Today's markets: Retail and house price gloom hits shares

European stock markets aren’t really sure what to do with themselves this morning following differing sessions for Asia and the US overnight. The FTSE 100 leads the losses and is down 0.2 per cent, with banks and supermarkets sending the index down, while shares in Paris and Frankfurt rose 0.3 and 0.2 per cent respectively.

US shares were propped up by tech once again, with Nvidia rising 3 per cent after it announced a new graphics card (remember it makes them too), powered by the same technology in its new Blackwell microchip. The S&P 500 rose 0.55 per cent, while the tech-heavy Nasdaq was up 1.24 per cent, but smaller and more industrial and domestic-focused companies struggled, continuing last year’s trend. The US Department of Defense also added several Chinese stocks to its list of companies it considers military entities, including Tencent and Xiaomi, which sent shares in Hong Kong down. The duo fell between 7 and 8 per cent, leading to an index loss of 1.9 per cent. Mainland-listed shares managed a small rise, however.

A damning outlook update from the British Retail Consortium (BRC) hat hit sentiment hard with the likes of Primark-owner Associated British Food, Tesco, and Sainsbury’s nestled among the lenders and housebuilders in the fallers table this morning. According to the BRC, the ‘golden quarter’, which ends in December, for UK shops failed to match expectations and the outlook for 2025 isn’t great. Sales growth won’t outstrip inflation in the coming 12 months and stores started their new year sales earlier this year to boost demand, which is rarely a good sign. One exception was Next, whose update today showed it managed a good Christmas, however, it warned its UK growth would slow with tax rises on the way. Michael Fahy dives into the details of the UK retail sector here, with tips on who might come out on top.

The house price outlook for the UK is equally muddy, according to the latest figures from Halifax, one the country’s largest mortgage lenders. Last year was decent overall, with the average home value rising 3.3 per cent, but figures started falling in December, the first negative monthly figure in six months. Why? Well, this is where it gets complicated. Stamp duty rates are rising in April, affecting first-time buyers, landlords and second-home owners, so there’s an incentive to get deals across the line and demand from that segment is building up. However, sellers aren’t coming to market as they’re waiting for mortgage rates to become cheaper. Deals fell steadily over last year but as the Bank of England kicked rate cuts down the road, that has slowed. There’s still some way for mortgage rates to go, so you’d expect falls to happen this year particularly as we get more clarity from the central bank. So it’s tax versus interest and we don’t know who will blink first. The surprising 0.2 per cent monthly house price fall meant lenders and housebuilders took a knock today, with Taylor Wimpey leading the way down, alongside NatWest Group and HSBC.

Linked to that is the economic outlook for the UK, with long-term yields on the rise (which will slow down mortgage rate cuts) as markets question the debt pile and where growth will come from. The 30-year yield hit 5.2 per cent, the highest in nearly 30 years. You can see a similar thing in the US as traders question President-elect Donald Trump’s economic and tariff plan and what it means for inflation. The US 30-year Treasury yield hit 4.86 per cent overnight, the highest since 2023, as a couple of auctions failed to attract significant interest.

By Taha Lokhandwala