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European markets steady, Sainsbury’s underwhelms

Barclays

In what has been another quiet session European markets have traded sideways with little in the way of overall direction, with US markets closed for the Independence Day holiday.

Europe

Notable movers today have been the UK’s second biggest supermarket, Sainsbury’s which has slipped back despite reporting a solid set of numbers for Q1. Like for like sales excluding fuel rose 9.8%, with grocery sales seeing an increase of 11%.

The one area of decline was in clothing sales which fell 3.7% with the supermarket reiterating its full year outlook of underlying profit of between £640m and £700m. Fuel sales also fell 21.4%, however the comparatives from the same quarter last year may have had a part to play here.

The lack of a change to guidance comes across as somewhat cautious which may help explain today’s share price weakness, however such caution is probably sensible given some of the criticism coming the sectors way with respect to accusations of greedflation, which is a helpful tool for politicians to distract from their own shortcomings.

Banks have also slipped back as they come under pressure to raise savings rates at the same speed that they increase their lending rates. This has been a common refrain and something that the major banks have always been prone to, quick to cut rates on savings and slow to raise them. NatWest, Barclays and Lloyds are all lower.

On the upside, Ocadoshares have continued to get a fair wind in the wake of the recent announcement that they have hired Gregor Ulitzka as head of its European solutions business, joining from Amazon. With all the recent stories linking Amazon and Ocado investors appear to be putting two and two together, and perhaps coming up with five.  

AstraZeneca is also seeing a modest rebound after its hefty losses from yesterday.    

US

US markets are closed    

FX

The Australian dollar has edged slightly higher after the RBA left its main policy rate unchanged at 4.1%, signalling a pause as the central bank looked to mull the impact of the previous two hikes on the wider economy. Policymakers kept their options open regarding the timing of further rate hikes saying that inflation remained too high at current levels, although there was evidence of a slowdown in household spending. Market expectations of further rate rises slipped back from where they were at the start of the week, however the expectation is that rates will still have to rise by another 25bps in August.

We’re also seeing modest gains in the Norwegian Krone and Canadian dollar on the back of today’s rebound in oil prices.

The pound is also attracting a bid as the US dollar slips back across the board in the absence of the US.

Commodities

Having initially slipped back yesterday, crude oil prices have edged higher, although they are still below yesterday’s highs, as oil markets absorb the impact of yesterday’s announcement by Russia and Saudi Arabia to keep their various supply curbs in place. With prices still struggling to push higher due to concerns over weaker demand, OPEC+ members are becoming increasingly worried about further falls in prices away from their own break-even prices.

These fears seem somewhat unfounded given that it is well known that the US is a ready buyer just below current levels as it looks to refill its SPR, between now and the end of the year.

Volatility

With a truncated trading session in the US ahead of the 4th of July holiday, market action was once again subdued to an extent. Soft commodity prices however continue to display elevated levels of price action and the corn contract was a good example here. That heavy selling seen towards the end of Friday’s session in the wake of the WASDE report continued in early Monday’s trade, before finding a degree of support at around 18-month lows. One day vol on corn printed 57.27% against 43.85% for the month.

Downside pressures on wheat prices appeared to be even more sustained with the contract closing down on the day, although given the previous 20% uptick seen in the latter part of June, the price remains comfortably above recent lows. One day vol came in at 54.57% against 44.81% for three months.

Despite a promising start, the FTSE-100 ended the day in negative territory with lacklustre economic data serving to dampen investor enthusiasm. One day vol on the index sat at 12.22% against 9.84% for the month.

And a pop higher in early trade for CMC’s proprietary basket of Green Tech stocks served to elevate volatility on this contract. The upside was pronounced at around 5% but failed to have any lasting impact, ending the reduced trading session little changed. One day vol came in at 54.59% against 45.17% for the month.

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