In a similar fashion to yesterday, the overall mood in European equity markets is positive but the FTSE 100 is underperforming in comparison with the major indices in mainland Europe.
The subdued activity in government bond yields is helping equities again. Mining stocks like BHP Group, Anglo American and Rio Tinto are weighing on the index. Financials like, Standard Chartered, Barclays, and Prudential are also hurting the UK market. The DAX 30 registered a record high, partially due to a well-received update from Adidas. Traders are largely content to buy into equity markets as hopes circulate in regards to the US’s $1.9 trillion spending plans and the global economic recovery story.
Just Eat Takeaway is one of the groups that saw a surge in demand in the last year as lockdowns prompted more people to avail of food takeaway services. Full year revenue jumped by 54% to €2.4 billion and EBITDA increased by 18% to €256 million. In 2020, delivery orders jumped by 26%, while the number of active customers and participating restaurants rose by 23% and 42% respectively. The group confirmed that trading at the start of 2021 has outperformed that of the early 2020 but then again, Just Eat’s appeal really took off once the pandemic struck. There are a lot of hopes that the UK economy will re-open in the months ahead so the acid test for Just Eat will be how it performs when restaurants and pubs have reopened.
While Just Eat benefitted from the health crisis, the Restaurant Group suffered greatly. The parent company of Frankie and Benny’s and Wagamama revealed a 57% fall in annual revenue to £459.8 million. The statutory loss grew to almost £128 million. On account of the pandemic, the firm now operates from 400 sites, down 38% - restructuring was necessary to preserve cash. Speaking of finances, a new debt facility of £500 million was secured. In addition to that, Restaurant Group intends to raise £175 million from an equity issue. Last year it raised nearly £55 million from a similar scheme. Given the UK’s solid performance on the vaccination front, the country is on track to open loosen restrictions and Restaurant Group should be in a good position to take advantage of the pent-up demand that is likely to be released on the re-opening of the country.
Spirax-Sarco is one of the highest risers on the FTSE 100 thanks to the group’s better-than-expected fourth quarter performance. The Watson-Marlow subsidiary saw strong sales and profits as demand from the pharma sector was boosted due to the coronavirus crisis. Overall, the yearly performance wasn’t that impressive as revenue and adjusted operating profit dipped by 3% and 1% respectively. The total dividend was lifted by 7% to 118p.
Legal and General confirmed that full year operating profit dipped by 4.3% to £2.2 billion. Post tax profit came in at £1.6 billion, down 12%. The lower interest rate environment along with unrealised market movements – as a result of the pandemic – were blamed for the fall in earnings. Return on equity fell from 20.4% to 17.3%. Despite the minor setbacks caused by the challenging environment, the company confirmed it is still on track to hit its medium term targets. The full were dividend was kept at 17.57p.
The bulls are in control on Wall Street following the inflation report. As expected by economists, the headline US CPI reading for February rose to 1.7%. It was a jump from the 1.4% registered in January. The core reading was tipped to hold steady at 1.4% but it actually slipped to 1.3%. For some traders, there was a sense of relief that the core level slipped as it points to a fall in underlying demand. This vindicates the views of the Fed chief, Jerome Powell, who is not too worried about inflation for the time being. Stocks are showing solid gains, the major indices are up over 1%, as the unexcitable US government bond market has encouraged equity bulls.
It was reported that General Electric’s aircraft leasing unit will be sold off to AerCap. The aviation sector suffered greatly because of the pandemic so the parties involved feel that some consolidation is required It gives GE an opportunity to focus on core areas of its business, as well as pay down debt.
Gamestop, AMC Entertainment and Koss Corp are higher this afternoon as there continues to be a buzz around the so-called ‘meme stocks’. The shares in question underwent major rallies and subsequent declines in late January and early February. In recent sessions, there appears to have been renewed interest in the stocks.
The US dollar index fell to session lows following the release of the CPI data but it has since bounced back, it is now flat on the day. Yesterday, the dollar eked out a three month high but it then underwent a massive reversal and finished firmly in the red.
Seeing as the US headline inflation didn’t overshoot forecasts and the core reading dipped, dealers decided to trim their exposure to the greenback. In the near-term, inflation fears could fade a little, which could keep a lid on the dollar. GBP/USD and EUR/USD were in the red but they are now essentially unchanged on the day due to the dollar’s recovery.
Gold was higher for the second day in a row but it has handed back some of its earlier gains. Like with yesterday, the weaker US dollar is helping the asset. In the early part of yesterday’s trading session, the commodity dropped to a fresh nine month low but it has rebounded since. In light of the latest US inflation data, we might see gold extend its rally from here as the US dollar could be in for a subdued period.
Oil’s volatility jumped in the wake of the latest EIA data being announced. It seems the big freeze in Texas last month is still playing havoc with refining capacity and in turn, inventories. US oil stockpiles jumped by 13.79 million barrels. Keep in mind the previous reading was 21.56 million barrels. In the prior announcement, it was confirmed that oil refining capacity fell to 56% and that was behind the mammoth rise in inventories – crude oil was waiting to be refined – and that still seems to be the case. Gasoline inventories tumbled by 11.86 billion barrels.
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