Early Morning Call: Sainsbury's, JD Sports Fashion post upbeat trading statements

Equity market overview

Europe equity markets opened higher this morning, following the path of US and Asia-Pacific indices.

In Australia, retail sales jumped in November. The index increased by 1.4% compared to October, after a 0.4% rise the previous month, boosted by increased demand in clothes, electronics and furniture. That was more than twice the median forecast of 0.6%.

Consumption remains robust in Australia, and so does inflation. The Reserve Bank of Australia (RBA) trimmed mean CPI, the core inflation reading by the central bank, picked up to its highest level since 2018 at an annual 5.6%. Economists agree that the continued strength in inflation coupled with the resilience in consumption means the RBA will keep hiking rates.

After having reached a decade-high 3.1%, the market expects the bank to raise its cash rate by another 25-basis points at its next meeting in February.

The Australian dollar rose this morning against all major currencies.

On the equity markets, Sainsbury's reported a 5.2% increase in retail sales excluding fuel, up 5.2%. Like-for-like sales were up 5.9%, and the retailer now expects profits to be towards the upper end of the guidance range of £630 million to £690m.

JD Sports Fashion posted total revenue growth of over 20% during the Christmas period and raised its full-year profit forecast.

There were also reports from Topps Tiles, Barratt Developments and PageGroup.

According to Bloomberg news, Apple plans to start using its own screens by 2024. This follows previous revelations by the news agency that the iPhone maker aims to use an in-house designed chip from 2025.

Amazon announced yesterday it plans to shut three warehouses in Britain. This will impact 1,200 jobs, but the group assured that workers would be given the chance to transfer to other units. Amazon, which operates 30 large warehouses across the United Kingdom, has opened a consultation to close three older British warehouses this year in Hemel Hampstead, Doncaster and Gourock. It plans to open two new warehouses in central and northeast England over the next three years, a move it said will create 2,500 new jobs.

Commodities

Oil prices are down this morning. On top of the demand concerns that have been weighing on oil prices recently, the API surprised the markets with a substantial increase in stocks.

US crude oil stockpiles jumped by 14.9 million barrels last week. At the same time, gasoline inventories rose by 1.8 million barrels, and distillate stocks by 1.1 million barrels.

Oil traders now await this afternoon's EIA inventories to see if they confirm the stockpile rise, and tomorrow's US inflation data. The market expects US CPI growth to have cooled in December, to 6.5% year-on-year (YoY), after a 7.1% rise in November. Inflation below expectations could drive the dollar down, which could mechanically boost oil demand as it would make the commodity cheaper for buyers holding other currencies.

As the US dollar fails to regain momentum, gold remains above $1,880, and both silver and platinum are trading higher this morning.

The copper rally continues, now up for a fifth straight day, and closing in on $9,000 per tonne.