Markets little changed to start the week

There’s been a fairly subdued start to the week across most asset classes with little seen by the way of major moves. While there is a temptation to see this as a winding down heading into Christmas there still remains plenty going on that could drive significant moves in the not too distant future. The FTSE is trading in the red and lower by around 10 points at the time of writing with Ocado and Marks & Spencer two of the biggest laggards and down by 4% and 3% on the day respectively. The pound has lacked any real direction so far as traders keep a close eye on the latest Brexit developments with PM May set to speak in parliament later where she is expected to talk down the chances of a second referendum.  

ASOS shares tumble after warning on profits

An unexpected warning of a significant deterioration in trading for the crucial period in the run-up to Christmas has caused shares in ASOS to plunge, with the fashion retailer’s stock falling by as much as 40%. Investors have clearly been caught off guard by the news, with the firm now cautioning that sales growth for the year will likely be around 15%, down from the 20-25% previously expected. Looking more broadly this is also a potential warning sign for online retailers who have hitherto held up relatively well compared to traditional High Street chains in what has no doubt been a challenging year for the sector. CEO Nick Beighton described the release as a “bump in the road” but given the market reaction it is readily apparent that some are treating this as something potentially far more serious.     

Fed decision the highlight

The stand out event of the week is Wednesday’s Fed rate decision where the US central bank are widely seen as increasing their base rate for the 4th time this year. Given the recent softening in some US data, the selling seen in the stock markets and the further flattening of the yield curve the main question as far as the markets are concerned is whether any of these factors will cause the Fed to alter their policy course going forward. At present there is only 1 further 25 basis point increase expected in 2019 and recent comments from Fed chair Powell suggesting the rate is not far from neutral have seen growing support for a slowing down or maybe even and end to the current hiking cycle. The US dollar has experienced a notable appreciation in the past 8 months or so after a soft start to the year and the greenback remains not far from its year-to-date high heading into the event.