It’s been another mixed session for European stocks with the FTSE 100 once again slipping lower, this time finding itself dragged down by the oil and gas sector as weakness in oil prices acts as a drag on BP and Royal Dutch Shell’s share price, after US inventories rose for the sixth week in succession.
Europe
Today’s Q3 trading statement from Next has seen another decent quarter for the UK’s largest clothing retailer. Full price sales rose 17%, vs two years ago, while sales in the last 5 weeks were also running ahead of expectations at 14%.
This growth is expected to slow to 10% in Q4, although the retailer is keeping its full year profits forecast unchanged at £800m, a figure that was upgraded back in September. The guidance did come with the same warning that accompanied the H1 results, namely that supply chain disruptions could hinder stock availability, while increases in prices might also crimp demand. This in turn appears to be acting as an anchor on the share price, although we are off the lows and is also acting as a drag on the likes of JD Sports and other retail stocks like Marks and Spencer and Frasers Group.
Darktrace shares have continued to fall with the post float lock-up period finally expiring today, though we haven’t as yet managed to take out the August lows, at 544p, which is still over double the price it came out of the blocks at on April 30th. A move below 540p could well trigger further selling if the doubts expressed by Peel Hunt about the company’s prospects become a little more mainstream.
Packaging group Smurfit Kappa announced this morning that trading for the year to date has seen a 15% rise in revenues to €7.29bn with EBITDA set to rise by 10% to €1.23bn, with Q3 accounting for €454m of that number. The US operation has produced the best performance of 11% compared to 2020. The company appears to have been able to pass on higher raw materials prices increasing margins to 17%.
Trainline latest H1 numbers are a vast improvement on last year, with revenues rising to £78m from £31m a year ago, with net ticket sales hitting the £1bn mark, though that hasn’t been enough to stop the shares inexplicably plunging by over 10%. Perhaps there’s some disappointment that with the improvement across its regions we didn’t see an upgrade to full year guidance
The lifting of lockdown restrictions over the summer months and staycations contrasted with last year when rail travel was hugely disrupted by various lockdown restrictions. The company cut operating losses to £9m from £43m, with the company saying that consumer demand was back at 95% of 2019 levels and returned to growth in August. Full year guidance was kept unchanged with net ticket sales expected to come in between £2.4bn and £2.8bn, with adjusted EBITDA expected to be around £37.5m.
Royal Mail shares are making a break to the upside after getting an upgrade from Swiss bank UBS to neutral, from sell. The shares have been treading water for the last month or so near eight-month lows, so today’s upgrade is welcome news, even if the accompanying note was less than effusive about the company’s future prospects.
British Airways owner IAG shares are higher after German carrier Lufthansa posted a surprise return to profitability, as the return of transatlantic travel this month, prompted a surge in bookings, and its first quarterly profit since the beginning of the pandemic. With IAG due to report on Friday, perhaps we could also see a surprise here as well?
US
US markets opened mixed today, with the Russell 2000 outperforming, as a stronger than expected ADP report for October showed 571k new jobs were added, comfortably beating forecasts of 400k.
The latest ISM Services index report for October showed a big improvement rising to 66.7, and a 24 year high, up from 61.9, with prices paid edging back above 80, while the employment component slipped back to 51.
Market attention remains predominantly fixed on this afternoon’s Fed rate decision, although we are seeing quite a bit of interest in the various companies below.
Ride hailing app company Lyft reported a rise of 73% in Q3 revenue, coming in at $864m, in its latest numbers yesterday, with a sharp rise in weekend and evening trips helping to boost its numbers. The company was even more bullish about Q4 revising upwards its revenue projections to between $930m and $940m. The number of active riders rose by 51% to 18.9m and said that they expected to improve their profitability, as it narrowed its losses to $71.5m or $0.21c a share, a big improvement from last years $459.5m. Uber will be hoping to record a similar improvement when it reports its latest Q3 numbers tomorrow.
Bed Bath and Beyond shares have soared in early trade, rising over 50% at one point on news of its deal with Kroger to sell a host of items including bedding and storage in stores and on the Kroger website.
On the other side of the meme stock coin Avis Budget Group has seen a modest reversal on yesterday’s gains after being on the receiving end of a downgrade from JPMorgan and Deutsche Bank, while GameStop and AMC Entertainment have squeezed higher.
FX
The pound has edged higher after the latest services PMI numbers for October showed an improvement to 59.5, from 55.4 in September. While a decent number, one notable takeaway was a steep rise in cost price inflation to their highest levels in over 25 years. On the flip side job creation and new orders also saw a decent improvement with consumers showing little sign of being put off by higher prices, something the Bank of England may well pay attention to when they make their monetary policy decision tomorrow.
The Canadian dollar is amongst one of the worst performers on the back of weakness in the oil price.
Commodities
Another week of rising US inventories has seen crude oil prices slide back, a state of affairs that is all the more surprising when you consider that demand expectations have continued to rise as we head into the winter months. Rig counts in the US have also been rising at a steady rate, and are currently at 544, their highest rate since April 2020, so maybe there’s more going on than meets the eye.
Gold prices have slid to two-week lows ahead of this afternoon’s Fed announcement, while US 2-year yields head back towards 0.5%, on an expectation that with the announcement of the taper, the timetable for rate hikes could well get moved up as well.
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