Oil price rally lifts FTSE 100, IPO machine whirs back into action and Burberry warns again

“Wall Street managed to avoid a big sell-off despite hotter than expected US inflation figures reducing the chances of interest rates being cut as soon as March,” says Russ Mould, Investment Director at AJ Bell.

“European shares raced ahead at the end of the week as investors focused on comments from European Central Bank (ECB) President Christine Lagarde who implied the worst was over with inflation in Europe, stoking hopes for rate cuts from the ECB.

“The FTSE 100 jumped 1% to 7,651, driven by oil producers, miners and banks. Oil prices jumped by more than 2% as a result of air strikes against rebel targets in Yemen in response to attacks on ships in the Red Sea. Markets have been worried that supplies of oil and goods will be disrupted. This military action also caused gold prices to jump as investors rushed to buy safe-haven assets.

“Better than expected economic growth during November in the UK gave support to the FTSE 250 index as approximately half of its constituents are seen as domestic plays. Housebuilders and real estate groups led the way with the biggest contributor to the FTSE 250 in terms of index points being Vistry.

“Previously known as Bovis Homes, Vistry came across as more upbeat than most of its peers in a trading update and said 2023 pre-tax profit would beat previous guidance.

“The IPO machine whirred back into action with Air Astana set to have a proper go at listing in London. There was previously talk of the Central Asian airline floating in London in 2018 but nothing came of it. Now the Kazakhstan flagship carrier intends to float in the coming months in an event that will provide an exit path for BAE Systems, which has a large stake in the airline. That investment dates back more than 20 years to when BAE tried to sell radar systems to the Kazakhs.

“London Tunnels also outlined plans to float in London amid plans to restore underground networks used to shelter people during the Blitz and turn them into a tourist attraction. James Bond fans might be giddy at the prospect of seeing the inspiration for Q-Branch as the Special Operations Executive, a secret British World War II organisation, was located in the tunnels in the mid-1940s.”

Burberry

“So much for the roaring twenties. The idea that wealthier individuals would completely brush off inflation and the cost-of-living crisis has been thrown in the bin. No sector is entirely immune from such pressures and over the past six months or so we’ve seen cracks appearing in the luxury goods sector as demand wanes.

“Burberry already flagged problems two months ago and now it says trading has seen further deceleration, meaning full-year results will miss expectations. The Americas and South Korea are the biggest problem areas for the group, judging by store sales trends.

“So, what can it do? Unlike your average fashion retailer, it is simply not the Burberry way to slash prices and hope bargains lure in shoppers. The luxury goods scene is about trying to make consumers want to have something exquisite and premium priced to give the illusion that it is only available to the elite. Discounting would tarnish the brand. Therefore, Burberry has no choice but to ride out the storm until the wealthier are feeling confident enough to splash the cash once more.”

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