Market outlook: Mulberry earnings in focus as Donald Trump’s treasury pick could calm markets

There has been a flurry of earnings data in the UK on Tuesday. Mulberry reported a 19% drop in first half sales. The luxury sector as a whole has been plagued by problems, and sales in Asia were a weak spot. However, the home crowd also turned their back on Mulberry this year, and UK sales also dropped 14%. The company cited challenging macro conditions, which cannot be denied. However, these results will surely give Mike Ashley more ammunition to try and get his hands on this iconic brand.

The company said that it will cut costs and potentially head count, as well as review its product and pricing in a bid to turn the company around. While trading conditions have been tough for luxury and in the UK, part of Mulberry’s problem is its product offering, which has not kept pace with its rivals. It also sits in an awkward space between high end and mid-range luxury. Thus, its sales slump also tells you a story about changing consumer desires when it comes to leather goods.

UK stocks are expected to open higher along with Europe on Tuesday, and US futures are also pointing to a positive open. Donald Trump has dominated markets since his election win in early November. However, the Trump trade has shifted from animal spirits about tax cuts and having a ‘pro-business’ President, to scrutinizing his policies, to then scrutinizing the people he has picked for his administration. Combined with a focus on inflation and how far central banks will cut rates next year, has made for a murky market outlook as we move towards the last weeks of the year.

The latest phase of the Trump trade, scrutinizing his picks for key roles in his administration, is now focusing on his pick for Treasury secretary. After the controversial choice of RFK Jnr for health secretary, the odds are narrowing on two candidates for the top job at the US Treasury: Kevin Warsh, a former official at the Federal Reserve, and Scott Bessent, a hedge fund manager. A co-headship at the Treasury could be good news for markets. Warsh’s history at the Fed could protect the central bank’s independence from Donald Trump’s interference, and Bessent has expressed an anti-protectionism, free trade stance in the past. Thus, a Bessent/ Warsh duo at the Treasury could limit Trump’s worst excesses when it comes to tariffs as well as preserving the integrity of the Fed. This is good news for US and global markets, and if they are announced as heads of the Treasury, we think that this would be good for market sentiment through to year end.

Gold has also overcome the Trump hurdle and is back in its rallying form. The yellow metal is higher by another 0.3% on Tuesday, after rising $50 so far this week. Gold is higher along with other industrial metals. Nikkel, Iron ore and steel are all higher by more than 1% on Tuesday, which is a sign that the market is brightening about the global economic outlook.

Gold had been a favourite commodity trade this year, until it was displaced by Trump. The fact that gold is making a comeback is another sign that other forces aside from the President elect are impacting markets. As long as the focus remains on what the Fed does next, then gold could be well positioned into year end.

This does not mean that Trump is no longer impacting the markets, however the latest phase of the Trump trade is more targeted at individual sectors and companies. The Magnificent 7 is experiencing a Trump-led divergence. Tesla is surging and was higher by another 5% on Monday after news that Trump could fast track legislation to allow self-driving cars. This is something that Elon Musk has been calling for, however, what is interesting is that Tesla doesn’t have a fully self-driving car in its ranger right now and has stated that it may not have one until 2026. Musk may want to speed up this process, if the Transportation Department, which previously has been reluctant to allow a regulatory framework for self-driving cars, pivots on this key issue.

It pays to be close to Trump. In the last month, Tesla has replaced Nvidia as the best performing member of the Magnificent 7, and has left the likes of the AI chipmaker, Google and Microsoft in its wake. Tesla’s share price is higher by more than 50% in the past month, which is not bad for a company that delivered 462k vehicles last quarter, which disappointed some analysts.

Ahead today, the final reading of Eurozone CPI will come into focus. The euro is down a touch as lead up to the data. After slipping on Monday, the dollar is making a comeback on Tuesday morning. GBP/USD also rallied at the start of the week, but it has stalled just below $1.27. This comes even though BOE policy marker Megan Greene reiterated that the BOE could take a cautious approach to cutting interest rates next year.