The FTSE 100 has continued to stand out as far as European markets are concerned, consolidating its position as a more defensive index, although the DAX also got a boost, after ECB president Christine Lagarde indicated rate rises would start in July, helping to lift the share prices of German and European banks, and help push the euro to its highest level in nearly four weeks against the US dollar.
Basic resources are doing well, along with the telecoms sector, with Vodafone posting its second successive day of strong gains after last week’s news that Etisalat had built a stake in the business.
Housebuilders have edged higher after the latest Rightmove house price index for May showed a better-than-expected gain on both the monthly and annual measure. Once again, a lack of supply is helping to support prices despite concerns over higher rates, with Barratt Developments and Persimmon outperforming.
The bar was low heading into today’s Q1 trading update from B&Q owner Kingfisher, with the shares trading near to their lowest level in almost two years at the end of last week. Expectations were for like for like sales to decline by -8.1%, largely due to the tougher comparatives from a year ago. With the help of a decent performance from its Poland operation, which saw a 50% rise in sales, Q1 sales for the group saw a fall of -5.8%, a much better than expected outcome, at just shy of £3.25bn. On a pre-pandemic basis sales are still significantly above the levels seen at the time, a rise of 16.2%. Full year guidance was left unchanged, with adjusted pre profits expected to be in the region of £770m, and the retailer announcing a £300bn share buyback.
It’s not been a good start to the year for Moonpig; its shares hit a record low earlier this month, however they have picked up in the last couple of weeks. Today’s news that the company is looking to acquire buyagift.com for £124m has given the shares an added lift. In April, the online card company lifted its revenue outlook to £300m from an upper limit of £285m a move that brought it no credit at all. Today’s acquisition should allow it to achieve that easily, as well as offer a much more diversified and all-round gifting experience for their customers.
Ocado shares have also continued their recent recovery rising for the third day in succession after reporting it is set to pay €10.2m for Myrmex, a Greek robotics start-up.
Ted Baker shares have slipped back after management said that it had selected a counterparty to take over the business and that any due diligence was likely to take a few more weeks. Management also said that Sycamore Partners, who originally made a number of bids earlier in the year, wasn't the bidder in question and had dropped out of the process.
US markets have continued to pull away from the fresh 18-month lows seen at the end of last week, helped by the more buoyant tone from markets in Europe.
We’ve been helped by some small-scale M&A activity with Broadcom said to be in talks with cloud company VMWare as part of a strategy to reduce its reliance on the surge in semiconductor revenues which, according to Broadcom CEO Hock Tan, won't last as more capacity gets added to the market.
Video games maker Electronic Arts is also higher on speculation that the business is looking to hitch itself to a bigger partner. With Microsoft acquiring Activision EA probably feels it needs the benefit of a partner with deeper pockets to help it keep up. It is being reported that EA has held discussions with the likes of Apple, Disney and Amazon.
Zoom is also reporting after the close in the hope that the worst of the share price declines are now behind it, now the shares are back at the levels they were pre-pandemic, below $100. Zoom said they expected to see full year revenue of $4.53bn to $4.55bn, along with annual profits of $3.48c a share. Zoom’s biggest problem, and it has always been so, is the fact it is up against the likes of Microsoft Teams, and Skype. Q1 profits are expected to come in at $0.87c a share
The US dollar has continued to come under pressure, sliding back to a four-week low, with the euro getting a lift from comments this morning from ECB president Christine Lagarde that indicated that we’d see rates back at zero by September, with the first rate increase set to come in July.
Commodity currencies are performing well, helped by a rebound in commodity prices, which is helping the likes of the Australian dollar, with copper edging to its highest levels in two weeks.
Brent crude and WTI oil prices are attempting to edge back towards last week’s peaks, helped by a softer US dollar, as well as the start of US driving season, which usually tends to lead to a significant pickup in demand at a time when US refineries are struggling to meet demand for gasoline.
Gold prices have also continued their recent recovery, also helped by the weakness in the US dollar, and the decline in US yields which we’ve seen over the past two weeks.
Falling inventories are helping to push copper prices to their highest level in two weeks.
US retailers have been very much in focus over the last week after earnings news served to underline the parallel pressures looming over both consumers and store owners. Rising living costs combined with input price inflation and those ongoing supply chain challenges are creating a perfect storm, with Target’s underlying share price losing 25% in a single day off the back of its numbers.
Daily vol in the retailer hit 594% on Wednesday, well ahead of the month’s print of 185%. Keeping with single stocks and indeed the fact that demand in China is slowing off the back of those supply chain constraints and Cisco Systems was also in focus. On Thursday, shares in the tech stock slumped by as much as 15% as a result of downbeat analyst assessments which singled out the company against peers. That drove daily vol to 244%, then on to 253% on Friday, against monthly prints of around 90%.
Fears over a US consumer slowdown have also been hitting lumber prices, with rising interest rates and smaller disposable incomes seen as reigning in housebuilding projects. Prices have now halved since the early March highs, with daily vol by Thursday sitting at 264% against a monthly print of 174%. As for fiat currencies, the Aussie dollar against the yen has faced opposing forces in recent days, with some softer wage growth data reported by Canberra and concerns over economic headwinds off the back of China’s attempts to manage its ongoing Covid situation being offset by the Bank of Japan’s dovish stance despite inflationary pressures now kicking in. Further two-way trade could be seen here as fresh data emerges, but by Friday daily vol sat at 21.52% against 17.74% on the month.
Finally, after those exaggerated levels of crypto volatility a couple of weeks ago, this market continues to cool, too. In the latter part of the week, bitcoin posted daily vol in the 50s below the monthly readings which were around 80%. Activity in altcoins remained somewhat more elevated but again by Friday, nothing was printing above 100% on a daily basis, with litecoin reaching 98% against 118% on the month.