It was looking set to be a rather mixed day for markets in Europe, although we have seen a move into positive territory during the afternoon session on the back of Fed chairman Powell’s clarification on what the Fed is likely to do on rates in two weeks’ time.
In a manner of a parent soothing an errant child Powell merely restated that the Federal Reserve remains data-dependent and that nothing has been decided when it comes to whether we get 25bps or 50bps.
As an exercise in stating the obvious, the comments appear to have helped push markets to their highs of the day, bringing about a modest rebound into the close, however, markets still appear very much rangebound, with no clear direction, with the DAX outperforming.
Insurers are amongst the biggest fallers today with Admiral and L&G both reporting full-year numbers.
Admiral shares have slipped back after reporting lower-than-expected profits for the year, which came in at £469m, a decline of 39% from the previous year. This probably shouldn’t have been too much of a surprise given warnings earlier this year from other insurers about an increase in weather-related claims. Net revenues also declined by 4% to £1.49bn, even as the insurer saw an 11% increase in customers. The dividend also fell to 112p from 187p.
L&G shares have also slipped back despite posting full-year profits that beat estimates. Full-year profits after tax came in at £2.29bn, shrugging off a fall in profits from its investment management division caused by the gilt market disruption back in October last year.
It’s a different story for Hiscox, whose shares are modestly higher despite posting a big fall in profits to $44.7m from $190.8m, however, the company has been able to boost the dividend to $0.36c a share.
Wagamama’s owner Restaurant Group shares have slipped back after reporting an increase in losses to £68.5m, despite an increase in revenues to £883m. This was mainly due to the impact of £117.5m in exceptional items, mainly related to its leisure business.
Earlier this week the shares jumped to 5-month highs on reports that one of its shareholders, Oasis Management called for it to sell its pubs and airport concessions businesses in an attempt to improve its overall performance.
Based on a cursory look at today’s numbers it's not clear how that would help given that on the basis of current trading, like-for-like sales in its pubs increased by 9%, well above the 2% rise in sales in its Wagamama’s business. The leisure business which includes Frankie & Benny’s appears to be the main drag with total like-for-like sales down 4%, which was also the main factor behind the various impairment charges. This underperformance is set to result in the closure of 35 of these restaurants as management looks to improve overall performance.
Darktrace shares initially slipped back after the cybersecurity company downgraded its free cash flow forecasts on the basis of IPO-related tax obligations on vesting agreements for its non-executive directors, lowering it to between 50-55% of adjusted EBITDA from 60-65%. The actual numbers themselves were slightly better than expected, which perhaps helps explain why the shares have recovered from their lows. H1 revenues beat expectations, coming in at $259.3m, while adjusted EBITDA came in at $59.69m.
The rate of customer growth in percentage terms does appear to be slowing, however, it is still in the mid-20%.
US markets opened modestly higher after the latest ADP payrolls report showed that 242k jobs were added in February, slightly above expectations. On wages, there was a slight drop to 7.2% from 7.3%, which still remains well above core inflation, and is unlikely to assuage concerns about sticky inflation.
Tesla shares are modestly lower on reports that it is under investigation by US regulators after two incidents of a steering wheel becoming detached, on its Model Y, while the car is being driven, due to a retaining bolt being missing. The issue could affect up to 120k cars.
Cybersecurity firm CrowdStrike shares are also higher after Q4 revenues came in at $637.4m, ahead of expectations as did profits at $0.47c a share. On guidance, the company was equally upbeat saying it expects to see Q1 revenues come in between $674.9m to $678.2m while saying that revenues for 2024 could rise as high as $3bn.
Jack Daniels owner Brown-Forman shares have slipped back after seeing Q3 profits fall back quite sharply. Q3 revenues came in at $1.08bn, however, profits came in at $0.21c a share, below expectations of $0.54c a share. Operating margins more than halved from 33.5% to 15.9%, while the company took a $27m charge on pensions. For the full year says is it still expects to see high single-digit organic operating income growth.
The US dollar has slipped back from 3-month highs, despite ADP payrolls coming in better than expected at 242k, and job openings in January fell back from 11.2m to 10.82m, reinforcing the picture of a tight US labour market.
The pullback came in the aftermath of Fed chair Jay Powell saying that nothing had been decided when it comes to whether the Fed would hike by 25bps or 50bps in two weeks’ time. Powell reiterated that the Fed was very much data dependent and would continue to look at the data in the round.
The pound has struggled to make gains, languishing at its lowest levels against the US dollar in 3 months, even as external MPC member Swati Dhingra made the case for rates remaining at their current levels of 4%, saying that the majority of inflation is being driven by higher import costs. Her argument was that inflation would come down by itself, however with the Fed seemingly intent on pushing rates even higher, which would drive the pound lower, this policy would have all the hallmarks of delaying that process, and ultimately be self-defeating as a weaker pound drives up import costs.
The Canadian dollar has remained under pressure after the Bank of Canada left rates unchanged as promised at 4.5%.
Crude oil prices have remained under pressure despite a surprise draw in weekly inventories of 1.46m, amidst concerns about future demand in a rising interest rate environment.
Gold prices have recovered from their recent lows, with the modest pullback in the US dollar and slightly softer tone in yields helping to put a short-term floor under prices. Other metals prices are also undergoing a modest rebound for the same reason.
Airbnb has posted some solid gains of late off the back of a broker upgrade and Tuesday’s gains were sufficient to see the stock find itself as one of the most active on the day. Although closing a couple of dollars down from session highs, one-day volatility stood at 94.18% against 73.79% for the month.
After the head of the Federal Reserve warned yesterday that interest rates would likely rise faster and further than had been previously expected, this took a toll on US equity markets with banks being left to look particularly vulnerable. As a result, CMC’s proprietary basket of 20 US banking stocks posted some meaningful losses with one-day volatility coming in at 41.17% against 29.2% for the month.
That US rate hike news took a toll on Hong Kong’s equity market too, with downbeat economic news out of China reversing early gains. One day vol on the Hang Seng stood at 36.78% against 26.24% for the month.
That testimony from the Federal Reserve boosted the US dollar across the board, but it was against the Aussie Dollar that we saw the highest levels of action. Yesterday’s 25 basis point rate hike by the RBA was seen by some as being overdone and that likely exaggerated movement here. One-day volatility on AUD/USD printed 16.76%, well up from the one-month reading of 12.04%.
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