The FTSE 100 and European stocks experienced gains on Tuesday, following a positive session on Wall Street on the last trading day before Christmas. However, Vistry shares tumbled after the housebuilder issued its third profit warning of the year. Trading hours were shortened on Christmas Eve, with investors anticipating a potential “Santa rally” before the holiday.
Table Content:
- Midday Market Movers: Vistry’s Profit Warning Drags Down Housebuilders
- Thames Water Under Scrutiny for Prioritizing Dividends Over Environmental Commitments
- Oil Prices Rebound in Thin Pre-Christmas Trading
- US Dollar Maintains Strength, Sterling Remains Under Pressure
- Vistry Shares Plunge After Third Profit Warning
- Brazilian Authorities Halt Construction of BYD Factory Over Labor Conditions
- Conclusion: Market Volatility and Uncertainty Persist Amidst Holiday Trading
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, commented on the market sentiment: “It’s never too late to believe in Santa. Investors on Monday were shrugging off last week’s negative news – particularly the indication that the Federal Reserve (Fed) would implement only two rate cuts in 2025 due to the resilience of the US economy.”
Ozkardeskaya highlighted recent economic data releases that contributed to this shift in sentiment: “Yesterday’s data revealed a larger-than-expected decline in US durable goods orders for November, a slightly weaker rebound in new home sales than anticipated, and an unexpected drop in consumer confidence in December.” She added, “This combination of negative news helped moderate the recent hawkish shift in Fed expectations, leading to renewed buyer activity.”
Key market indicators at the start of the trading day:
- London’s FTSE 100 index saw a 0.3% increase.
- Germany’s DAX index experienced a slight dip of 0.2%.
- The CAC 40 in Paris rose by 0.4%.
- The pan-European STOXX 600 index was up 0.1%.
- Wall Street anticipated a positive opening, with S&P 500, Dow, and Nasdaq futures all trading in the green.
- The British pound remained stable against the US dollar at 1.2535.
Midday Market Movers: Vistry’s Profit Warning Drags Down Housebuilders
Vistry shares plummeted after the company significantly lowered its profit guidance for the year, citing delays in year-end transactions and completions. The revised adjusted pre-tax profit forecast is now around £250 million, down from the previous estimate of £300 million.
Vistry attributed the downgrade to protracted negotiations with partners and the withdrawal from deals with unfavorable commercial terms. Analyst Britzman characterized this as a “troubling trend driven by a string of poor management decisions and forecasting missteps.” This negative news impacted other housebuilders, with Persimmon, Taylor Wimpey, and Barratt Redrow also experiencing declines.
Thames Water Under Scrutiny for Prioritizing Dividends Over Environmental Commitments
Thames Water faces criticism for diverting funds earmarked for environmental improvements towards bonuses and investor payouts. Internal discussions reportedly acknowledged the potential for public and regulatory backlash, raising concerns about license breaches and legal repercussions. The utility company, facing a financial crisis, distributed substantial bonuses and over £100 million to investors while reducing spending on crucial measures to mitigate river pollution.
Oil Prices Rebound in Thin Pre-Christmas Trading
Oil prices recovered from previous losses, experiencing a modest increase on Tuesday. Brent crude futures rose to $73.05 a barrel, while U.S. West Texas Intermediate crude futures reached $69.62 a barrel. Analysts at FGE anticipate short-term price fluctuations around current levels due to reduced trading activity during the holiday season.
Positive factors supporting the oil market outlook include recent supply and demand dynamics and the potential for supply disruptions to trigger price spikes.
US Dollar Maintains Strength, Sterling Remains Under Pressure
The US dollar held near a two-year high, supported by the Federal Reserve’s signals of a slower pace of interest rate cuts in 2025. The pound sterling continued to trade around $1.2541, significantly lower than its September highs.
The Bank of England’s decision to hold interest rates steady, coupled with a dovish outlook, has contributed to the negative pressure on sterling. The pound also remained relatively stable against the euro at €1.2053.
Vistry Shares Plunge After Third Profit Warning
Vistry issued its third profit warning this year, leading to a 20% drop in its share price. The company cited delays in completions and transactions, lowering its profit forecast to £250 million for the year. British homebuilders are facing challenges due to subdued demand and concerns about the trajectory of interest rates. Vistry shares fell to a two-year low of 523 pence.
Brazilian Authorities Halt Construction of BYD Factory Over Labor Conditions
Construction of a BYD electric vehicle factory in Brazil has been suspended due to allegations of “slave-like” labor conditions. Over 160 workers were rescued from “degrading” conditions, with reports of withheld passports and salaries. BYD stated it has severed ties with the construction company responsible and emphasized its commitment to complying with Brazilian law.
Conclusion: Market Volatility and Uncertainty Persist Amidst Holiday Trading
Market activity leading up to the Christmas break was marked by a mix of optimism and caution. While major indices showed gains, concerns remain about economic indicators and individual company performance. The Federal Reserve’s signaling of potentially fewer rate cuts in 2025, coupled with ongoing economic data releases, continues to influence investor sentiment. Individual companies like Vistry faced significant challenges, highlighting the volatility that can persist even during traditionally quieter trading periods. The coming year promises further developments in these areas, requiring investors to remain vigilant and adaptable.
