European markets have undergone a somewhat choppy session today, starting the day on the front foot, before running out of steam, sliding back into negative territory on some modest profit taking, with the DAX and CAC40 both falling away from their highest levels in a month.
The FTSE100 has performed slightly better, hitting a one month high before retreating, but is still holding up slightly better largely due to the outperformance of the energy sector with the gains being led by BP and Shell, on the back of firmer oil prices.
Elsewhere we’re seeing modest losses in the likes of UK focused companies like house builders, and consumer discretionary on disappointment after the Chancellor of the Exchequer gave a downbeat assessment of the UK economy, as the OBR downgraded its outlook for 2022 and 2023. B&Q owner Kingfisher is lower again, as is Taylor Wimpey, Barratt Developments and Persimmon.
Saga shares have slumped sharply after full year revenues came in at £377.2m, a rise of 12% on 2021, while pre-tax losses narrowed to £23.5m. The travel business bore the brunt of the disruption caused by the stop-start nature of covid restrictions, as well as the delivery of a new ship which added to costs. The insurance business traded in line with expectations, although profits were lower due to increased marketing spend.
The lack of specific guidance for 2023, apart from a pledge to return to profit, along with the lack of a final dividend appears to be the main reason for today’s share price pullback.
Also on the downside, Reckitt Benckiser shares have gone a bit “Cillit Bang” sliding back on the back of a broker downgrade, due to concerns about the effect higher commodity prices might have on its margins.
US markets have slipped back on the back of the weakness in European markets and some profit taking as investors took profits after seeing decent gains in five days out of the last six. Yesterday saw the Nasdaq 100 and S&P500 both hit their best levels since the February 10th so it’s likely what we’re seeing today is nothing more than some modest profit taking.
On the earnings front Adobe shares have slipped back despite beating estimates on Q1 earnings, with the shares sliding back after issuing guidance for Q2 guidance that was below expectations, due to the company halting sales to Russia. Q1 revenues came in at $4.26bn and a net profit of $3.37c a share. Adobe said revenue would be $75m lower this year due to halting sales to Russia.
Tencent shares have slipped back after its Q4 numbers showed the slowest revenue growth since the company went public, although profits rose to a one gain as a result of an asset disposal, which pushed profits up by 60%.
The firmer oil price is helping to support the likes of Chevron while on the downside Boeing shares are still under pressure after Chinese authorities said they had recovered one of the flight data recorders from the crash scene in China
The pound has had a poor day, sliding back after inflation hit a new 30 year high, rising to 6.2% in February, up from 5.5% in January, and looks set to go even higher over the coming months. With RPI now at 8.2% and the latest set of input prices rising to 14.7%, the odds of a double figure print for headline CPI appear to be becoming increasingly likely in the coming months, as we head into the summer months.
This afternoon’s spring statement from the Chancellor of the Exchequer did go some way to mitigating some of this, however the measures, while helping to some extent, will do little to ameliorate the bulk of what’s coming our way in the coming months.
On the plus side, in a welcome move the Chancellor did move the threshold for National Insurance contributions in line with income tax thresholds to £12,500, a £3,000 increase from July.
He also cut fuel duty by 5p a litre until March 2023, which in all honesty is unlikely to touch the sides, given how much petrol prices have gone up at the pump in the last few weeks, although its better than nothing.
The outperformers today have been the commodity currencies of the Norwegian krone and Australian dollar, both edging higher against the US dollar
A bigger than expected decline in US API inventories has seen Brent crude oil prices edge back above $120 a barrel after slipping back yesterday, on expectations that EU leaders would be unable to agree on a ban on Russian imports. The rise has also been exacerbated by damage to a key pipeline in Kazakhstan which runs to Novorossiysk, which could affect output of up to 1m barrels a day.
Gold prices are on the up again after another hot inflation number, this time from the UK, while a softening in US yields isn’t hurting either.
Earnings news from Nike at the start of the week impressed the market and served to drive price action yesterday, although stock in the sportswear company did give back a fair bit of its gains as the session progressed. Daily vol advanced to 132% against 89% on the week.
It was a similar story at UK IT infrastructure services provider Softcat where earnings yesterday came in well ahead of expectations, driving a 10% uptick in the underlying before easing back later in the session. Daily vol moved out to 137% against 89% on the month.
Equity indices and crypto markets were both left looking somewhat subdued on Tuesday, but in fiat currencies, the Kiwi dollar was pushed into focus. The currency reversed from two-week lows yesterday against the Aussie Dollar, despite mounting sentiment that the country’s reserve bank has a careful line to tread when it comes to rate hikes in order not to push the economy into recession, Daily vol on Aussie Kiwi hit 8.83% up from 6.77% on the month.
In terms of commodities, Lumber and Cotton both continue to see elevated levels of price action, but lean hogs have also made it onto the list, with daily vol exceeding 70%, although that’s not too much higher than the monthly print of 66%. As with many other products, there does appear to be a theme of price weakness emerging here after those big gains last month.