European equity markets are set to finish higher on the day as the bulls are in control. Worries about the pandemic and the lockdowns have waned for now and the high hopes for a pro-stimulus Biden administration in the US are helping too.
Europe
For the past three days the FTSE 100 has seen the biggest gains in Europe but today it is up 0.4% and eurozone indices are in better shape.
Sainsbury’s had a solid performance recently as like-for-like sales over Christmas increased by 9.3%. Third quarter LFL sales excluding fuel grew by 8.6%. 2020 saw a surge in e-commerce and Sainsbury’s cashed in on the trend too as online grocery sales jumped by 128%, while total grocery sales increased by 7.4%. The general merchandise division had a good run also as total sales rose by 6%. Argo sales saw an 8.4% rise. The supermarket chain, along with other well-known high street names, decided to forego business rates relief, which equated to £410 million. In light of the business rates relief news, Sainsbury’s expects underlying profit before tax of at least £320 million, and keep in mind that last year’s metric was £586 million. The update sent Sainsbury’s share price to its highest mark in almost two years.
Mitchells & Butlers shares have been hard by today’s update coving the 14 weeks until 2 January. The pub group had been rocked by the lockdowns and the board of directors said it would be prudent to explore the possibility of carrying out an equity raise as a way to beef up its balance sheet. It was stressed that no decision has been made so far but the very mention of an equity raise sent traders rushing for the door. The group’s cash balance is £125 million and all its facilities have been drawn down. The monthly cash burn is £35-£40 million and it has a debt service payment of £50 million, which is due in mid-March. Total sales in the first quarter were 67.1% down last year.
Trainline announced that it was offering a bond issue and it wants to raise £150 million from unsecured bonds – which are riskier than secured bonds and therefore come at a higher interest payment to bondholders. The fact that they are going down that route indicates that the company is under pressure. The bonds can be converted into stock. Trainline is taking the action as a way of strengthening its liquidity position.
B&M European Retail SA has had a good crisis so to speak as discount stores tend to do well in times of economic uncertainty. In September, the stock was promoted to the FTSE 100 which speaks volumes about the share price performance. Third quarter group revenue increased by 22.5%, and that was a huge improvement on the 9.9% registered in the same period last year. In the three month basis its UK stores saw a 21.1% rise in total sales ,while the French unit saw a 1.4% fall, but that was due to lockdowns. We are in an era where the high street is struggling but B&M opened 18 new stores and closed two in the UK. A special dividend of 20p was announced and that should appeal to income seeking investors.
Entain, who were previously called GVC Holdings, has made an £250 million offer for Sweden’s Enlabs as the group wants to expand overseas. The move comes not long after Entain rejected a takeover offer from MGM Resorts.
TP ICAP, the interdealer broker, announced a rights issue as a way of partially funding its $575 million takeover of Liquidnet.
BP has relaunched the sales of North Sea assets. Premier Oil was lined up to acquire the assets but the deal didn’t go-ahead after it was taken over.
US
The S&P 500 hit a new record high as the bullish sentiment is still doing the rounds. Stocks are driving higher on the belief that Joe Biden will go down the stimulus route. The initial jobless claims report came in at 787,000 and that undershot the 800,000 forecast. Yesterday’s ADP report was poor and traders are looking ahead to tomorrow’s US non-farm payrolls report. Lately there have been signs that the economic rebound is running out of steam, so that will be on dealers’ minds.
The ISM non-manufacturing reading for last month was 57.2, the fastest growth rate in three months. The finer details show that the prices paid and new orders metrics ticked, up but the employment component dipped so that is something to consider ahead of the jobs report tomorrow.
Walgreens Boosts Alliance shares are higher this afternoon on the back of the well-received first quarter numbers. Revenue ticked up by 5.7% to $36.31 billion, topping the $34.95 billion consensus estimate. EPS was $1.22 and that easily exceeded the $1.03 that equity analysts were anticipating. Higher prescription sales in the US were largely behind the good revenue numbers. It cautioned that its UK division – Boots – could suffer because of tighter restrictions.
Plug Power shares are powering ahead as it was announced that it will receive $1.5 billion in investment from SK Group – a conglomerate from South Korea. The motivation behind the move is to provide hydrogen fuel cell systems and hydrogen fuelling stations in South Korea and other countries in the region. The CMC renewable energy share basket is up 7%. The renewable energy sector has been in play recently ad traders are taking the view the future Biden administration will invest heavily in the sector.
Bed Bath & Beyond shares have tumbled on the back of the poor third quarter numbers. EPS was 8 cents and that was nowhere near the forecast of 19 cents. Revenue slipped by 5% to $2.62 billion, undershooting the $2.75 billion estimate.
Tesla shares have hit yet another all-time high and Elon Musk, the founder and CEO, is now the richest person in the world.
FX
Eurozone CPI last month held steady at -0.3%, while economists were expecting it to tick up to -0.2%.
The retail sales report for November showed a 6.1% fall on the month and that was a huge drop from the 1.4% growth registered in October. The ECB is operating a very loose monetary policy in a bid to spur on demand but the impact of the various lockdowns clearly had an impact on spending.
Yesterday, the US dollar index fell to its lowest level in 33 months but then recovered and finished up on the day, and it is extending on those gains today. The scale of the upward move in the past 24 hours could be a sign that we have seen the low in the dollar in the near-term. EUR/USD is in the red because of the move in the greenback.
Commodities
Gold took a beating yesterday on the back of the sharp rebound in the US dollar and the risk-on attitude. Today, it is a similar story as the upward move in the greenback has dented the yellow metal.
WTI and Brent crude oil are a touch higher again as it has been a great few days for the energy. Oil has recently hit an 11 month high on the back of Saudi Arabia’s plans to cut production by 1 million barrels per day in February and March. US oil stockpiles fell by over 8 million barrels too.
