It’s been another slow day for markets in Europe, with the FTSE100 again outperforming, but still failing to gain traction above the recent highs near 7,120.
The rest of Europe has struggled to make any semblance of progress into positive territory, although the losses are minor, just shy of record highs.
The UK index has been helped by outperformance in the telecoms sector with BT Group shares surging higher after French multinational telecoms company Altice announced it had taken a 12.1% stake in the business. The company which owns a range of assets including French mobile phone operator SFR said it doesn’t intend to make a bid for the business, with the UK stake being run as a separate business, Altice UK.
With all the stories about rising used car prices due to chip shortages for new cars, you would have expected Auto Trader to have reaped the benefits as a consequence of the pickup in the used car market and shift to online sales.
Today’s full year results showed that revenues fell 29% to £262.8m, while profits before tax fell 37% to £157.4m. A large part of the reason behind these declines was due to the sudden stop that we saw post lockdown from last year, as well as the decision by the business to provide free advertising in April and May, as well as December and February, in order to simulate interest in a market that has been challenging over the last 12 months.
It is only recently that activity has stepped up in the wake of the chip shortage with Covid-19 now having little impact on the financial performance of the business, as cross platform visits increased by 15% in the last month. In a clear sign that management is much more confident about the outlook, a 5p dividend was declared, with the company saying they expected to deliver high single digit growth on its 2020 performance. This has seen the company’s shares jump to the top of the FTSE100.
Outsourcing group Capita announced it had signed a new three year £58m contract renewal deal with Tesco Mobile.
The main drags today have been consumer discretionary shares led by the airline sector over concerns that any talk of a UK/US transatlantic corridor wasn’t in any way imminent, even as the bosses of the major transatlantic carriers are pushing for a return to international travel as soon as possible. With rising infection rates of the Delta variant IAG shares are slipping back, along with the rest of the sector, with easyJet and Ryanair also lower, as the prospect of all restrictions being eased on 21st June starts to look less likely.
This also appears to be impacting the likes of Cineworld and other retail outlets that rely on the total easing of restrictions like Hollywood Bowl, Wetherspoons, and Wagamama’s owner Restaurant Group to name but a few.
Today’s US open has seen the S&P500 put in another new record high after the latest US CPI number for May jumped sharply to 5%, well above expectations, while core prices rose by 3.8%, the highest since 1992, with used car prices once more helping to push the numbers higher.
It wasn’t just motor vehicles however with some transitory costs like airfares and accommodation costs, along with household furnishings all seeing significant rises in prices. Initial reaction was for yields to push higher however there appears to have been enough in the report to suggest that the numbers may well start to come down from current levels even if there is some persistence in the wider numbers.
Weekly jobless claims also fell again to a new post pandemic low of 376k.
GameStop shares have slipped back after the company announced it might sell up to 5m shares, as management looks to take advantage of the recent sharp moves higher in the share price. Yesterday’s latest Q1 results showed that revenues rose 25.1% to $1.28bn, while losses came in lower than expected at $0.45c a share, almost half of what was expected.
On the flip side of the meme coin, we saw the likes of ContextLogic and Clover Health rebound, in an action replay of yesterday, slid into negative territory after a strong open.
Boeing shares are higher after it was revealed that it is in talks with United Airlines to buy at least 100 737 MAX aircraft.
Tesla shares are higher on reports that it is planning to launch its new Model S Plaid at its Fremont plant later today.
As expected, the European Central Bank kept monetary policy unchanged, with the ECB upgrading its GDP forecasts for 2021, from 4% to 4.6%. This appears to have helped the euro find a bit of a bid, however trading has been subdued with the US dollar also a degree of support after the latest May CPI numbers came in at 5%.
This initial bid soon disappeared for the greenback as US 10-year yields sank back below 1.5%. The pound has been leading the gainers despite tensions between the UK and EU over the Northern Ireland protocol, or the June 2021 sausage crisis as it is slowly becoming referred to. While the pound did briefly slip to its lowest level since 14th May it didn’t stay there very long before rebounding, rising against the euro, as JPMorgan brought forward its BOE rate hike forecast to Q4 2022, on the basis of a continued strong economic rebound.
Oil prices have continued to edge higher despite yesterday's big build in gasoline inventories, which suggested that US consumers were driving less. This suggests that consumer demand is weaker than expected at a time when driving in the US becomes more popular, as people venture further afield in their RV’s. While crude stockpiles have been shrinking there is a risk that unless consumer demand picks up inventories may well start to rise again as demand slows.
Despite US 10-year yields being unable to hold onto its initial gains above 1.5% gold prices appear to be drifting, albeit with a slight upward bias.
Bitcoin prices have stabilised in the past couple of days after looking as if they could drop below $30k earlier this week.
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