FTSE 100 lower as miners slip, Biden set to block US Steel takeover, more bad news for retail sector, Next hit by negative broker comment and Wizz Air and Ryanair passengers up in December

“The FTSE 100 failed to maintain recent momentum as weakness in the mining sector put the index on the back foot,” says AJ Bell Investment Director Russ Mould.

“Miners’ fortunes are closely tied to the commodity-hungry Chinese economy where faltering stimulus efforts, uneven economic data, and the threat of tariffs continue to raise questions about metals demand. Domestic Chinese shares came under further pressure amid mixed trading in Asia more broadly.

“The post-Christmas malaise in US stocks continued as investors await the inauguration of president-elect Donald Trump who could prove a wildcard for markets this year.

“White House incumbent Joe Biden appeared to be keen to reinforce his legacy as a champion of working people in America as he reportedly prepares to block the $15 billion takeover of US Steel by Japan’s Nippon Steel. Trump had already threatened to quash the deal once he entered office.

“It looks like people may have prioritised pints and prosecco in the run-up to Christmas as new figures from the UK hospitality sector showed bars did well and pubs were resilient, while the retail sector registered a drop in December footfall.”

Retail sector: BRC retail footfall, Next, profit warning risks

“Weak footfall for retailers in December illustrates how life remains tough for the sector. While some spending has shifted online, the industry is in a perilous position thanks to a cautious customer and pressure on costs.

“Interest rates have started to come down but they still remain considerably higher than the rock-bottom levels we saw between 2009 and 2022. People who were accustomed to an era of cheap borrowing have been knocked for six and it’s going to take a lot more cuts from the Bank of England before their finances can get into better shape. That means we could see more cautious consumer spending for quite some time.

“Layer on top the impact of higher employer National Insurance, an increase in the minimum wage and costs associated with changes to employer rights, and you’ve got a nasty cocktail which means retailers start 2025 in a fragile state.

“Retailers will be nervous about passing on extra costs to the customer, but they won’t want to stomach lower profit margins if possible. Some might slash prices in a bid to drive up sales volumes, others will look hard at their cost base and keep trimming away.

“We’ve already had talk of potential job cuts in the sector. That has naturally caused people to worry about their jobs and to think hard about whether something they fancy is an essential or simply a ‘nice to have’ purchase.

“There is a heightened risk of profit warnings from the retail sector over the coming weeks as management teams take a more realistic view of the year ahead. That’s a key reason behind a negative broker comment on Next which has sent its shares down by nearly 1%. Deutsche Bank is worried that Next will give weaker forward guidance than is currently expected by the market.

“Next is the bellwether for the UK retail sector and anything it does to upset investors could have a negative read-across to other retail shares on the London market.

“The other issue to consider for the broader retail sector is the cold snap at the start of January. That could leave retailers with lots of unsold stock and dampen spirits for any operators which did manage to have a good time in the run up to Christmas.”

Airlines

“Despite the impact of weather disruption, Ryanair and Wizz Air both saw passenger numbers climb in December.

“This concluded a year of passenger growth but average fares have been coming under pressure as operators have been forced to reduce prices to entice hard-pressed consumers to continue booking flights.

“At least the sector has seen one of its major cost pressures ease as fuel prices came down significantly in 2024. However, with oil creeping higher in the first knockings of 2025, fuel costs could still return as a meaningful headwind for the industry.”

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