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European markets slip as EU lays out plan to ban Russia coal imports

Coal

Markets in Europe have had a slightly softer tone after it was announced that the EU was proposing a mandatory phaseout of Russian coal imports in response to the atrocities committed by Russian forces in and around Kyiv, and in Bucha in particular.

Europe

While this is likely to have a limited impact, the pressure is growing for this commitment to be extended to oil and gas supplies. For now, this is meeting significant resistance from the likes of Germany and Hungary, with some suggesting that Germany cares more about the economic impact of doing this than it does about the fact that unarmed civilians have been massacred.

It is becoming ever clearer that Russia is likely to become increasingly more isolated as sanctions get tightened and widened further, with the prospect that inflationary pressure in the global economy will remain more persistent in the coming months.

Today’s services PMIs while positive and showing decent jobs growth, also showed that prices were still rising sharply, and that not all of rise in prices had been passed through to consumers.

These concerns appear to be weighing on markets in Europe, with the DAX and CAC40 sharply lower, although the FTSE100 is outperforming with the more defensive energy sector holding up well, ahead of the publication of the UK governments new energy security strategy later this week, with SSE shares hitting a new record high, while National Grid and United Utilities shares have also moved higher.

Today’s trading update from Moonpig has seen the shares hold on to the gains seen since the lows in February, after the online card maker upgraded its group annual revenue target for this year to £300m.

This was due to a pickup in activity during the period of Plan B restrictions in December and January, with underlying revenue for FY22 set to remain unchanged at £265m. The company also reiterated its medium-term target for EBITDA margin to between 24% to 25%. 

Homeserve shares have received a lift after the company said it expects to deliver in line with expectations, with the Home Expert division delivering a profit for the first time on a full year basis, due to outperformance at Checkatrade, with an increase in paying trades to 47k with average revenue per trade expected to come in at £1,200.     

US

US markets opened slightly lower, taking their cues from the softer tone for markets in Europe.

Cruise ship operators have seen a lift after Carnival reported its best booking week in the company’s history for the week beginning 28th March. Royal Caribbean and Norwegian Cruise Lines are also higher.

Twitter shares also rose again, jumping above their 200-day MA for the first time since October last year, after the company announced that it was appointing Tesla CEO Elon Musk to its board of directors. So much for the 9.2% stake being a “passive” one. What’s happening here appears to be a calculation on the part of the board that it’s better to keep Musk where they can see him. Adopting the mantra that it’s better to keep your friends close, but your enemies closer.

FX

The Australian dollar jumped to a nine-month high today after the RBA revised its guidance about the prospect of rate hikes, removing references to “highly” when referring to supportive monetary conditions, as well as removing the word “patient” when it comes to reacting to changes in the factors that are driving inflation higher.  The RBA has been well behind the curve when acknowledging the risks around rising prices, and with little prospect of a hike in May due to the Australian election, on the 21st May, we could well see a 50bps move in June. The rise in the Australian dollar has taken the New Zealand dollar along with it, as markets price in much more aggressive tightening from both central banks.  

Commodities

Brent crude oil prices have continued to edge higher finding support at the $105 a barrel after Saudi Arabia raised its official selling price to its Asia customers, while the prospect of new sanctions on Russian supplies also helped put a floor under prices. 

Gold prices are subdued as yields continue to push higher with the US 10 year pushing back towards the 2.5% level, and closing the gap with the 2 year yield.

Volatility

Markets are looking comparatively subdued as the run into the Easter break gets underway. Starbucks however proved to be something of an outlier as the company’s founder – and newly installed interim CEO – cancelled share buyback plans, tipping the stock lower as a result. That served to drive daily vol out to 127%, up from 81.1% on the month and this could remain one to watch if there’s further potential for strategic shifts to be seen here.

Also in focus were OJ futures, where prices have been soaring again in recent days amidst renewed concern over the poor harvest that is set to be recorded this year. The underlying has been closing in on the late January peak and that’s serving to drive action in the commodity. One day vol sat at 153% against 103% on the month.

Looking at CMC’s proprietary share baskets, the Social Media contract surged in terms of price action yesterday, thanks to that news of Elon Musk buying a close on 10% stake in Twitter. Daily vol on the basket pushed out to 127% against a monthly print of 82% as a result.

Keeping with the Elon Musk theme, his pet crypto Dogecoin saw its price spike off the back of the news yesterday. There’s arguably only a vague dotted line to draw between these two events but the market appears to have done it anyway, driving daily vol on the crypto against the greenback to 123%, up from 73% on the month. Equity indices and fiat currencies offered little to excite markets.

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