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European stocks drift, as US stocks hit new records

European stocks drift, as US stocks hit new records

After a positive start, and another decent Asia handoff, the early gains for European markets have largely melted away, slipping back from their intraday highs in the process. The FTSE 250 has managed to outperform, making another new record high, however the FTSE 100 has lagged, along with the rest of Europe’s stock markets, with the exception of the DAX.

Europe

We’re seeing some decent gains in airlines, with easyJet leading the gainers, with the calculation appearing to be that as vaccines get set to receive approvals from various regulators, it will then make it easier to oblige or compel people to have the jab, and thus make a return to some semblance of normal that much easier. In all honesty this seems to be a bit of a stretch, given the other challenges in a return to normal, however for now investors don’t seem that bothered. 

With a more buoyant airline sector Rolls-Royce shares have also moved higher, hitting their best levels in five months, with investor sentiment around the business starting to become more positive as maintenance revenues start to show signs of picking up, along with a broader focus on other areas of its business, namely defence and the power business which have continued to look resilient.

Deliveroo shares initially got a boost after announcing a deal with Boots to deliver an initially limited set of products, particularly beauty products, however the gains were short-lived, with the shares continuing to find the air a little thin above their IPO price of 390p and slipping back.  

Wood Group's latest H1 numbers have seen the shares drop sharply after they came up slightly short on revenues. H1 revenues came in at $3.15bn, a fall of 23%, with profits attributable to shareholders coming in at $18.5m, down from $22.6m a year ago. The order book, on the other hand looks more promising, up over 9% from a year ago with almost $7.7bn of pending work, with management keeping the outlook for the full year unchanged, with full year revenue still expected to come in between $6.6bn to $6.8bn.

Sainsbury's shares are the biggest losers, as they give back some of yesterday’s M&A-inspired gains. 

US

Even as European markets struggle, US markets are still in buoyant mood, opening higher with the Nasdaq and S&P500 both setting new records, with travel stocks leading the gainers.

Airlines and other travel stocks are getting a tailwind with the likes of American Airlines, Carnival and Hyatt Hotels pushing higher in unison in the hope that vaccine approval will prompt an uplift in uptake from reluctant Americans, though one can’t help feeling this could be more of a hope than an expectation.   

US electrical retailer Best Buy has followed a decent Q1 performance with another stellar set or results for Q2. Sales rose by almost 20% over the quarter, with revenues coming in at $11.85bn, above expectations while profits came in at $2.98 a share, crushing expectations of $1.85. The company also raised its full year guidance to between $51-$52bn in annual revenue, with Q3 revenues expected to come on at $11.5bn.

US cyber security firm Palo Alto Networks is also up strongly after seeing a big jump in revenues in Q4, up 28% to $1.22bn. For Q1 the company raised its guidance for revenues, to $1.2bn, while also revising up its full year estimates to $5.3bn and profits of $7.20c a share mid-point.

Chinese shares have also seen decent gains, helped by a decent rebound in their Hong Kong counterparts, after JD. Com saw a better-than-expected performance in Q2 revenues. Also higher is Tencent Music, as well as Alibaba which yesterday hit a record low, and is now over 10% above those levels.   

FX

The US dollar has continued to slide, down for the third day in succession, with the biggest losses being seen in the strength in commodity currencies today, with the Australian and New Zealand dollar squeezing various short positions further.

The pound has continued to find progress difficult despite a decent CBI retail sales report for August which saw sales volumes rise at their fastest levels in seven years, as consumers opened their wallets after a slow July. There was also some upward pressure on prices with selling prices rising at their fastest level since November 2017.    

Commodities

Crude oil has continued to build on yesterday’s strong gains, with Brent back above $70 a barrel, while US prices received an uplift after a fire on a Mexican platform knocked out 421,000 barrels of production.

Gold has continued to edge higher, nudging against the 200-day MA for the first time since 4 August.

Copper prices are also higher for the third day in a row, only days after hitting a four-month low and the 200-day MA.


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