UK market loses some steam, Goldman signals interest rate cuts in February

by | Nov 17, 2023

  • UK market optimism fades and US markets consolidate gains 
  • Interest rate cuts in February, according to Goldman Sachs  
  • Brent crude on track for its fourth weekly decline 
  • Amazon to sell cars online from next year

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown

UK market optimism has faded. While sentiment isn’t crashing, it has waned compared to recent trading sessions over difficult news for some of the FTSE’s big dividend payers as the oil price comes under pressure. There are also concerns about the consumer landscape following Burberry’s profit warning – the pull back from even higher-net-worth individuals has difficult connotations for the consumer discretionary sector, to which the FTSE has significant exposure. 

Across the pond in the US, the mood is a little brighter, with pre-market indicators suggesting markets are largely consolidating the gains they’ve amassed recently. No need to mind the gap – Gap shares jumped 15% on better-than-expected results which has given the market cause for relief. The consumer landscape does remain challenging too, in a similar way to here. Walmart shares struggled after it sounded the alarm over the outlook for consumer spending. 

One sure way to fire markets up would be a definitive course of action on interest rates. In the absence of certainty though, markets only have maybes to go on. And the latest suggestion from Goldman Sachs suggests that interest rate cuts could be coming in the new year and will brighten up February. There has been some concern over when the Bank of England will start snipping the tightropes of monetary policy, given that there is still some residual heat in the economy. Policymakers are insisting that loosening isn’t on the cards just yet, but things have been moving in the right direction which opens up the possibility of a policy shift in the coming months. 

Brent crude has steadied above the $77 mark, but is still on course for a fourth weekly decline. There was a 5% dip on Thursday after news of very strong supply in the form of US inventories and news that production this quarter won’t be as tight as expected. This outweighed concerns around OPEC+’s decision to go ahead with voluntary supply cuts. Prices are still elevated compared to pre-pandemic, but this window does potentially offer some respite to businesses and consumers if it can be sustained – and in the short term that will depend on escalating tensions in the Middle East.

Amazon is racing to new heights and announced that next year it will allow auto dealers to sell cars through its site – starting with Hyundai. Amazon has been shouldering its way to the front of this market for some time, but this is the first time the plan to sell vehicles has come to fruition. While car dealers remain the end sellers, the offer will mean consumers will be able to search for available vehicles in their area, and check out on Amazon. The addressable market is huge and potentially lays the track for a whole new world when it comes to car shopping, which could have ramifications for traditional car-selling websites. But it will take time for this new proposition to build trust and teething problems can’t be ruled out.”

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