After yesterday’s shenanigans European markets have rebounded quite strongly, setting aside yesterday’s concerns over cryptocurrency volatility and the US central bank's stance on inflation to close higher, and mark a welcome respite to the declines of the last couple of days.
The DAX is having a decent session, as is the FTSE 100, having fallen back below the 7,000 level yesterday and hitting a low of 6,897, it's spent most of today’s trading session trying to get back above it.
EasyJet shares have slipped back after posting a £701m H1 loss. First-half revenue came in slightly higher than the April guidance at £240m, with passenger numbers down 89.4% to 4.1m, around 14% of 2019 levels, while the load factor fell to 63.7%, missing expectations of 65.5%. For all the talk of pent-up demand the outlook for Q3 doesn’t look much better with the airline saying it only expects to fly around 15% of its 2019 capacity, with the hope that this would increase from June onwards as the next stage of lockdown restrictions are expected to be eased. This still seems a big ask and certainly today’s market reaction suggests investors are also doubtful about this optimistic scenario playing out.
Trainline shares have plunged today after the government outlined its latest shakeup plans for the UK rail network. The decision to announce a new publicly-owned overseer called Great British Railway will conjure up memories to those of a certain age of British Rail, whose service levels could kindly be described as "poor", when the railways were last in state hands, and where investment was minimal. Sometimes it’s easy to forget that so-called nationalisation isn’t the panacea a lot of people think it is, but maybe this time could be different, though history tells us it probably won’t be. The abolition of franchising looks set to mean fewer ticketing options and it is perhaps here that could be causing the collapse in the Trainline share price, with the government collecting fares and operators being paid a fee to run services, with the government set to create its own ticketing options and app.
While today’s Trainline share price collapse suggests investors have concerns around this move by the government, the reality is likely to be somewhat different. Trainline has first-mover advantage and given recent experience of governments setting up an app and websites, the NHS app being a case in point, I wouldn’t be losing too much sleep over it. It is thought it could take the government nine months to set up its own version. The reality is it could be much longer, which means that today’s share price fall could reverse. Flexible tickets will also be introduced next month to cater for the new hybrid type of working between home and the office.
B&Q and Screwfix owner Kingfisher has been one of the few retailers to do well from the pandemic. Classed as an essential retailer the business has been able to remain open and while there have been higher costs, these appear to have been more than offset by even higher sales volumes. When the company reported in March, it saw full-year sales increase 6.8% to £12.34bn, driven largely by an increase in e-commerce which saw an increase of 158%, and now account for 18% of total group sales, compared to 8% a year ago. Trading in the UK and Ireland was particularly robust, with Screwfix exceeding £2bn in sales for the first time ever, with the company paying a total dividend of 8.25p per share. Today’s Q1 numbers have continued in this vein, with the company upgrading its guidance for H1 from low double digit LFL sales growth to mid-to-high teens, as well as raising its profit outlook to £580m to £600m. The group as a whole saw total Q1 sales rise 60%, to £3.45bn, with UK reported sales rising 66.8%. The B&Q business saw an 82.7% rise, with Screwfix contributing 42.5%. French sales also boomed, rising 98.8
Royal Mail shares have really delivered for shareholders this year, the shares are up over 40% year to date, and today’s full year numbers have seen annual profits before tax come in at £726m, which was in line with previous guidance at the end of March, when management also announced a one-off dividend of 10p a share. In more good news for shareholders management also outlined a new progressive dividend policy with the dividend for 2021/22 set at 20p per share. While the pandemic has presented the wider business with a number of challenges, the parcels business has performed very well, with revenues there up 38.7%, although letter volumes declined 12.5%. Higher operating costs were a factor with a rise of 9.2%. The new trading year also got off to a positive start in April with revenue up 24.1%, with GLS showing a 22.3% rise, although Royal Mail parcel volumes are down 2%.
The merger between Virgin Media and O2 appears to have been given the go-ahead by the UK competition watchdog, sending BT shares lower, as the combination ups the ante in the scramble for services in a highly-competitive mobile marketplace.
National Grid also reported its latest full-year numbers, with a 19% increase in profits before tax to £2.08bn. The company also outlined its intention to invest £30bn to £35bn of capital investment over the next five years to help the transition to greener energy.
US markets have started on a much more positive note after the losses of recent days after weekly jobless claims fell to 444k, another post pandemic low. What was a little more concerning was a rise in continuing claims to 3.75m, while the latest Philadelphia Fed survey slowed more than expected in May, falling back to 31.5, from 50.2. Nonetheless after the falls of the last two days the Nasdaq is leading US markets higher.
After a lacklustre debut yesterday, Squarespace appears to be having a better day today, after seeing a 6% fall on its listing price yesterday. Today it is Oatly’s turn to dip its toe in the turbulent waters of this week’s market rise and falls. With a valuation of $10bn and a $17 price, this vegan dairy startup is being hyped up to be as popular as Beyond Meat, which saw its share price surge out of the blocks when it went public two years ago.
Given those sorts of expectations, and the popularity of the brand in the US across a wide demographic, hopes are high of a successful debut. The company also has some high-profile celebrity backers, including Jay-Z, and while the company hasn’t made a profit yet, losing $60m last year on revenues of $421m, the global market for milk alternatives has a value of $18bn.
It does have some stiff competition with brands like Alpro, which is owned by Danone, however with brands like Starbucks carrying its products the outlook appears positive, with the only question being whether the company justifies a $10bn valuation. If Beyond Meat is any guide the shares could well surge.
After yesterday’s rebound the US dollar has slipped back, as markets continue to parse yesterday’s Fed minutes. Ultimately the minutes aren’t that significant given that circumstances have changed since that meeting, which means for all the chatter about a discussion on a possible taper, such an outcome isn’t imminent given April’s disappointing payrolls report. Today’s softer US dollar would appear to reflect that.
Oil prices have continued to slip lower, on course for their third successive daily decline on the premise that Iranian supply could find its way back on to the market. EU officials expressed confidence that a deal could be reached in anticipation that the US could ease some of the sanctions on Iran. Iranian President Rouhani has claimed that an agreement has been reached on a number of key issues, although some other smaller issues remain.
Bitcoin’s recovery from yesterday’s lows of $30,000 has continued, recovering back above $40,000 in the process in a remarkable two-day swing, with ethereum also rebounding strongly after being over 40% lower at one stage yesterday.
The recent weakness in copper prices has continued sliding back after an initially positive start to the day.