European markets have got the week off to a disappointing start as increasing concern about rising bond yields, and what they are telling us about the economic outlook, is spurring some profit taking, particularly in US markets which are on course for their fifth successive daily decline.
Both the FTSE 100 and FTSE 250 are starting to pare their losses after the details of the UK route out of lockdown was laid out by the prime minister to parliament a few minutes ago. The oil and gas sector has helped in some regard, due to the continued resilience in oil prices, with US prices back above $60 a barrel and Brent prices on course for their best daily close since January last year, helping to push BP and Royal Dutch Shell close to the top of the index.
This optimism over an economic reopening appears to be taking its toll on the areas that have performed the best as a result of the pandemic, with the likes of Ocado and Just Eat Takeaway getting hit hard, along with tech stocks like Sage Group and Avast. On the plus side, travel and leisure is doing well with the likes of easyJet, Ryanair, TUI and Holiday Inn owner Intercontinental Hotels Group higher, ahead of this afternoon’s announcement from Boris Johnson in the UK parliament, as he outlines a roadmap out of lockdown.
Also, among the gainers IAG, owner of BA and Aer Lingus is higher after announcing that it has taken further steps to bolster liquidity this morning, to the tune of £2.45bn, with the help of a £2bn five-year Export Development Guarantee loan partially guaranteed by UK Export Finance, and underwritten by a syndicate of banks, which will be drawn down this month. Flutter Entertainment appears to be benefiting from optimism over its US business, as more US states look at measures to legalise online betting.
G4S shares have slipped back after Gardaworld declared its improved 235p per share offer as final, disappointing those shareholders who were holding out for a better offer than the 245p one from Allied Universal which was accepted by the G4S board back at the end of last year. Given the recent problems G4S has experienced over the past few years, it would appear that the shareholder hold-outs overplayed their hand in trying to extract a higher bid. They now need to accept that they are unlikely to wring any more out of this particular bid, and accept the money on the table now.
US markets have traded lower as rising long term bond yields prompt some further profit taking, after last week’s record highs, and ahead of tomorrow’s testimony from Fed chair Jay Powell to US lawmakers. He is likely to face some questions over the next couple of days, on how the Fed can keep a lid on longer-term inflation expectations at a time when yields are rising sharply. The Nasdaq appears to be leading the decliners, with tech stocks feeling the heaviest pressure.
In M&A news, Cooper Tire company is up sharply after Goodyear agreed to a $2.8bn deal to acquire the business, and in doing so reinforcing its position as the US’s number one manufacturer, as well as increasing its market share in China.
Boeing shares are lower after the weekend failure of an engine on a United Airlines Boeing 777 which saw debris strewn across a Denver suburb. The US FAA took the decision to order checks on all Boeing 777’s with the Pratt and Whitney PW4000 engine, while Japan has grounded all planes with the same engine, and the UK has closed its airspace to all Boeing 777’s running with that engine type. until more details about the failure have become known. United Airlines has taken its other 24 Boeing 777 aircraft out of service until all checks have been completed.
GameStop shares are still swinging around wildly, opening higher on reports that one of the higher profile names on Reddit, Keith Gill, had doubled his stake in the video game retailer.
The US dollar has had a rather mixed day losing ground against the higher beta currencies of the Australian and New Zealand dollar, as well as finding it difficult against the pound, which posted its best level against the greenback since 2018 as it looks to close in on the 2018 peaks of 1.4380.
This afternoon’s outline of a roadmap out of restrictions has helped underpin the pound pushing the CMC GBP index to its best level in nearly a year, as traders mull the prospect of an end to restrictions on all social contact rules towards the end of June.
Copper prices have continued their advance higher to new nine-year highs, as speculation grows that demand is likely to outstrip supply for years to come as the focus inexorably shifts towards electric vehicle production, where copper is an extremely important component. Prices of tin and nickel are also showing decent gains, both of which are also used extensively in the production of electric vehicles.
Bitcoin prices have seen a sharp reversal today, briefly slipping back below the $50k level after hitting a new record high just shy of $60k, as questions grow as to the sustainability of the current rebound. On the plus side Tesla’s stake in the cryptocurrency means it’s likely to post a record profit for its latest quarter, it's just a shame it won’t be for selling cars.
Gold prices have continued their rebound from their $1,760 lows of last week after finding support at the November lows, helped in some part by US 10-year yields pulling back from their recent peaks, just below 1.4%.
Oil prices have rebounded from last Friday’s lows as continued supply concerns outweigh any concerns about demand. With prices in the US back around $60 it is likely to take some time for US output to return to any sort of normal as engineers wrestle with the problems of ice damage to various infrastructure items. These problems would suggest that output may take longer to resume to normal levels than would ordinarily be the case.