It’s been a steady start to the week for markets in Europe, with the DAX making a new record high, and the FTSE 100 once again the serial underperformer.
Europe
There still seems to be a great deal of uncertainty prevailing over the rate of increase in Delta variant cases, and the prospect of a much slower reopening process, as governments try to win the race between vaccines and accelerating case numbers. For most of the day markets in Europe had been in negative territory, however the opening of US markets saw these losses start to unwind, and move back into positive territory.
Both the FTSE 100 and FTSE 250 have underperformed, despite health secretary Sajid Javid confirming that all remaining coronavirus restrictions would be dropped as expected on Monday next week.
The increasing concern over a slower reopening process has once again taken its toll on travel and leisure, with the likes of easyJet, IAG and Jet2 all sharply lower, as rising Delta variant rates in Europe offset any optimism that double-jabbed passengers can travel without quarantining.
Cineworld shares are also sharply lower, after the health secretary said that mask wearing would still be recommended in crowded indoor settings, in what appears to be a classic case of the more things change, the more they stay the same. The government appears to be shifting the onus on to businesses to manage any Covid risk to frontline staff as well as customers, with venues such as nightclubs likely to be expected to require some form of covid certification, although it wouldn’t be a legal requirement.
Admiral shares are among the better performers after the insurance company upgraded its profit-before-tax expectations for the first half of its 2021 financial year, to between £450m and £500m. The outperformance is largely due to a lower number of insurance claims over the course of the period. This appears to be primarily down to the lockdown restrictions imposed at the start of the year, which meant lower traffic levels.
Daily Mail shares are higher after the company announced it was considering the sale of its insurance division, along with the prospect of completion that the rest of the business could be taken back into private hands of the controlling shareholder, Rothermere Continuation Limited.
Tate & Lyle announced that it was looking to sell a stake in its Primary Products business with a view to creating two new standalone businesses, with the new business being called rather unimaginatively NewCo, and which will focus on plant-based products for the food and industrial markets.
US
US markets after initially opening lower have once again pushed into positive territory with the S&P 500 posting yet another record high, with most investor attention on the start of US bank earnings season tomorrow, with the release of Q2 numbers from JPMorgan and Goldman Sachs.
Virgin Galactic shares initially looked as if they might take off on the open after the successful weekend test flight to the edge of space by Richard Branson and five of the company’s employees, however they soon fell back to earth, on reports the company was mulling a share sale, as it looks to ramp up its flight plan schedule.
Didi Global shares are down again this morning after the company reported it had taken down another 25 apps in China, due to reported violations of Chinese security laws. TikTok owner Bytedance also announced it was shelving plans for its US IPO in the wake of the recent crackdown by Chinese authorities on US-listed Chinese company shares.
FX
With US CPI due tomorrow and the prospect that other central banks may well get left behind when it comes to the prospect of tapering, the US dollar is much better bid, while the euro appears to have shrugged off weekend comments from ECB president Christine Lagarde, that the ECB is likely to change the guidance around its PEPP programme when it meets next week, in what is likely to be interpreted as a move to keep rates lower for longer.
Oil prices are coming under pressure as rising cases of the Delta variant prompt concerns that the direction of travel when it comes to unlocking could well go into reverse as hospitalisations start to rise, along with infections. While the link between infections, hospitalisations and deaths has been weakened, there is a concern that it could get re-established in the event the virus adapts further to bypass the vaccine.
Copper prices are also a little bit softer over concern about weaker Chinese demand, after last week’s cut to Chinese banks reserve requirements, and ahead of this week’s Chinese Q2 GDP numbers.
Gold prices are slightly softer ahead of tomorrow’s US CPI, which could show a further increase from the current level of 5%.
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