Must read: FTSE 100, government borrowing, Crest Nicholson, Premier Foods

GLOBAL MARKETS

European markets have opened mixed after a rally overnight in Hong Kong and fresh highs in the United States. The FTSE 100 is in the green, with China sensitive stocks like the miners, Prudential (LSE:PRU), and Standard Chartered (LSE:STAN) outperforming. 

US futures are pointing to a mixed open after a strong session on Wall Street, with the S&P 500 hitting a record high and the Dow topping 38,000 for the first time. 

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The Hang Seng enjoyed its best day of 2024 overnight. Authorities in Beijing are mulling support measures to stem the pain facing China’s struggling stock market. Meanwhile, in Japan the central bank stuck to its ultra-accommodative monetary policy, keeping its key short-term interest rate unchanged at -0.1%. The Bank of Japan also reduced its 2024 inflation forecast from 2.8% to 2.4% on the back of lower oil prices.  

Bitcoin has had a tough time so far this year – it is down over 10% against the US dollar, despite US regulatory approval from the SEC for bitcoin exchange-traded funds (ETFs). 

Oil is trading near a four-week high, with Brent crude trading above $80 a barrel as investors weigh a slew of factors including the sluggish global growth backdrop which could weaken demand versus the potential negative impact on supply from the Middle East conflict, the war in Ukraine, and cold weather hurting production in the US.

In terms of the corporate calendar, focus in the US will be on results from Netflix Inc (NASDAQ:NFLX) today and Tesla Inc (NASDAQ:TSLA) tomorrow for clues into whether the tech rally has more room to run in 2024.

PUBLIC SECTOR NET BORROWING 

UK public sector net borrowing excluding banks hit £7.8 billion, down from £13.7 billion in the previous month and sharply below forecasts for £14 billion. This was the lowest December borrowing figure since 2019 and was around half the same figure in December 2022. Central government debt interest payable also fell significantly, thanks to a reduction in inflation, specifically the Retail Price Index (RPI) which impacts index-linked gilts. 

However, on a longer-term view, over the financial year to December, government borrowing came in at £119.1 billion, up by £11.1 billion versus the same period in the previous year and the fourth highest on record for the April-December period. Net debt as a percentage of GDP is at levels last seen in the early 1960s, estimated at around 97.7%. 

The reduction in December’s borrowing is a win for the government, providing some fiscal wiggle room to cut taxes in a crucially important year for the Conservatives. The fall in inflation acts a tailwind to the public purse by reducing the government’s debt interest costs which jumped on the back of rising inflation and interest rates.

CREST NICHOLSON 

Crest Nicholson Holdings (LSE:CRST) reported 2023 full-year pre-tax profit of £41.4 million, below analysts’ expectations for £44 million but just ahead of its own guidance for £41 million. Forward sales hit 1,732 units, down 14% year-on-year. Meanwhile, CEO Peter Truscott is planning to retire this year, with Martyn Clark taking over the role. 

Housebuilders have had a tough time amid the backdrop of decreased mortgage affordability, build cost inflation and financial pressures on households. But with the Bank of England expected to begin the shift towards monetary loosening in either the second or third quarter, investors have been looking back towards the housebuilder sector as a potential source of opportunity. The dynamics which have punished the sector in recent years look set to shift in 2024, helping lift housebuilder shares off the November lows. However, it could still be a bumpy ride ahead.

PREMIER FOODS 

Premier Foods (LSE:PFD) reported third-quarter sales up 14.4% thanks to strong demand over the festive season for seasonal products such as Mr Kipling mince pies. The company behind brands like Bisto and Ambrosia has been offering price promotions, which have helped to boost demand for its at-home products. Premier Foods has also enjoyed a tailwind from falling cost inflation, which has helped to reduce margin pressure. 

Cost-of-living pressures, higher interest rates and elevate inflation have prompted consumers to eat out less, purchasing more food for home consumption instead. Premier Foods’ range of supermarket sauces, cakes, and other treats have enjoyed a boost from this shift as well as consumers’ increased price sensitivity.

Shares are trading higher today, extending recent gains, with the stock up by nearly a quarter over the past year.