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UK retail stocks – not the duds we thought they would be

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Building on a positive close on Wall Street, European stocks are trading higher this morning although, the DAX was been slowed down by signs of lower industrial production and manufacturing in Europe’s biggest economy.

In London Christmas sales data is giving reason for optimism as retail facing businesses ended up less hurt by Brexit than expected. Asda chalked up the biggest increase in sales among all the supermarkets but Tesco also managed to boost sales, in contrast to Sainsbury and Morrisons.

Whether to celebrate Christmas or to drown their Brexit worries, Britons frequented pubs more often this December, according to pub operator Greene King which posted double digit sales growth. Tesco, Next and Ocado are leading the FTSE 100 gainers this morning while Greene King notched up a 4% increase in share price.

This all points to a far more positive set of numbers from retailers than traders were perhaps expecting. This looks like a classic case of expectations being managed: investors were bracing themselves for apocalyptic numbers; these numbers are not brilliant, but they look a lot more positive than many traders and analysts were anticipating.

China and US still at the negotiating table

China and the US are on their second day of face-to-face negotiations over trade and the best sign so far has been the absence of negative comments. US stocks are bubbling higher as investors hope that the discussions will yield a resolution to the protracted trade dispute between the two countries and allow technology companies to regain momentum lost through lower Asian sales.

The US government remains in partial shutdown, now on its 17th day, and although some government departments are operating again a large number of employees remain on forced leave. President Trump is due to make a speech Tuesday evening on the disputed financing of the Mexican wall, the reason for his standoff with the government, but it seems unlikely that the Democrats will yield to his demands on the financing.

“Wall Street seems to largely be ignoring the friction between Trump and Congress, focusing instead on the upcoming earnings season which is still expected to show good signs of economic growth,” says Fiona Cincotta, an analyst with City Index.

The dollar is mixed against major currencies, almost flat against the pound but lower against the yen and the Canadian dollar.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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