Having set records on an almost daily basis last week, it’s been a lacklustre start for European markets today with little in the way of direction, with weakness in commodity prices being offset by strength in the likes of defensives, with utilities and healthcare outperforming, and helping to prop up the FTSE100.
Europe
The tug of war between Philip Morris and private equity group Carlyle over Vectura stepped up a notch today when PMI put in a 165p bid for the inhaler maker. This has resulted in the Takeover Panel asking both parties to submit final bids by 5pm tomorrow, or go to an auction, which will last until 17th August. It’s a high stakes decision for Vectura as well, with the board coming under fire from some for even considering the bid from tobacco giant Philip Morris.
The move by Philip Morris would appear to be a recognition that cigarettes are a declining market, and that medicines and devices to deal with breathing problems are a growing one. It’s a somewhat ironic shift given tobacco’s role in helping to create the problem they seem to want to help solve, and a controversial one in some quarters.
The importance of companies on the front line like Vectura, and its partnership with UK based Inspira, has become even more important in the context of Covid which also being a respiratory illness, is driving development of respiratory drugs that can alleviate the worst effects of diseases like these Rightly or wrongly when you look at the amount of money companies like Pfizer are making from vaccines, the ability to deliver a treatment by way of inhaler is likely to be a key milestone in helping to deliver more effective treatments for a disease that has infected millions of people.
Deliveroo shares have taken another leap to the upside ahead of this week’s first half trading update, after German rival Delivery Hero announced it has taken a 5% stake in the business. The shares still remain below the 390p IPO price of earlier this year, however a decent update on Wednesday could be the catalyst that could enable it to complete a five-month round trip for the share price, from its April lows of 225p.
Amongst other outperformers today SSE has risen sharply on reports that activist investor Elliot Management has or is building up a stake in the business. This has prompted a modest read across to the rest of the utilities sector with modest gains for Severn Trent and United Utilities.
The rise in market volatility that accompanied this year’s meme stock frenzy may well have seen companies like Robinhood take centre stage, however the surge of media interest has also helped the more established names as well, as a younger cohort of customers get involved, and open new share dealing accounts. Hargreaves Lansdown has been a notable beneficiary of a lot of this new business, though judging by today’s reaction to their full year results, you wouldn’t necessarily know it, with the shares falling sharply, over concerns about rising costs, and potentially lower volumes, over the remainder of the year.
This is despite new business inflows of £8.7bn year on year, which has pushed assets under management up to a record £135.5bn. Despite the big increases in revenues that have been generated by the events of the last year, the share price performance has been disappointing, which is a little surprising given that revenues rose by 14% to £631m, however pre-tax profits came in slightly short of expectations at £366m, with higher costs eating into the headline number.
Travel and leisure stocks are also back under pressure again as sentiment continues to ebb and flow over rising Delta infection rates in the Asia region, with IAG leading the fallers.
US
We’ve seen a slightly softer start to the week for US markets after the sugar high of last week’s decent payrolls report wears off, with the decline in oil prices weighing on the likes of Chevron and Exxon Mobil.
Concerns over rising Delta cases in Asia also appear to be weighing on airline stocks again with the likes of United and American Airlines both lower.
The latest data for US job openings in June has seen a new record of 10.07m openings, looking for someone to fill the role. This was an increase from just under 9.5m in May, and came despite over 1m jobs getting added back to the payroll numbers during that month. This growing disparity is likely to exert upward pressure on wages as employers struggle to fill a growing number of roles. The biggest rise was in professional and business services, however the shortfalls are being seen across sectors, from education and health services, to leisure and hospitality.
BioNTech shares are also rising after its Q2 numbers showed a strong quarter. Revenues came in at €5.1bn well above estimates of €3.5bn, with the company raising its full year guidance to €15.9bn. profits came in at $12.97c a share well above expectations of $8.91c a share.
FX
It’s been a pretty slow day on currency markets, with the US dollar broadly hanging on to its gains of the last week or so, ahead of some key inflation numbers later this week.
Commodities
Gold and silver prices flash crashed in Asia trading earlier today, gold hitting a four-month low and silver a nine-month low, clobbered by a combination of a stronger US dollar, and expectations that US rates could start to edge up sooner rather than later.
The price of crude oil has continued to fall over concerns about weaker demand after the latest Chinese imports data showed that oil imports fell below 10m barrels a day for the fourth month in a row. Coming on the back of reports of new travel restrictions, and rising Delta infection rates, the slide in prices suggests that expectations of a strong demand rebound in the later part of this year are being dialled back a touch.
