decline seen in food stores since December 2016 and the largest monthly decline since October 2015 of negative 1.8%. Anecdotal evidence from a number of stores stated that goods did not sell as well as expected in December 2019.
Clothing experienced strong declines both on the month at negative 2.0% and in the three months to December at negative 2.3%. This is the sixth consecutive month of no growth for clothing stores for the three-month on three-month movement.
The quantity bought within department stores continued the downward trend, with a monthly decline of 1.8% and a three-month on three-month decline of 0.3%.
More to follow...
European stock markets are rallying this morning, on hopes that China’s economy could be turning a corner.
The main indices are all positive, with Britain’s FTSE 100 gaining 21 points or 0.3%.
That may be surprising, given China’s worrying slowdown in 2019. Investors, though, are cheered that Chinese retail spending and industrial output both jumped in December.
Ricardo Evangelista, senior analyst at ActivTrades, says optimism is bubbling in the City.
Friday’s trading session began with optimism taking over the market sentiment. The positivity came mainly from China, where industrial production and retail sales both exceeded the forecast, appearing to signal the turn of a corner for the growth of the Chinese economy.
This good news, together with American retail sales above forecasts, compounded the lingering positive feeling left by the signing of a trade deal between the US and China earlier in the week.
A bit of history.
Google floated on the US stock market back in 2004 at $85 per share, valuing the firm at around $24bn.
It was a troubled process (enlivened when its founders gave an interview to Playboy which was published during the IPO ‘quiet period’). Some investors were wary of tech stocks in the aftermath of the dot-com crash, with some warning that internet companies were over-valued.
But anyone who bought shares then, and held them, has enjoyed strong growth - with Alphabet’s share price nearly tripling in the last five years.
Christopher Rossbach, CIO of private investment firm J. Stern & Co, reckons Google’s value is going to keep climbing, having smashed through the $1tn barrier last night.
The company’s investment in artificial intelligence and machine learning should boost its business, Rossbach says.
And that means it could potentially double in value to $2bn in the ‘near term’. That might seem a stretch, except Alphabet’s shares did rise by 28% last year.
“As Alphabet joins Apple, Microsoft and (from time to time) Amazon among tech companies that have reached this level, it marks just the start for the company. It still has significant further room to grow, both in its core online advertising business as it innovates in advertising monetization and formats and in its cloud computing business.
“Alphabet is laying the foundations for a much larger company as it is the unequivocal leader in artificial intelligence and machine learning.
“It is also disrupting new multi-trillion dollar markets, for example healthcare, with this technology. Its sizeable investments give Alphabet a sustainable competitive advantage as it applies this technology across its business.
Updated
Google's parent company Alphabet now worth $1 trillion
The other big news of the morning is that Alphabet, Google’s parent company, is now worth a staggering one trillion dollars.
Barely 21 years after PhD students Larry Page and Sergey Brin created their pioneering search engine, the company has become the fourth tech giant to hit a $1tn valuation - after a late surge on Wall Street last night.
Apple, Amazon and Microsoft have all hit the milestone, during the remarkable rally in FAANG tech stocks in the last few year.
Google’s value has steadily surged as it has tightened its grip on the search market, boosted its advertising revenues from web searches and YouTube, created and grown its Android mobile operating system, and launched a series of smart-tech products including Google Home and Google Assistant.
It has also invested heavily in future technologies, including AI, virtual reality, and a self-driving car project - which could ensure its dominant position long into the future.
Updated
Introduction: Chinese growth rate hits near-30 year low
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Along with death and taxes, the other certainty in life is that China will expand in line with Beijing’s targets.
But thanks to the US trade war, and the global slowdown, that means the weakest growth in almost 30 years.
New GDP figures out today show that China achieved a 6.0% annual growth rate in the final three months of 2019. That means growth for the entire year came in at 6.1%, down from 6.8% in 2018, and the lowest rate in 29 years.
It confirms that China’s economy has taken a significant hit from the tariffs imposed on its goods by Donald Trump during the trade conflict which is now easing.
The recent slowdown in the global economy, and Beijing’s attempts to rein in its shadow banking sector, also weighed on growth in the world’s second-largest economy.
Investors are hoping that Phase One trade deal signed this week, although limited, could help thaw relations between the two sides.
Craig Erlam of trading firm OANDA explains:
It’s clear that the trade war has taken its toll on China’s already decelerating economy and the deal that was signed this week may enable it to find some form, again.
But there are also reasons for optimism in today’s economic data. China’s industrial production grew 6.9% year-on-year in December, which is the strongest in nine months. Retail sales grew by 8.0%, which was also stronger than expected, while fixed asset investment beat forecasts with 5.4% growth.
Jim Reid of Deutsche Bank says:
Overall a strong set of December numbers came out from China pointing to a gradual recovery in economic activity.
More reaction to follow....
The agenda
- 9.30am GMT: UK retail sales for December. Expected to rise by 0.8%, after shrinking 0.6% in November
- 10am GMT: Eurozone inflation data for December. Expected to confirm a rise to 1.3%, from 1.0% in November
- 3pm GMT: University of Michigan consumer confidence report.
