Stocks markets are on track to finish higher in what has been a fairly uneventful session.
The minor fears that circulated during the week in relation to the rise in the US-10 year yield and yesterday’s US jobs data have faded, even though the issues haven’t gone away. It is possible that we are seeing some bargain hunting following the losses seen in previous sessions.
Consumers tend to tighten their belts in January as December is typically a busy shopping period. Last month, UK retail sales dropped by 8.2% on a monthly basis. It was a brutal update as it undershot the -2.5% forecast. The lockdown was obviously a factor in the reading. Even though the update was pretty dire, JD Sports, Next, and ASOS and are all higher this afternoon.
The data in continental Europe was mixed as the services readings in France and Germany showed a drop off in activity in February, while the manufacturing readings picked up. The German manufacturing PMI update was 60.6, the fastest rate of expansion in three years. The UK’s manufacturing update nudged up. The services metric was 49.7, so it is still in contraction territory but it was a big improvement on the 39.5 registered in January, so that says a lot about the sector.
The banking industry has taken a beating from the pandemic as vast sums of money had to be set aside for bad debts. In addition to that, central banks cut interest rates to rock bottom levels in a bid to support their respective economies, which put pressure on lending margins. NatWest swung from a profit last year of £4.2 billion to a loss of £351 million this year. The dreadful reading still managed to beat analysts’ estimates as they were expecting a loss of £418 million. An impairment of £3.24 billion – credit loss provisions – was behind the loss registered this year. Margins on lending fell from 1.99% to 1.79%. The bank was already undergoing some re-organisation before the pandemic. Cost savings of £277 million were achieved, exceeding its own target of £250 million. Risk weighted assets fell by £8.9 billion, namely at the NatWest Markets unit. NatWest owns Ulster Bank, it was confirmed the bank will be exiting the Irish market, although it will be remaining in Northern Ireland. Even though the current environment is uncertain, NatWest declared a dividend of 3p and it intends to return at least £800 million per year to shareholders until 2023.
In terms of share price performance, Segro has been the biggest gainer in recent years within the commercial property sector. While the likes of British Land have been hit by the health crisis because of their exospore to retail assets, Segro has benefitted from the crisis as it rents out warehouse space to e-commerce groups. The online shopping boom helped Segro register a 10.8% rise in full year pre-tax profit to £396.5 million. Net Asset Value is a closely watched metric in the sector, and it is 814p, up 16.3% on the year.
Renault shares are in the red as the group delivered an €8 billion loss on the year, a record for the car maker. The company is confident it can return to profitability in the second half. Concerns about semi-conductor shortages are hanging over the company as it might lead to production cuts
Tech stocks as leading the rally today after the sector suffered the largest losses earlier in the week. The hopes of the Biden administration signing off on the $1.9 trillion relief package without support from Republicans never went away. Treasury Secretary, Janet Yellen, called for more stimulus last night – the message is still circulating today.
Novavax shares have been given a boost as it signed an agreement with Gavi, the vaccine alliance, to supply 1.1 billion doses of a vaccine for Covid-19.
Dropbox announced its fourth numbers last night. Adjusted EPS was 28 cents, ahead of the 24 cents forecast. Quarterly revenue topped $500,000 million for the first time as the company signed up in excess of 1 million new paying users. The headline reading showed that the company swung to a loss of $345.8 but that was because of a one-off real estate charge of more than $398 million.
GBP/USD set a new 34 month high as it is trading above the 1.4000 mark. Sterling has been in a solid upward trend recently, it came under a bit of pressure this morning in the wake of the dreadful UK retail sales numbers but the move was relatively small when you consider the awful reading. The UK’s much better-than-expected services data helped the currency pair continue in its recent bullish trend. The CMC GBP Index hit its highest mark in almost one year.
EUR/USD is higher on the session thanks to a broad move lower in the US dollar index. The greenback has been rangebound recently, it retreated from its nine day high on Wednesday but at the same time it is comfortably above the recent lows.
Bitcoin traded above $53,665, so the asset topped the $1 trillion valuation mark.
Overnight, gold fell to its lowest level since July but it has since recovered, thanks to the weakness in the US dollar. The metal has rebounded from the session low but the wider negative trend since early January remains in place. If the metal turns lower, it could target $1,747.
Brent crude oil and WTI are in the red as it is understood that production in Texas will be ramped up in the near term. Some oil fields and refineries halted operations on account of the freezing weather but now it is looking as if those shuttered businesses will reopen, so supply is tipped to jump. In a way, the bearish move is a correction from the rally brought about because of the big freeze.