Stocks are mixed as Jerome Powell, the head of the Fed, testifies in Washington D.C.
So far the central bankers hasn’t give much away in terms of clues as to possible changes to monetary policy, although earlier in the day, he warned that uncertainties have continued. Some dealers are sitting on their hands until they get a clear view from Mr Powell.
Superdry continues to struggle as the group revealed a 56% drop in full-year profit before tax. The decline in profit wasn’t a shock seeing as the group issued a profit warning in May – it’s third in 12 months. Revenue was largely unchanged on the year, and the fashion house predicts that revenue will slip on the year. Superdry has undergone major management shakeup this year, but it is confident it is taking the right measures to return the company to high profitability. In the mean-time, the outlook remains weak, as the retail market remain ‘uncertain’ and the business issues won’t be ‘resolved overnight’.
JD Wetherspoon are performing well as the company revealed that like-for-like (LFL) sales for the 10 weeks until early July jumped by 6.9%. Since the start of the financial year, the firm closed more pubs that it opened, and that is why total sales only increased by 6.6%. The wider industry has been struggling as on account of higher operating costs, but JD Wetherspoon is ticking along nicely, and its policy of focusing on profitable pubs is paying off.
Dunelm shares are a little in the red this afternoon despite the solid fourth-quarter figures. Total LFL sales jumped by 15.4%, and the online surged by 37%. It is encouraging to see that revenues are on the rise given that many retailers have complained about a fragile retail market. The impressive jump in online sales underlines the change in consumer trends. The outlook was optimistic too, as it predicts full-year profit to be at the top end of the guidance of between £124 million and £126 million. The stock has been driving higher since December, and if the bullish move continues it might target 1,000p.
US
Mr Powell comments ahead of the US open helped stocks get off to a solid start. The central banker said there was a case of somewhat easier monetary policy at the June meeting, and he cautioned that uncertainties have continued since the last Fed meeting. Traders viewed the comments as a sign the Fed is edging towards cutting interest rates, and that helped the S&P 500 hit 3,000.
Levi Strauss shares are down after mixed Q2 figures. Earnings per shares came in at 7 cents, which undershot the 8 cents forecast. The fashion house foresees that full-year revenue will come in at top end of the ‘mid-single digit range’. Given the financial reporting of the company, it will narrowly miss-out on Black Friday – the busiest shopping day in the US, and that has led traders to believe that second-half sales figures will be softer than the first-half number.
Tesla shares have traded higher this afternoon on a report the company will boost capacity at its factory in California.
FX
The US dollar index sold-off on the back of the comments made by Mr Powell. GBP/USD has been lifted by the respectable growth figures from the UK. On year-on-year basis, in May, the UK economy grew by 1.5%, which exceeded the forecast of 1.3%. Adding to the positive news, the April reading was revised upward to 1.6% from 1.3%. EUR/USD has also been lifted by the softer US dollar. The European Commission kept the 2019 GDP forecast unchanged at 1.2%, while the CPI forecast was trimmed from 1.4% to 1.35.
USD/CAD is a little lower today after the Bank of Canada kept interest rates on hold at 1.75% - meeting forecasts. The Canadian central bank said the current rate remain appropriate.
Commodities
Gold was given a boost by the softer US dollar and the metal has retaken the $1,400 mark. The strong inverse relationship between the commodity and the greenback continues. Gold has enjoyed a bullish run for a few months, and if the wider upward trend continues it might retest the $1,439 area.
WTI and Brent crude were jolted higher in the wake of the Energy Information Administration update, which showed a fall in oil and gasoline stockpiles. Oil inventories dropped by 9.49 million barrels, which dealers were only expecting a draw of 3.08 million barrels.
