European markets have had an altogether more positive tone after yesterday’s declines; however, the shadow of the Delta variant continues to overshadow wider sentiment.
Europe
Travel and leisure are once again feeling the heat after Spain removed UK visitors from their list for restriction free travel, with TUI recording the largest losses, with Ryanair, easyJet and IAG also lower. Rolls-Royce is also underperforming, as its target of achieving wide-body engine flying hours of 55% of the levels of 2019 starts to look increasingly difficult to hit.
There appears to be a growing realisation that for all the optimism over the UK’s vaccination progress, the travel sector will never recover properly until the rest of the world gets its act together when it comes to vaccines. Given how fast the Delta variant is spreading, there is increasing concern that the summer of 2021 could well go the same way as the summer of 2020 for Europe’s holiday sunspots, creating the potential for further problems for EU politics heading into year end.
Elsewhere in the world, Australian authorities are battling to contain the spread of the Delta variant, while the rest of Asia, Indonesia, Vietnam and Japan are battling to cope with a rise in cases. For Japan and Tokyo especially, it is particularly problematic so close to the start of the Olympics.
UK house prices jumped 13.4% from a year earlier according to the latest numbers from Nationwide, while there was also a bigger-than-expected rise in mortgage lending in May, which has helped boost housing stocks, with Persimmon leading the gainers.
Just Eat Takeaway appears to be receiving a lift due to the resilience in the tech sector, as well as its position as perhaps being considered recession proof, given its dominant position in UK, US and European markets.
US
US markets opened modestly higher, led by bank shares, after last night's after-the-bell announcement that they would be raising their dividends, with the S&P 500 once again setting a new record at the 4,300 level. After passing the latest set of stress tests from the Federal Reserve, US banks got a head start on their upcoming Q2 earnings last night by mostly announcing increases in their quarterly dividends for the upcoming quarter. This wasn’t entirely unexpected, although Citigroup shareholders will be a little disappointed that they left their quarterly dividend unchanged at $0.51 a share.
JPMorgan Chase announced an increase to $1 a share, Goldman Sachs an increase to $2 a share, while Morgan Stanley said it would double the dividend to $0.70 a share, as well as buying back up to $12bn of shares. Bank of America also said it would raise its dividend by 17%.
Facebook shares joined the $1trn market cap club yesterday after winning its case against the Federal Trade Commission, who had charged it with anti-competitive behaviour over its purchase of WhatsApp and Instagram. The FTC now has 30 days to decide whether or not to appeal the decision.
United Airlines seems to be on a spending binge when it comes to new aircraft. Having agreed to an order for 15 Boom Overture supersonic planes a month ago by 2029, today it said it would be buying 200 Boeing 737 MAX and 70 Airbus A321neo jets, to replace its aging existing 757-200 fleet by the end of 2026, with CEO Scott Kirby saying he expects business and international travel to recover by 100%. This seems like a big call, but by not putting a timeframe on it, he at least has a chance of being right in the next 10 years.
The latest US consumer confidence numbers showed a marked increase in June, rising to 127.3, and the highest levels since February 2020 before the pandemic, when it was up near record highs. This rise in confidence jars with the assessment of the US economy by Minneapolis Fed president Neel Kashkari, who said that it's still in a very deep hole. This comes across as a little hyperbolic given the strength of recent economic data and today’s sentiment numbers.
FX
Currency markets are somewhat of a snooze-fest with the Australian dollar among the weakest performers as a large part of Australia goes back into lockdown.
The US dollar is once again in the ascendancy over concerns about the effect rising Delta variant cases could have on the global economic recovery.
The pound is also coming under pressure, sliding to a 13-day low against the euro, and a one-week low against the US dollar. Let’s just hope it isn’t an arbiter of what might be about to transpire at Wembley in just over an hour.
The strength of the US dollar is also hitting precious metals prices with both gold and silver slipping back sharply. The slide in gold prices has seen it slip below the lows earlier this month and below the lows in May, and on course for its worst monthly decline in five years.
Copper prices are also on the back foot again, driven by the stronger US dollar and concerns that rising Delta variant cases could slow demand in the second half.
Brent crude prices are pulling back some of yesterday’s losses ahead of this week’s Opec+ meeting, although the rebound is somewhat muted against a backdrop of concern about accelerating cases of the Delta variant, and its potential impact on demand as we head into the second half of 2021.
Bitcoin prices appear to be trying to carve out a base, breaking above its one-week highs and above $36,000 for the first time since 18 June.
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