It’s been another positive day for markets in Europe today with the FTSE 100 eking out a new 16-month high, however the FTSE 250 has lagged behind somewhat, in the aftermath of yesterday’s confirmation of an extension of restrictions to July 19.
Shares in TUI have continued to fall as it becomes apparent that the window for a summer holiday boost from UK holidaymakers has got a whole lot smaller. The likes of Ryanair, easyJet and IAG have seen their shares tread water.
On the flip side the likes of Restaurant Group, Cineworld and JD Wetherspoon have seen their share prices rebound a touch, as bargain hunters look to swoop in. It’s been a bit of a mixed bag for retail today with Primark owner Associated British Foods shares up on the day reversing its big fall yesterday.
H&M shares have fallen sharply today after Q2 sales came in short of expectations. A rise in sales of 75% to SEK46.5bn was certainly noteworthy however markets were hoping for more especially given the recent relaxation of restrictions was expected to boost foot traffic as stores reopened. A large part of the reason behind the miss may have been the social media backlash in China, its third biggest market, over comments about forced labour, which saw 20 of its stores closed.
Boohoo’s latest numbers appear to show that the company got off to a strong start in Q1, carrying on the momentum we saw at the end of last year that saw the business post a 41% boost in revenues and a 35% increase in profits before tax to £124.7m. At the time management warned that they expected 2021 to be a much more cautious year in terms of the outlook with sales growth predicted to slow to 25%. With lockdown restrictions set to ease and consumers likely to want to spend on a summer wardrobe this came across as a little cautious, and today’s Q1 update appears to bear that out. Q1 revenue rose to £486.1m a rise of 32%, with the UK and US markets seeing the strongest gains, while the rest of Europe saw a decline of 14%. The full year outlook for sales growth of 25% was kept unchanged suggesting that at some point over the next few months management expects to see a bit of a slowdown in demand.
Ashtead’s Q4 numbers showed a decent rise in revenues for Q4, coming in at £1.27bn, helping to keep annual revenues above the £5bn mark. Rental revenues for equipment also improved helping to push operating profit up by 95% for the quarter. Despite the outperformance in Q4 the numbers weren’t enough to prevent annual pre-tax profits from dropping below £1bn to £998m, from £1.06bn in 2020. Nonetheless the improvement was enough for a final dividend of 35p taking the total dividend to 42.15p, and above last year's 40.65p. On the downside the weakness in copper prices is weighing on the likes of Anglo American, Antofagasta and Glencore.
US markets have seen a subdued start with the S&P500 eking out yet another record high before slipping back as markets focus on tomorrow’s Fed rate meeting.
Today’s May retail sales and PPI numbers didn’t add much more detail to the economic picture with core PPI jumping more than expected to 5.3%, while May retail sales slid 1.3%, much more than the -0.7% expected. Offsetting that fall was April retail sales getting revised upwards from 0% to 0.9%, so while prices are experiencing upward pressure the spending patterns for US consumers continue to look very stop start.
Early movers for US stocks are DraftKings, an American sports betting operator that has seen its shares get clobbered after a note from Hindenburg Research that suggested the recent SPAC deal that saw it go public in a three-way merger with its SPAC sponsor and Bulgaria based SBTech, could expose it to the potential for money laundering, and organized crime.
JPMorgan Chase shares are also underperforming after CEO Jamie Dimon warned that the bank's Q2 performance was unlikely to match that of Q1. Trading revenue could well be lower than the consensus estimates of $6.5bn as lower yields and volatility impact turnover. Dimon also played down expectations over loan demand and income after a bumper Q1.
The US dollar has continued to range trade despite the hotter than expected PPI report for May, as markets look towards the conclusion of the latest Federal Reserve policy meeting. We did see a brief push higher in US 10-year yields in the wake of this afternoon's PPI report, hitting a peak of 1.51% before slipping back.
The pound has had a slightly softer tone after last night’s confirmation that some lockdown restrictions were being extended to the 19th July, however commodity currencies are faring worse with the Australian and Canadian dollar the worst performers on weaker commodity prices.
Copper prices have slid to one-month lows, with the selloff being exacerbated after prices fell through the June lows at $4.42, with the prospect that we could well head lower. Since prices peaked back in May momentum has been stalling, and while long term demand still looks positive, in the short term we could well be vulnerable to further losses towards $4.20.
This weakness in commodity prices, oil prices notwithstanding is likely to take some of the heat out of concerns about rising prices, however the fact that oil prices are still showing few signs of slowing means there has to be some concern that if we go too much higher, we could start to see some early signs of demand destruction.
For now, that doesn’t appear to be happening, but we’ve still made another 24-month high on Brent pushing us closer to $75 a barrel and the highs from 2019. If we go much above $80 that picture could change quite quickly.