The FTSE 100 has maintained its recent resilience and outperformance, closing at its highest level this year, and its best level since 26 February last year, while the FTSE 250 has also closed at a new record high.
While other major indices have led the way in posting record highs in recent weeks, UK stocks appear to be finally finding favour with investors as an economic reopening beckons, even though the FTSE 100 still has a lot of ground to make up, before it has reversed its losses from last year’s peaks of 7,689.
The main laggards today have been travel and leisure stocks, somewhat surprisingly given all of the optimism surrounding the lifting of lockdown restrictions, with easyJet, Wizz Air and Carnival slipping from their recent peaks. One reason behind today’s weakness in this sector could be concerns about possible delays in the UK being able to complete its vaccination programme on schedule, and a delay to the 17 May overseas travel deadline, given the change of advice with respect to vaccinating the under 30s cohort.
Johnson Matthey got off to a decent start to the day, initially topping the FTSE 100 after reporting that it expects full year results to come in at the top end of expectations. Consensus forecasts for underlying operating profit are around £469m for the current year, slightly below last year’s £539m. The decline in profits was mainly down to a poor first half, due to Covid-19 disruptions, however a better H2 due to better margins has pulled some of this back. Its New Markets division is expected to perform well over the next 12 months with strong growth in Fuel Cells which has seen a 20% rise in sales. The company supplies key fuel cell components for a range of automotive and non-automotive applications and plans to expand capacity in this area over the next 12 months.
Anglo American looks set to spin off its South African coal operations at Thungela as a stand-alone business. To do this Anglo said it would provide a cash injection of $170m to help smooth this process along.
At its last trading statement in January ASOS reported a 24% rise in total retail sales, for the four-month period to date, with the UK market driving those gains with £554.1m, a rise of 36% from the same period a year ago. In today’s first half numbers ASOS reported a rise in gross profits of 19% to £890m on revenues of £1.98bn. This has resulted in adjusted profits before tax rising by 275% to £112.9m, despite slightly higher costs of £15m due to Brexit, a number which was reported back in January.
The acquisition of a number of key brands as a result of a devastated retail landscape, has seen it gain control of the brands of Topshop, Topman, Miss Selfridge and HIIT brands for £266m, fully funded from cash reserves, while integration costs were lower than expected, reduced from £20m to £10m. Despite this positive news the shares have slipped back sharply, though they are still up over 15% year to date, which suggests that today’s move is perhaps a case of, buy the rumour and sell the news.
We’ve also seen a good set of numbers from homeware retailer Dunelm, which has managed to ride out the Covid-19 pandemic fairly well, despite the various store closures it has had to contend with over the last 12 months. In its last full year numbers, the resulting bounce back after the first lockdown saw full year sales fall a mere 3.9%, which given the store closures was a fairly decent result. In February, the company reported a 23% rise in total sales to £719.4m in its H1 numbers, driven by a 111% rise in digital sales, despite stores being closed for most of Q2. Profits before tax saw an increase of 34.4% to £112.4m with management taking the decision to pay an interim dividend of 12p per share.
This figure also included the repayment of the furlough money, reinforcing the success the business has had in being able to adapt to the challenges that have come its way. Today’s Q3 numbers have been similarly positive, even if total sales were down 16% from this time last year, at £236.6m. This shouldn’t be a surprise given that stores have been closed all of this year Digital sales rose 92.4% with total sales year to date up by 10% at £956m. As we look to Q4 the company is also gearing up for the reopening of its store real estate next week, and a potentially stellar final quarter as we come to the end of what has been a difficult fiscal year for the retail sector, with management saying they expect to end the year modestly ahead of full year profit estimates of £120m-£125m.
On the downside BP and Royal Dutch Shell are lower on the back of slightly weaker oil prices.
US markets have opened mixed with the S&P 500 posting a new record high, while the Dow opened slightly lower. A surprise increase in weekly jobless claims to 744,000 has seen US 10-year yields slip back a touch, with this particular data set contrasting to last Friday’s bumper non-farm payrolls report.
Tech stocks are once again outperforming with the Nasdaq within touching distance of its previous record high which was set back in February.
Constellation Brands, the owners of Corona beer this morning announced Q4 profits that came in above expectations at $1.82c a share, on sales of $1.95bn. In the round these numbers were much better than expected given the hit the closure of bars, pubs and restaurants has had across all of its brands, even accounting for increased sales from supermarkets, off-licences, as a result of the various lockdowns. The company also said it would pay a dividend of $0.76c a share, while updating its guidance for 2022. While beer sales are expected to rise between 7% and 9% the sales of wine and spirits are expected to decline sharply by between 22% to 24%, with the shares sliding lower in early trade
GameStop shares rose sharply on the open after announcing that Ryan Cohen would be stepping into the chairman role to oversee the company’s move to a more digital model.
We’ve seen some stabilisation in the pound after two days of declines. The latest UK construction PMI for March saw economic activity expand at its fastest rate since September 2014, coming in at 61.7 driven by significant improvements in house building, civil engineering and commercial work. Confidence in the outlook was also positive with growth projections at their best levels since June 2015.
The US dollar has also had a softer tone today, with the latest claims data showing few signs of managing to sustain a move below the 700,000 level, with another surprise rise, this time to 744,000. Continuing claims have continued to decline, although at a much slower rate than originally expected. The divergence between these numbers and last week's monthly numbers are a little hard to square, giving a rather uncertain picture of the US labour market.
Gold prices have continued to look well supported, hitting their highest levels in over a month, as US 10-year yields slide back on the back of this afternoon’s surprise increase in weekly jobless claims.
Yesterday’s weekly inventory data, which showed a surprise rise in US gasoline stockpiles appears to be limiting the upside for crude oil prices in the short term, with $64 acting as a bit of a top. We do have fairly solid support down near $60 and the March lows.