It’s been a solid day of gains for the FTSE 100 today, however it is struggling to push much beyond the 7,120 level and the highs last week, while the FTSE 250 is also slowly edging higher, on a day where markets appear to be drifting higher on inertia more than anything else. Not even a partial global internet outage was enough to generate any significant volatility.
While the FTSE 100 has seen a decent day, the DAX has struggled after industrial production for April slid unexpectedly by 1%, getting Q2 off to a pretty ropey start for the German economy.
Among the best performers today Intermediate Capital shares are near the top of the pile today after reporting full year revenues of £829.9m and a rise in profits to £509.5m. third party assets under management saw an increase of 19% to $56.2bn with the company announcing a 10% increase in the dividend to 56p per share.
British American Tobacco shares are also on the up after the company raised its full year guidance for constant currency revenue growth to above 5%, above the previous guidance of 3% to 5%, driven by optimism over rising demand for alternatives, across all of its ranges, and its markets.
This included its markets in the US where its menthol cigarettes and flavoured cigars are facing the prospect of a ban or other form of restriction.
Aviva shares are also higher after activist investor Cevlan Capital took a 4.95% stake in the business, while calling for CEO Amanda Blanc to return £5bn of excess capital to shareholders by 2022.
Thungela Resources has had a yoyo start to its FTSE 100 career, rebounding over 30% today after its big losses yesterday, which were prompted by a research note that claimed the business was worthless.
US markets underwent a rather mixed start to the week on Monday with big gains in meme stocks prompting a significant outperformance in the Russell 2000. The Nasdaq also managed to eke out a gain, while the larger benchmarks slid back.
Today we’ve seen a similarly mixed start with the Russell 2000 and Nasdaq once again outperforming with the likes of AMC Entertainment and GameStop still in demand, while the S&P 500 and Dow have continued to lag.
On the data front the latest job openings data for April showed that there were over 9.2m vacancies, a rise of almost 1m since March, and once again highlighting the problems facing US employers in filling roles as the US economy reopens. With over 8m less people in the workforce than was the case pre-pandemic, employers may well have to hike salaries quite substantially in order to entice these people back, with the most vacancies in the hospitality sector. This in turn could have significant consequences for inflation expectations, especially if US CPI comes in anywhere near to 5% later this week.
Web services company Fastly shares initially opened lower, but have since reversed sharply higher, despite this morning’s failure in its global network which caused a host of major websites to go offline. The company quickly identified the problem, implemented a fix and announced that services were coming back on line. While the quick resolution was welcome, the point of failure does raise awkward questions as to how it was allowed to happen at all, and whether the company’s contingency and failover measures for problems like these were, and are adequate. The fact that this happened at all suggests that these failover measures are not, given how many companies like Amazon, Reddit, as well as various payment and major news sites were affected by the outage.
Apple shares are also higher after the company laid out its latest roadmap for software and hardware upgrades at the WWDC.
It’s been another slow day on currency markets, only this time the US dollar is outperforming a touch pulling back from yesterday’s lows. The market appears to be range trading ahead of this week’s US CPI numbers, while a decline in US10 year bond yields to a one month low, would appear to suggest that debt markets are becoming desensitised to concerns about higher prices.
The pound has been among one of the worst performers today, after another failure to crack the 1.4200 level. It has been suggested that concerns over the 21 June reopening date being put back might be behind this, however this comes across as unlikely given that the economic data continues to point to a resilient consumer bounce back. This morning’s BRC retail sales survey showed that sales rose at their best rate since the pandemic struck the UK. Total sales for May increased 10% compared to 2019, and by more than the same number in April on a two-year basis, with clothing retailers the biggest beneficiaries of a return to the High Street. This would appear to augur well for next week’s UK official ONS May retail sales numbers.
With crude oil prices close to 18-month highs, we are starting to see waning momentum as questions start to get asked about global demand. Imports in China appear to have slowed, hitting a five-month low, while rising infection rates are starting to see questions raised about the speed of any economic reopening.
This year’s rebound in oil prices may well have also been predicated on a resumption of international air travel, something that still looks a long way off as we come to the middle of the summer. A resumption of international air travel, is also something that doesn’t look likely to happen in a particularly strong fashion in the second half of this year either, which may also be tempering demand expectations.
Copper prices have also come under pressure over concern that short term Chinese demand may have peaked, with support coming in at last week’s low.
Bitcoin prices have slipped to their lowest levels since the 19 May sell off that saw the cryptocurrency slip briefly below $30k.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.