Europe

European markets started to gain traction this morning immediately after the latest German ZEW expectations survey unexpectedly posted a big jump in September, moving up from 71.5 to 77.5. This surprise shift appears to have prompted a fresh bout of optimism, helping to send the FTSE100 to its best levels since 25th August, with markets elsewhere in Europe also enjoying a decent move higher.

It’s been a broadly good day for retail stocks, helped by decent updates from Ocado and Sweden’s H&M.

The explosion in on-line shopping that the pandemic has brought about is evident in Ocado’s latest Q3 sales numbers today, which has seen the company push its way to the top of the FTSE100. A rise in retail revenue of 52% in the last quarter to £587.3m, helped push the average spend to £141, with average orders per week rising to 345k from 315k, from the same period a year ago.

The company also updated on its recent switchover to Marks and Spencer, offering an initial range of 4,400 food products, along with 700 from the M&S lifestyle range. The company also offered guidance on full year EBITDA saying that they expected it to come in at around £40m, helping to push the shares back towards their August highs.

Marks and Spencer shares have also seen a decent uplift on the back of today’s Ocado numbers in a sign that this deal could well be the moment that the tide starts to turn for the beleaguered retailer, as it looks for a change in its recent fortunes. 

Another retailer reporting a pickup in spending patterns has been H&M, which has said that Q3 trading has been better than expected with Q3 pre-tax profits coming in at SEK2bn, well above estimates of SEK246m, but unsurprisingly well below the levels we saw in the same period last year. Sales came in at SEK50.87bn, a decline of 19%, with 200 stores still temporarily closed at the end of Q3.

Given the disruption caused by Covid-19 these numbers are pretty encouraging and suggest that despite the losses incurred in Q2 the consumer still has the capacity to bounce back. The big question is whether this momentum can be sustained into Q4, as unemployment levels in their main markets start to rise.  Zara owner Inditex shares also enjoyed a decent lift on the back of these numbers, ahead of the release of their own numbers tomorrow.

Today’s trading update from Chemring, has seen the shares pop higher, helped by a rise in order intake to 31st August of 4%, pushing the order book up to £452m.

The company’s exposure to defence has helped insulate the business from the worst effects of the pandemic, on the aerospace and defence sector, despite the company seeing an increase in costs of as a result of health countermeasures to secure the safety of their staff. All of its divisions are performing well with sensors and information reporting a 32% rise in orders from a year ago.

William Hill shares have pushed to their highest levels since October 2018 after its US partner, Caesars signed a deal with ESPN, which will carry betting ads for ESPN digital platforms to those US states, where betting is legal. This deal has also given a lift to the rest of the sector GVC and Flutter Entertainment, who both have exposure to the US market.

RSA Insurance and Hiscox shares have also popped higher, rising to the top of the FTSE100 and FTSE250 respectively, despite the High Court finding against them in respect of Covid-19 business interruption claims. The spike higher came about after both businesses said that the overall financial impact, after the application of reinsurance would be significantly less than £100m.

US

US markets have picked up where they left off yesterday, the S&P500 pushing above the 3,400 level with the tech sector inspired sell-off of the last two weeks appearing to be an almost distant memory.

US cruise ship operator Carnival shares slipped sharply on the open after the company said it expected to post a $2.9bn loss for Q3, despite its Italian brand completing its first 7 day cruise last weekend.

After the bell we have the latest quarterly numbers from the likes of FedEx and Adobe, where in respect of FedEx we’ll get a decent insight into how the US economy is doing in the context of the number of packages being ordered and sent across the country.

This evenings on-line event at Apple HQ in Cupertino is likely to give investors and customers alike an insight into the next set of upgrades, as well as new products from the company in the lead-up to what is normally the most lucrative quarter for the year, with Thanksgiving and Christmas spending likely to be more subdued than previous years. 

FX

The pound is largely firmer despite a slight uptick in this morning’s latest unemployment numbers. UK ILO unemployment for the three months to July edged up to 4.1%, from 3.9% as the economic damage from Covid-19 starts to make itself felt. The numbers still don’t include those who remain on furlough and are likely to lose their jobs when the scheme expires in October, which means the number is likely go quite a bit higher as we head into autumn. In terms of the number of jobs available we’ve seen a fall of 695k jobs from where we were in March.

On a more positive note there was a 30% increase in the number of vacancies in the June-August period than was the case from the lows in April to June.

While UK economic data has continued to show signs of improving its important to remember that the government’s emergency measures are masking the worst of the economic damage, and in the absence of an extension of the furlough in key areas in October the line of least resistance for the unemployment numbers is still skewed towards the upside.   

The US dollar has slipped back a little more after yesterday’s losses, as the latest Fed meeting starts to get underway later today, with gold prices back at one week highs. The latest manufacturing and industrial production data for August both missed to the downside, though they were still positive readings. 

Commodities

Gold prices have retained their resilient bias, ahead of this weeks Fed meeting, pushing up to their best levels in two weeks, as markets price in a dovish bias. 

Crude oil prices have rebounded from their losses of yesterday, unable to break below their one week lows of last week, with the upside still being constrained somewhat by yesterday’s global demand downgrade from OPEC. The weaker US dollar appears to be limiting the downside for now, as does Hurricane Sally as it closes in on the Gulf Coast.