Equities have rallied well today, but are now pulling back from the
highs of the day. There is an increasing appetite for risk taking as
evidence by the pullback in high yield spreads. Spreads are still
elevated, but they are at least moving in the right direction. Despite
worse than expected US pending home re-sales, sentiment surrounding the
expected Obama stimulus package continues to help push markets higher.
The FTSE has been in rally mode ever since major retailers, Next and
Debenhams released their latest results. Their figures were generally
inline with expectations, but this has been enough to spark a rally
across the UK retailing sector with Marks and Spencers also up ahead of
its earnings announcement tomorrow. While today's Christmas trading
numbers have been described as robust, Next in particular has warned
that 2009 will be a very difficult year. There is a very real
possibility that 2009 earnings will fall significantly below consensus
estimates. Companies such as Marks and Spencer held of making
redundancies until the new year and 2009 could see many other companies
following suit. It appears that shoppers didn't entirely ditch their
spending habit last year, but with the jobs market set to worsen in
2009, the Christmas of 2008 could be seen as the shoppers' last hurrah
for a good few years.
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