News

FTSE 100 higher despite miners drag, NASDAQ booms

European stock markets are extending yesterday’s stellar rally but the gains registered today are far more modest. 

The dip in government bond yields has acted as the green light for the equity bulls and lately, spikes in yields have sent tremors through stock markets. The positive mood is being fuelled by the hopes the US government will implement the $1.9 trillion relief package soon. Hopes connected to the economic recovery story have lifted sentiment too. The FTSE 100 hasn’t rallied as much as its eurozone equivalents. Declines in mining and banking stocks are holding back the British index.      

ITV confirmed that full year total external revenue dropped by 16% to £2.78 billion. Adjusted EBITDA was £573 million, down 21%. Advertising is extremely important for the company and the chaos caused by the health crisis hurt the business. Production of shows was disrupted, which contributed to ITV Studios registering a 25% decline in revenue. Firms cut their advertising budgets as a reaction to the pandemic but things are slowly starting to improve. This morning ITV confirmed they saw improved advertising trends. In the final quarter, total advertising revenue increased by 3%, but that was overshadowed by the prediction that it will fall in the first quarter of the new financial year by 6%. There were some positive aspects to the update too. In March, total advertising revenue is tipped to rise by 8% and in April is anticipated to jump by 60-75% - when the majority of programmes in production are back. The cost-cutting scheme is going well as it managed to save £116 million, easily beating the £60 million forecast. Next year, ITV is aiming to deliver £100 million in savings, while the previous guidance was £55-£60 million. The stock was lower but is now up 2%

Equity traders are hungry for Domino's Pizza shares in light of the company’s solid annual figures. Sales ticked up by 11.4% to £1.34 billion. Like-for-like sales grew by 10.3%, which helped statutory pre-tax profit increase to £39.7 million. No doubt lockdowns played a role in the firm’s popularity in the last year. Disciplined cash management led to a 26% fall in net debt, so the balance sheet is now leaner. Dominos dished up a 9.1p per share total dividend as well as a £45 million share buyback scheme. Yesterday it was announced the company agreed to sell its division in Sweden for £1.8 billion as it wants to focus on the UK and Ireland.

Standard Life Aberdeen confirmed that net outflows fell from £17.4 billion to £3.1 billion, excluding the Lloyds Banking Group tranche withdrawals. Fee-based revenue was £1.425 billion, down from £1.63 billion, and that was largely reflecting outflows. The fall in revenue led to a 27% decline in adjusted operating profit. The total dividend was 14.6p, down from 21.6p last year, reflecting the slide in revenue and earnings.       

US

The NASDAQ 100 is booming today after it endured a number of painful sell-offs recently. Some of the exuberance that engulfed the tech sector in the past year has disappeared, which led to the NASDAQ 100 recently falling to a three-month low. It seems that a combination of bargain hunting and short covering has ramped up the index. The overall bullish mood is helping the Dow Jones and the S&P 500 too.       

Dick's Sporting Goods posted solid fourth quarter numbers but the firm also issued a cautious outlook so that weighed on sentiment. Quarterly EPS were $2.43, ahead of the $2.28 forecast. Revenue increased by almost 20% to $3.13 billion, slightly above analysts’ estimates. Same store sales and online sales jumped by 19.3% and 57% respectively. On account of the lockdowns, home fitness items and sporting goods saw a jump in demand, yearly same store sales grew by almost 10%. Looking ahead, next year’s annual same store sales outlook is between -2% and 2%. Dealers dumped the stock on the not-so-hot forecast.

Stitch Fix’s second quarter figures were mixed. To add insult to injury, the downbeat outlook put extra pressure on the stock. The loss per share was 20 cents while the consensus estimate was for a loss per share of 22 cents. Net sales increased by 12% to $504.1 million but that undershot the forecast of $512.2 million. Stitch’s supply chain has been disrupted by the health crisis so it expects ongoing issues in that regard. Full-year revenue is predicted to grow by 18-20% and keep in mind the previous guidance was for growth of between 20% and 25%.            

GameStop continues to experience a lot of volatility - the stock is up over 20%.     

Tesla shares are higher this afternoon following a heavy decline recently, whereby it fell to a three-month low on Friday. 

It was reported that Johnson & Johnson is under pressure to deliver 55 million Covid-19 vaccines to the EU in the second quarter. 

FX

Overnight the US dollar index hit a new three-month high but it has since pulled back. It would appear the move lower in the US 10-year yield acted as a good excuse to book profit on the greenback’s rally. The US economy expanded by 4.1% in the fourth quarter of last year so it was already on the road to economic recovery before the robust vaccine distribution scheme was put into place. The upward move in the dollar in the past two months is probably a reflection of the nation’s relative strength amid the pandemic. GBP/USD is higher today due to the negative dollar move.

The eurozone is in worse financial health than initially thought as the region contracted by 0.7% in the last three months of 2020, on a quarterly basis. Economists were predicting the update would remain unchanged from the flash reading at -0.6%. Germany’s trade surplus in January jumped to €22.2 billion from €16.4 billion. It was largely as a result of imports tumbling by 4.7% - which implies weak internal demand. EUR/USD is in the red.          

Commodities

Gold is back trading above the $1,700 mark as the sizeable slide in the dollar has helped the metal. Recently, the inverse relation between gold and the greenback has dented the commodity but today its fortunes have been reversed. Also playing into the mix is the cooling of bond yields as a high yield can redirect funds away from gold.

Oil is in the red as today’s earlier gains were eroded following on from the volatile session that was experienced yesterday. The energy market stands to benefit from the rolling out of the vaccines and the wider recovery story. The fact that OPEC+ is still keeping output relatively restrained is also propping up the oil market.     


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.