The FTSE 100 has underperformed today on the back of weakness in basic resources, with Rio Tinto shares down heavily due to trading ex-dividend, and which is acting as a 23 point drag on the index, along with weakness in Shell and BP shares which are also lower.
The FTSE 250 on the other hand has continued to make new record highs, along with the DAX and Stoxx 600, although they have all slipped back from their intraday highs as a consequence of a little bit of weakness in US markets, just after the open.
Cineworld shares have jumped sharply today despite posting a poor set of H1 numbers. This may well be down to the fact that the bar was already very low in the leadup to today’s release. Revenues came in at $292.8m, well below the same period a year ago of $712.4m.
Admissions were down to 14.1m, from 47.5m, a reduction of 70.3% from the same period last year which saw the chain experience similar restrictions to its business, albeit on a shorter time frame. The company is also exploring the possibility of a US listing, as well as the possibility of listing its Regal operations in the US to shore up its finances further, perhaps hoping to reap the benefits of the AMC effect and get a lift from the Reddit crew.
Today’s decision by Aviva to return up to £4bn to shareholders by next June may well have been prompted by the recent intervention by new activist investor Cevlan Capital, who took a 4.95% stake in the business in June. At the time they urged CEO Amanda Blanc to be more proactive in increasing returns to shareholders, prompting a little bit of weakness in the share price. The shares have rebounded since then on optimism that not only will Aviva be able to deliver, but the increased focus on the UK, Ireland and Canada will reap dividends as well, with the shares the best performers on the FTSE 100 today, pushing back close to the highs in June.
The £4bn will be funded from the £7.5bn proceeds of the eight recently sold non-core businesses which is due to arrive by the end of 2021, with the first buyback starting this month. Overall business in the first half was also positive building on a solid Q1, seeing a 24% increase in inflows to its savings and retirement business, an increase of £1bn to £5.2bn, adding over 100k new workplace customers. Operating profits from continuing operations rose 17% to £725m.
Having seen its shares rise earlier this week on the back of sector peer Flutter Entertainments positive numbers, Entain, owners of Ladbrokes and Coral, has posted a similarly positive set of H1 numbers with its US markets a big driver off its business, due to its joint venture with BetMGM, which contributed H1 NGR of $357m.
TUI shares gave up their early gains despite reporting an improvement in business in the three months since its H1 update. 876k customers went on holiday in Q3, up from 159k in Q2, pushing revenues up to €649.7m, and to €1.366bn for the current fiscal year. Its current pipeline has a total of 4.2m customers as restrictions continue to get loosened on the back of rising vaccination rates. Management were keen to focus on the positives, however today’s updates couldn’t disguise the fact that the company is still having to cancel holidays, due to UK consumers deciding to go with the certainty of a domestic break, rather than a European break.
If anyone was hoping that yesterday’s CPI numbers might mark a possible high point for US inflationary pressure, today’s US PPI numbers, threw a lot of shade on that belief. A big jump to 7.8% on US PPI with core prices rising to 5.6% was a huge and unwelcome jump and saw US 10-year yields edge back towards yesterday’s highs.
While yields moved higher US equity markets opened around the flat line, before drifting lower, with the likes of Moderna and BioNTech trying to find a base after plunging sharply over the last couple of days over concern about their valuations.
Later today we have the latest Q3 numbers from Disney. The company was optimistic about this quarter when reporting all the way back in May, although there were still concerns about headwinds on the parks, with an estimate of another $1.2bn impact on revenues due to lower capacity constraints. Profits in Q2 were still better than expected, coming in at $901m, or $0.79c a share, while profits for Q3 are expected to decline to $0.56c a share. There is little doubt that revenues from Disney+ has helped the “Mouse House” through the pandemic and while the service is still operating at a loss, we are now starting to see a host of new content which may attract new users including the addition of Loki, as well as a new animated Star Wars series, The Bad Batch. For UK, Canada and Australia viewers, the addition of Star which includes the Fox catalogues of X-Men and Avatar as well as National Geographic is also a plus, along with the fact that users don’t have to pay extra for 4K content like they do for Netflix.
Vroom shares have also plunged despite posting a Q2 loss of $0.48c a share, or $66m, as well as selling more cars than ever before. Revenues rose to $762m from $253m a year ago and sold 18,268 vehicles in the quarter. The loss was better than expected, however the company’s guidance for Q3 was disappointing, projecting higher losses of $0.75c a share despite higher revenues of between $858m and $891m. The company said it expects to sell over 20k cars in Q3 below market expectations of 22k.
The pound has seen little reaction to the latest Q2 GDP numbers, which showed the UK economy grew by 4.8% over the quarter, and 22.2% year on year. Most of the growth came from a big increase in private consumption of 7.3% as restaurants and bars reopened. Government spending was also a big contributor, however business investment was weaker than expected, rising 2.4%, instead of the predicted 6%. This was probably down to uncertainty over the pace of reopening due to delays in the June date, which may have contributed to some caution on the part of businesses to wholly commit resources for a full reopen. Rising delta cases are also likely to have played a part in this caution. Monthly GDP for June was also better, coming at 1%, while on the downside weakness in manufacturing and industrial production acted as a drag.
The US dollar has found itself slightly better bid after yesterday’s sell off, with the sharper than expected rise in US PPI prices helping to pull it off the lows of the day. The sharp rise in July PPI appears to have caught the market slightly unawares after yesterday’s data showing July CPI levelling out last month. This divergence between PPI and CPI muddies the water ever so slightly when it comes to the transitory narrative.
Crude oil prices have slipped back after the IEA said that it sees an oil surplus in 2022. The Biden administration has once again double downed on the fiction that it is OPEC+’s responsibility to push oil prices back down in the US. The reason they have started to push higher in the US is because of the Biden’s administration new green policies, and the refusal to invest in new shale capacity, as well as the cancellation of the Keystone pipeline. It does however make good politics to blame an external third party.
Gold prices are continuing to struggle in the wake of this week’s flash crash, with the $1,760 level likely to act as a significant barrier. A slightly firmer US dollar and firmer US rates are also acting as a drag in the wake of this afternoons elevated US PPI numbers.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.