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FTSE 100 continues its advance, Darktrace plunges again

McLaren with Darktrace banner

It’s been a positive start to the week and the month for markets in Europe, with the momentum from Friday’s record finish in the US, and a decent Asia session, carrying over into the new week. The FTSE 100 has continued to drive high towards the 7,300-level marking a new 20 month high in the process.

Europe

BT Group shares have popped higher ahead of this week’s H1 numbers after the company said it had delivered on its £1bn of gross annualised cost savings 18 months ahead of its March 2023 deadline.

Ryanair shares are modestly higher after reporting its first quarterly profit since the beginning of the Covid-19 pandemic. Today’s first half numbers still translated into a loss of €48m, due to a poor Q1, but the number of passengers carried saw a rise of 128% compared to a year ago, with the load factor rising to 79%. Revenues came in at €2.15bn, although the business cautioned on a return to profitability due to its focus on capacity over prices which are likely to be kept low over the rest of the year in order to put pressure on its competitors. The airline also said it is considering delisting its shares from the London Stock Exchange.

IAG shares are also higher, after its British Airways operation announced it had agreed a £1bn 5 year committed credit facility with UK Export Finance, on top of a £2bn facility that was agreed at the end of last year, and drawn in March 2021.

Barclays share price has fallen back on the announcement today that CEO Jes Staley has stepped down with immediate effect, to be replaced by Head of Global Markets, C.S Venkatakrishnan. Staley is said to be contesting the preliminary conclusions of an FCA and PRA investigation into his “characterisation to Barclays of his relationship with the late Mr Jeffrey Epstein”.

On the flip side, both Lloyds Banking Group is building on its gains from last week, finally overcoming the 50p level, taking out its previous peaks in June, and hitting its highest levels since February 2020 in the process.   

Darktrace shares have continued to chop around in the aftermath of last week's rather bearish note from Peel Hunt which saw its share price plunge, before seeing a strong rebound in the back half of the week. Today’s share price move has seen another sharp move to the downside as it looks to retest the lows of last week, amidst speculation that we could see some more share sales as a 180-day lockup period expires later this week. While recent share price moves have been vertigo-inducing, the shares are still up over 170% since the shares came out of the blocks back in April.    

UK housebuilders are also lower ahead of this week’s Bank of England policy decision, and ahead of their own earnings season which starts next week.

Barratt Developments, Berkeley Group, Persimmon and Taylor Wimpey have all lost ground in recent weeks over concerns that a rise in interest rates might hamper the UK housing market. While that is certainly a valid concern there is little evidence available to support it given recent housing market data. Despite what markets appear to be pricing one year out, it's highly unlikely that the central bank will do more than a 0.15% rise in the headline rate, before year end. In short markets appear to be getting a little ahead of themselves, especially as most mortgage holders are likely to be on fixed rates.

US

US markets have picked up where they left off on Friday, opening at new record highs, ahead of the start of tomorrow’s Federal Reserve rate meeting and US economic data that has continued to show resilience. The latest ISM manufacturing numbers for October came in at 60.8, with employment rising to 52 and prices paid rising to 85.7.

Moderna shares have tumbled after the FDA delayed a review of Covid19 vaccine effects into teenagers.

It’s been a bit of a mixed bag in the electric vehicle market with Chinese electric vehicle manufacturer Xpeng pushing higher after managing to sell over 10k vehicles for the second month in a row. Nio on the other hand has underperformed after its deliveries fell 65% due to supply chain issues and manufacturing changes.

Tesla shares are also higher again setting another record high as COP26 gets underway, while EV start-up Lucid Group is also higher after making its first ever vehicle deliveries at the weekend.  

FX

The US dollar has slipped back a touch after Friday’s big rebound, paring its gains across the board with the exception of the Japanese yen which has come under pressure in the wake of this morning’s confirmation that the Japanese Liberals have regained power with an improved mandate. This outcome appears to set expectations for another fiscal stimulus plan in the coming weeks.

Commodities

Oil prices are slightly higher, even as OPEC+ releases another 400k barrels a day onto the global market, while a release of emergency reserves by China did little to undermine sentiment. US shale firms are also adding rig counts as US prices continue to gain traction above $80 a barrel.

Precious metals prices are also firmer on the back of a slightly weaker US dollar.


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