We’ve seen some big moves this week, with global equity markets getting routed on Monday as rising virus concerns rippled out across global markets sending the DAX to a two-month low, and the FTSE100 closing at its lowest level in three months.
The declines were as a result of worries that surging Delta cases and rising self-isolation rates would cripple the ongoing recovery. These concerns haven’t gone away, however markets appear to be taking a glass half full attitude for now as company reports by and large come in ahead of expectations.
As a consequence, markets in Europe look set to close the week higher, and while the rebound since Monday won’t reverse the losses of last week, the fact that we’ve finished this week higher after such a poor start on Monday is remarkable in itself.
The FTSE100 has once again underperformed, while markets in Europe have performed better after the latest European flash PMIs showed a further improvement in July
The underperformance of the FTSE100 is particularly notable when compared to the FTSE250, which has done so much better, closing back to within touching distance of the record highs of earlier this month, and almost wiping out the losses from last week.
Today’s gainers have also been by and large earnings driven with the telecoms sector leading the way as Vodafone reported Q1 revenues that came in well ahead of expectations, at €11.1bn. Organic service revenue also saw an increase of 3.3%, well above expectations of 1.91%, with a strong performance in Germany, helping drive the improvement. The lack of travel meant that roaming revenues were still on the low side, but that should improve over time, and it is not a problem unique to Vodafone. The company said it was on track to meet its full year EBITDA target.
Having been one of the biggest fallers yesterday, NatWest Group has recovered the lost ground, after agreeing a Memorandum of Understanding with Permanent TSB in Ireland for the sale of its Ulster Bank business. PTSB will buy €7.6bn of performing loans from NatWest, as well as 25 Ulster Bank branch locations, while the UK bank will also take a 20% stake in the Irish lender. NatWest is also set to release H1 numbers next week.
It’s been another positive start for US markets, as we look at three successive days of gains with the Nasdaq 100 setting another record high, along with the S&P500, as the momentum from the last few days look set to translate into a positive week as we head into a huge week for earnings next week with the release of Amazon, Apple, Microsoft, Alphabet and Tesla’s latest numbers.
The latest flash PMIs for July show that the US manufacturing sector remains resilient, however input prices have remained high, while services activity underwent a surprise slump from 64.6 to 59.8.
Snap, so often the poor relation when it comes to social media, reported a bumper set of Q2 numbers last night, with revenues, profits and users beating expectations. The company reported 293m active users, while posting revenues of $982m and narrowing net losses to $153m. The company said it hoped to achieve over 300m active users by the end of Q3 with the shares surging over 10%.
Twitter also managed to beat expectations in Q2, with revenues coming in at $1.19bn, a rise of 74% over the same period a year ago, while daily active users rose by 11%. For Q3, the company said it expects to see revenues of between $1.22bn to $1.3bn.
With both Twitter and Snap beating forecasts, attention now shifts to next week's numbers from Facebook, as well as Alphabet with expectations of similarly robust ad revenue numbers from the market leaders in social media and online advertising.
GM shares are also proving to be choppy after the company issued a second recall of its Chevy Volt electric vehicle due to a battery fire, after two previously repaired vehicles caught fire again.
The US dollar has swept all before it this week with the notable exception of the Canadian dollar, which may have been helped by last week's announcement by the Bank of Canada, that it was reducing its bond buying program, and rebounding oil price.
The US dollar index hit three-month highs earlier this week and with a weaker euro and next week's Fed meeting looming there is an expectation we could well head higher.
The pound has shrugged off a sharp fall in the latest UK services PMI for July, which saw economic activity drop from 62.1 to 57.8. A lot of the reason behind this fall has been a consequence of economic activity being hampered by nonactivity of employees who are self-isolating due to being “pinged” by the NHS Track and Trace app. Business optimism about the economy is also declining, especially given ongoing concerns about labour shortages even before enforced employee absences.
Retail sales on the other hand came in better than expected at 0.5% in June as consumers spent more on food and drink as a result of England progressing to the final of Euro 2020.
Oil prices plunged in the early part of the week over concerns that rising global Delta variant infection rates could undermine the economic rebound, or at least slow it down. These worries haven’t gone away, however even with the new OPEC+ agreement there are still residual concerns that even with a slower economic rebound we could see supply struggle to keep up with demand, hence the recovery in prices heading into the weekend.