After yesterday’s modest pullback, markets in Europe have opened higher this morning, after US markets pulled off their lows, and the Nasdaq made a new record high, while markets in Asia also finished the day modestly higher.

The perception remains that stocks appear to be a one-way bet, given the support being proffered by central banks, as well as various fiscal measures, with the all eyes on the conclusion of today’s Federal Reserve rate meeting.

Various economic reports have continued to disappoint, with the latest Chinese inflation numbers for May pointing to a weak demand outlook. Factory prices in particular have continued to look weak, declining 3.7% to their lowest levels since March 2016, though some of this fall is likely to have been down to the recent declines in energy prices.

On the companies front, Zara owner Inditex has been one of the few retailers that have been able to navigate the worst of the problems in the retail sector in the past few years.

Owner of the Zara brand as well as Massimo Dutti and Stradivarius the retailer has managed to grow revenues, as well as profits consistently over the last few years.

Even with that resilience the company has been unable to insulate itself from the effects of Covid-19 and the closure of its retail outlets, as it reported a Q1 loss of €409m on sales of €3.35bn, a significant  but not surprising fall from a year ago when sales came in at €5.39bn.

The decline could have been worse but for the resilience of its on-line operation which has helped offset the impact of over 80% of the company’s stores being closed.

Today’s Q1 loss, which was more than expected, has prompted the company to delay the extraordinary dividend, which it now intends to pay next year. The ordinary dividend, however, will still be set at €0.35c a share.

The ability to pay the dividend has been helped by Inditex management’s decision not to use the government furlough scheme, instead continuing to pay its employees during the shutdowns, which goes a long way to explaining todays bigger than expected Q1 loss.

Continuing the retail theme, Debenhams has announced the closure of another three stores after failing to agree rent terms with landlord Intu Properties, with the closure of its stores in Newcastle, Milton Keynes and Watford. Debenhams still intends to reopen its remaining stores on the 15th June.

West End property owner Shaftesbury PLC also announced its latest H1 numbers today saying it intends to collect up to 50% of the rents for the period April-September, as well as move commercial tenants onto monthly payment programs. Its H1 loss after tax came in at £287.6m, largely due to revaluation adjustments. Underlying income saw a rise of 2.1% before coronavirus provisioning.

Premier Inn owner Whitbread announced the results of its recent 1 for 2 rights issue at 1 500p saying it had received bids for 91.4%.

Segro shares are modestly lower after announcing that it intends to raise the size of its share placing to £680m from £650m, due to higher than expected demand.

The Restaurant Group also confirmed the closure of 125 Frankie and Benny sites as part of a CVA arrangement that would see its airport concessions and pub operations unaffected, along with its Wagamama brand.  

On the currencies front the pound has hit its highest levels against the US dollar since the 12th March, after Bank of England deputy Governor Jon Cunliffe said that while negative rates were still being examined, the fact that he conceded the financial sector might experience “a great deal of pain” suggests that the barrier to such a move had got that little bit higher.

After all, why would the central bank implement a policy that makes the transmission of monetary policy more difficult, and cause pain to the very sector that the bank relies on to implement that policy.

The US dollar has continued to weaken, falling to its lowest levels in nearly three months, ahead of the conclusion of todays’ Federal Reserve rate meeting. No change in policy is expected, however the main focus is likely to be on the Fed’s economic projections, particularly in light of last week’s surprise payrolls report for May.

The economic projections will be particularly instructive in the context of whether Fed policymakers believe a v-shaped recovery is likely, and whether they think the worst is behind the US economy. We’ve already seen more details this week of the Main Street Lending program, however it will be on how the Fed intends to manage the recovery process that will be of most interest.

There has been a lot of talk about negative rates in recent weeks, as well as yield curve control, with the latter more likely than the former. The prospect of negative rates has become much less likely in recent weeks, with a number of Fed policymakers, while not ruling it out entirely more or less shotting that particular fox, due to its impracticalities. We could see some indications about the prospect of yield curve control, however given recent moves in the bond markets the prospect of that seems less likely than it was a few weeks ago. That doesn’t mean it won’t come at some point later this year.

Having dropped sharply post last week’s US payrolls report, gold prices have recovered above $1,700 an ounce on the back of the recent weakness in the US dollar, as well as some caution about the resilience of the current rise in stock markets, and caution about the economic outlook.

US markets look set to open higher with the main focus expected to be on the US Federal Reserve meeting, as well as the Q&A with Fed chair Jay Powell.

The Nasdaq has continued to underpin the US market with another record high yesterday, led by the FAANG stocks, with Facebook, Amazon, Apple and Microsoft also hitting new record highs yesterday, with three of them with market caps in excess of $1trn, with the exception of Facebook.

Shares in the new IPO Vroom also did well, with the online user car sellers shares more than doubling on their stock market debut

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