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News

New records for the DAX and CAC40, as FTSE100 underperforms

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While we’ve managed to make marginal new record highs for the DAX and the CAC40, the FTSE100 has lagged behind, slipping into negative territory, largely due to weakness in the financials and basic resources sector.

Europe

The lacklustre nature of European markets today appears to be driven by some profit taking in US markets, ahead of tomorrow’s October CPI numbers. Today’s latest US PPI numbers for October came in as expected, unchanged from the previous month, and perhaps holding out the hope that the recent surge in costs through supply chains may be coming to an end.

Primark owner Associated British Foods has had a disappointing year share price wise; it’s been one of the worst performers on the FTSE100, over 10% down year to date, despite a stronger than expected recovery in its Primark business, which saw all of its stores closed over last winter, so today’s rebound in the share price has been long overdue.

In Q3 the company said it expected full year profits to be broadly in line with 2019/20 levels, and today delivered on this expectation, with statutory operating profits coming in at £808m, only slightly down from last year’s £810m. Its Primark business has seen a decent recovery in margins despite a 12% fall in like-for-like sales, while its food business has also seen a strong performance, with the company paying a special dividend of 13.8p, as well as a final dividend of 20.5p. The company also said it was planning a big expansion program in Europe and the US, pushing the number of its stores to well over 500 from the current 398.

Rolls-Royce shares are also higher after gaining government support for its small modular reactor technology, which it is hoped will help the UK transition away from fossil fuels and meet its net zero carbon targets. This funding, along with £195m of private funds is expected to secure the creation of up to 16 reactors which would be installed across the country, from the early 2030’s.  

BT Group shares are also higher after being on the receiving end of an upgrade from Berenberg.

At the bottom of the FTSE100, housebuilders have underperformed, with Persimmon shares slipping back despite posting a decent set of numbers for Q3, and stating reservation rates were well ahead of 2019 levels, with new home sales completions expected to be over 10% ahead of last year's levels. Forward sales are at £1.15bn, with new developments also set to come on stream. Build cost inflation is expected to come in at 5% this year, with margins expected to remain resilient.

Support services company DCC shares are also lower despite posting a 29.7% rise in H1 revenue to £7.52bn, with decent growth across all of its businesses, with the biggest growth in healthcare which saw revenues rise by 26%.   

US

It’s been a mixed start for US markets after US PPI inflation for October came in unchanged at 8.6%, and in line with expectations, raising hopes that the rise in factory gate prices might be starting to level off. Core prices were also unchanged at 6.8%, with the focus now shifting towards tomorrow’s CPI numbers, as we start to see a little profit taking after 8 successive days of gains.

AMC Entertainment latest Q3 numbers showed that the various new films like the new Bond film “No Time to Die” and the loosening of restrictions was helping it to return better numbers. Q3 sales came in at $763.2m, well above estimates of $708m, narrowing its losses to $0.44c a share. Attendance levels were still below pre-pandemic levels but the numbers are heading in the right direction, although to look at the share price, you wouldn’t know it with the shares sharply lower.

Having hit the headlines earlier this quarter over its brief interest in Pinterest, PayPal shares have also been clobbered after disappointing Q3 revenues and downgrading its Q4 forecasts. Q3 revenues came in at $6.18bn, below $6.23bn, while for Q4 the company said it expects to see revenues of around $6.9bn, below expectations of $7.2bn. The company also signed a deal with Amazon to allow customers to pay with its Venmo app, which supports cryptocurrencies, from next year.

Robinhood Markets shares have dropped after announcing a data breach of around 7m of its customers.

While Moderna warned over its revenue numbers last week, BioNTech has had no such issues, raising its full year revenues guidance to €16bn to €17bn, however the shares are still lower on the day.

Nvidia shares have surged to record highs ahead of its earnings announcement next week, on expectations that it will be a big beneficiary of the move to the metaverse, due to the power of its chips, and the rolling out of its enhanced Omniverse platform. With Qualcomm raising its guidance last week on the prospect of high demand and higher prices, the move to the metaverse is prompting a move into high spec chipmakers, with AMD and Intel also seeing decent share price gains in the last few days.

GE shares are also on the rise after announcing that it would be splitting into three separate units, spinning off into aviation and energy, and spinning off healthcare, while retaining a 19.9% stake in it.

Tesla shares are also lower again for the second day in a row, sliding to their lowest levels this month, as investors weigh how CEO Musk will go about selling his holdings.   

After the bell we have the latest Q3 numbers from Coinbase, as we look at record highs for both Ethereum and bitcoin today.

We also have the latest Q3 numbers from Vroom, who will be hoping that the big rise in used car prices has seen a big uptick in business and margins.

FX

A slightly firmer US dollar has prompted a little bit of weakness in silver, copper and platinum prices, pressuring the commodity currencies of the Australian dollar. The greenback is also gaining ground against the Canadian dollar and Norwegian krone.

The Japanese yen is catching a bid on the back of weakness in US treasury yields which have slipped back in the wake of today’s US PPI numbers.   

Commodities

Crude oil prices are edging higher again with the return of transatlantic travel fuelling expectations of a return to travel normality. The signing off of the new US infrastructure bill is also raising the prospect of higher demand as well.

Bitcoin and Ethereum prices have both hit record highs today.

The weakness in metals prices appears to be being driven by last night’s Federal Reserve financial stability report, and those concerns about a festering debt crisis in China’s property sector.   

 


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