After a decent start to the month the last two weeks have seen the FTSE 100 take a bit of a pause, and though we’ve struggled to maintain a foothold above 7,000, the index is still up for the third successive month in a row. It’s also important to note that while the FTSE 100 has underperformed, the FTSE 250 has made new record highs this month.
It’s been a similarly choppy and mixed end to the week for the rest of Europe’s markets, with the DAX struggling more than most as it looks set to close lower for the second week in succession. although on the day we could well eke out a modest gain.
Aside from that, company earnings this week have largely been better than expected, and confidence in the global recovery still remains high, despite concerns about events in India, Brazil and tighter restrictions in Turkey, as well as parts of Japan.
Barclays has been one of the better performers for UK bank shareholders over the last 12 months, reversing all of its post pandemic declines earlier this year, on the back of rising optimism over the health of the UK economy, as well as the outperformance of US investment banks and their recent strong numbers. However, today’s Q1 update has seen investors cash out with some significant profit taking after FICC trading revenue came up short, and the bank unlike its peers, chose not to release some of its loan loss provisions back onto the balance sheet, possibly through an abundance of caution more than anything else. Nonetheless the disappointment over the FICC miss seems to be the prevailing sentiment in early trade, with the shares well adrift at the bottom of the FTSE 100.
Despite today’s declines it’s still been a solid week for UK lenders, showcasing that UK banks appear in a much healthier state than their European counterparts. That’s not to say there aren’t any weak spots but by and large profits are on the up. Total income fell 6% to £5.9bn from the same quarter last year, while lower impairment provisions has meant that net operating income saw a 40% increase to £5.8bn, boosting attributable profits to £1.7bn. This morning’s numbers for Barclays have showcased why CEO Jes Staley was probably correct in pushing back on activist shareholder Ed Bramson to force the slimming down of the investment, and despite the miss on fixed income, the equities business saw a big beat, and banking fees also came in better than expected.
Anglo Swedish pharmaceutical company AstraZeneca hasn’t had a great quarter from a PR point of view; however, its wider business isn’t doing too badly at all, with the shares the best performers today on the FTSE 100, and their best levels since 28 January. Q1 revenues saw a 11% increase to $7.3bn, with $275m of that coming from the coronavirus vaccine. The pharmaceutical company may well be providing the vaccine at cost, but the rest of its business also seems to be performing equally as well. The big gainers came from new medicines across the Oncology and biopharma segments from the likes of its Tagrisso and Farxiga drugs. Tagrisso saw a 17% rise to $1.15bn, while Farxiga revenues rose 50% to $625m. Core operating profits came in at $2.52bn slightly above consensus expectations, while its Alexion acquisition is expected to complete in Q3 of this year.
Hikma Pharmaceuticals is also having a decent day after upping guidance on its generic business, while affirming guidance on injectables and branded. The company said it expects full-year generics revenues to be towards the top end of its guidance range of $770m and $810m with a core operating margin around 20%.
Packaging has seen a big boom with everyone confined to their houses, and this has been borne out by Smurfit Kappa’s latest trading update. The packaging firm has seen Q1 revenue growth rise by 6% to €2.27bn, while EBITDA margins have risen by 17% sending the shares back up to two-month highs.
In a welcome boost for the London IPO market after the Deliveroo flop, UK cybersecurity company Darktrace has launched well above its initial price of 250p per share, trading as high as 359.75p on its first day of trading, as investors set aside concerns about its links with former Autonomy CEO Mike Lynch, which in an ideal world it wouldn’t have to contend with. Lynch, who is on trial for fraud as part of his involvement in the Hewlett-Packard Autonomy deal, is fighting extradition charges to the US over that deal is a founder member of Darktrace through his Invoke Capital fund, which has a 18.5% stake in the business.
US markets opened sharply lower today largely as a result of some month end profit-taking after what has been a really solid April for US stocks, with the S&P 500 up over 5%, and Nasdaq up over 7%.
The latest personal income and spending data for March came in broadly as expected, there being an enormous skew as a result of the $1.9trn stimulus payments, with incomes rising 21.1% and spending by 4.2%.
Twitter shares plunged over 10% to two-month lows in early trading, despite beating on profits and revenues in Q1, however the kicker came after Q2 forecasts fell short of expectations, after guiding down on its monetizable daily active user average (MDAU) growth rate. As a result, revenue expectations for Q2 were guided down to below $1bn.
While the likes of Facebook and Alphabet appear to be reaping the benefits of a big rebound in advertising spending, Twitter appears to be a major outlier. Amazon shares on the other hand have moved higher after smashing expectations with revenues of $108.5bn and profits of $15.79 a share, crushing estimates of $9.54, while it also guided up its forecasts for Q2.
Apple shares are also lower after the EU opened an antitrust investigation into its App store, accusing the company of abusing its position in its distribution of music streaming apps. The investigation has come about as a result of a complaint by Spotify, about the 30% commission fees.
Exxon Mobil shares are lower despite the US’s biggest oil major taking advantage of the upswing in oil prices in the same way as its UK peers, with higher revenues and a return to profit, after four consecutive quarters of losses. In Q4 the company posted losses of $20.1bn, so today’s Q1 profit of $2.7bn is very welcome, with revenues coming in at $59.15bn.
The US dollar appears to be benefitting from a little bit of month end and week end profit taking in an April that has seen it slide around 2%, reversing all of its March gains against a basket of currencies.
The release of the latest Chicago PMI numbers for April appears to have given the US dollar a lift after a big jump to 72.1, while the prices paid component surged to its highest level since February 1980. Now while some of that gain may be because of energy base effects there will still be a part of it that isn’t.
The pound is also getting a bit of a kicking, though on the plus side this appears to be helping to underpin the FTSE 100 which earlier this morning was in negative territory.
Crude oil prices have slipped back after hitting six-week highs yesterday, with a little bit of month end and weekend position adjusting knocking some of the froth off recent gains. The demand outlook continues to look encouraging, however events in India, Turkey as well as Brazil appear to be tempering some of the exuberance we saw yesterday.
Industrial metals prices are continuing to look resilient with copper having another look above the $4.50 level, while palladium prices set another new record high, as demand expectations over their use in renewable energy continues to drive demand. Palladium is not only used in catalytic converters for hybrid vehicles, but also in other hydrogen-based fuel cell technology.
Gold prices are a little bit softer, with the rebound in the US dollar weighing a little, as it looks to post its first monthly gain of 2021.
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