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Slow day for markets as ex-div weighs on the FTSE 100

FTSE100 lagging due to ex-div

It’s been a subdued day for European stocks with little in the way of direction one way or the other, with the FTSE 100 managing to shrug off an ex-dividend discount of 14 points, led primarily by BHP, which is one of the biggest fallers today, as it goes ex-dividend. It’s also probably being weighed down by the prospect that it faces being shunted out of the FTSE 100 if it moves its primary listing to Australia.  

Europe

Markets appear to be marking time ahead of tomorrow’s US jobs report, as well as the upcoming long Labor Day weekend in the US.

Barratt Developments' share price has slipped back despite posting a decent increase in full year profits of 65%. The rise in profits needs to be put into context of the big slide seen last year as Covid-19 disruption impacted costs and margins. Revenues were better, and were also above pre-pandemic levels of 2019, coming in at £4.81bn, however margins have lagged somewhat.

There’s been little respite for JD Sports and its attempts to push through the £90m acquisition of Footasylum which was blocked last year by the Competition and Markets Authority on competition grounds. JD Sports appealed the decision to block the takeover, a decision which was vindicated at the end of last year when the competitions tribunal overturned the decision. The tribunal said that the CMA didn’t fully assess the impact of the Covid-19 pandemic when weighing up its original decision, and had acted “irrationally”.  

The overruling of the original decision however doesn’t appear to have swayed the CMA in changing that decision, with the regulator once again ruling that competition could still be reduced as part of the deal, and that shoppers would once again be forced to pay higher prices. The ruling hasn’t had that much of an effect on the share price, which has pulled back slightly from a

The ruling is even more mind boggling given that Footasylum makes up less than 5% of the UK market, proving once and for all that the CMA is living in a different universe to the rest of us, when it comes to defining what competition actually means.

JD Sports now has until 16 September to try and convince the CMA to change its mind before it issues its final report next month, and could well be faced with having to try and sell the business, which is likely to be a tough ask in the current retail environment. Alternatively, it could simply appeal again until the CMA sees sense   

On the plus side, Melrose Industries shares are comfortably atop the FTSE 100 after the business reported H1 numbers better than expected. In June the company said trading was in line with expectations, with a recovery in automotive and powder metallurgy, although shortages in semi-conductors were causing problems. Despite these shortages, profits after tax came in at $109m, with revenues of £3.8bn, with the numbers boosted by a recovery in its aerospace division, as well as the disposal of Nortek Air Management for £2.62bn, back in June. As a result of that sale £729m will be returned to shareholders on the 14th September.

US

US markets have opened higher, pushing to new record highs, after the latest weekly jobless claims numbers came in at 340,000, while continuing claims fell below 2.8m to 2.75m and a post pandemic low for both.

The disruption caused by the rains across the Eastern seaboard caused by hurricane Ida doesn’t appear to be impacting on sentiment in early NY trading despite a lot of the subway system being out of action due to flooding.

Early moves in US trading have seen electric vehicle infrastructure company ChargePoint surge after the company upgraded its full-year outlook after Q2 revenues beat expectations. The company which operates electric vehicle charging networks saw revenue surge to $56.12m in Q2 and revised its full year guidance to an upper estimate of $235m from $205m.

The rise in bitcoin prices back above $50,000, and its highest levels since May, has given the likes of MicroStrategy and Coinbase a lift.

Cazoo shares are also higher after the company bought Cazana, an automotive data insights platform for £25m.     

FX

The US dollar has remained under pressure today, with the biggest losses against the Australian dollar, although this needs to be set in the context of the fact that in the last three months the greenback has posted its biggest gains against the commodity currencies of the Aussie and the Canadian dollar. It therefore has much more scope to rally and unwind those big long positions.

The euro is also higher, continuing to make ground after the higher-than-expected CPI numbers earlier this week, which has seen the single currency head back towards a one month high. The big jump in the headline number to 3% has rather predictably prompted speculation that we will see an intensification of debate about the ending of the ECB’s PEPP programme, however it doesn’t change the fact that underlying inflation is still almost half of where US CPI is. Talk of a possible tightening of monetary policy is pie in the sky, even if the noise levels about it might increase.    

Commodities

A weaker US dollar is helping to support oil prices, along with the disruption that Hurricane or Tropical Storm Ida is causing to US refining capacity, as it becomes apparent that the disruption is likely to see some refinery capacity take weeks to return to any kind of normal, due to damage caused by flooding. OPEC+ has agreed to continue with its policy of adding another 400,000 to the market on a monthly basis.

Gold prices are treading water ahead of tomorrow’s US non-farm payrolls report, however there appears little doubt that a weak number could well see the yellow metal head back towards the recent highs at $1,835. The recent US dollar weakness has helped gold rebound strongly from its 9 August flash crash lows, but it needs to hold above $1,800 for this upward momentum to be maintained.


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