Flickers of light on the high street

European markets are showing some optimism this morning despite a significant correction among US indices last night and the Dow Jones Industrial Average losing 181 points on the day. London shares are being pulled higher by retailer Next and its upbeat trade forecasts which are a signal point of light in the gloom that has cloaked UK retailers over the last six months amid a general malaise on the British high street. Resources companies are also on the move, adding to the FTSE’s 0.18%.

Next set up for Brexit

The clothes retailer Next reported better than expected sales for the first six months of the financial year defying a trend of declining sales which has seen the closure of Mothercare, Maplins and Toys R Us and a desperate sale of House of Fraser. Also, in a first from the UK high street, Next said it was well prepared for Brexit, even if it is a no-deal hard Brexit. It is the first major UK retailer to do so, demonstrating that those shops that mean to survive the tumult of Brexit will have to do some considerable groundwork. Next shares jumped 8.3% in early trade beating all other stocks for the lead riser position. Other retailers will take note of this and the importance the market is placing on transparent, hard Brexit contingency plans. Some retailers have been far too nebulous in this respect.

Oil firm rise as crude prices move

The latest war of words between President Trump and Middle Eastern oil producers has had the opposite effect of what was intended and Brent crude is now nudging towards $81, a level not seen since 2014.  The rally already started Monday after the oil cartel OPEC’s meeting in Algeria where member countries decided to not increase production to accommodate Trump’s request for keeping oil prices at bay. The oil market is heading towards a period of thinner supplies when the US brings in sanctions on Iran in November and the US is keen to avoid the fallout this will have, not only on transport fuel costs but also as a raw material in industry, particularly chemicals. What remains to be seen is whether the vaunted North American shale oil industry will respond to this – currently US oil reserves are still looking substantial, with the US WTI crude oil contract trailing Brent crude considerably. This raises the possibility that higher post-November prices will hit non-US energy markets the hardest.