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European markets eke out fresh two-month highs, despite record gas prices

a gas refinery

European markets have continued to edge higher, with the DAX and FTSE100 both eking out fresh two-month highs. The UK index has been helped by a decent performance from the mining sector, with solid gains from Rio Tinto, Glencore and Anglo American.


The catalyst for this has been a bumper set of numbers from Australian miner BHP who reported record attributable profits of $30.9bn, a rise of 173% on last year. This was driven by a strong rebound in its coal operation, which generated over $9bn in profits, compared to a loss last year.

There had been some concern that weaker demand for industrial metals like iron ore and copper might have weighed on the results, and indeed iron ore profits were lower due to reduced demand from China, but management were optimistic that this would improve.

BHP said they expected Chinese demand to pick up strongly, against a backdrop of rising costs. This seems optimistic given the current economic backdrop and relies on the Chinese government calling time on its zero-covid policy, which to date it has shown little sign of even considering.

Only months after rejecting a £254m bid from Sycamore Partners, Ted Baker today announced that it had agreed to be taken over by Authentic Brands, owner of Juicy Couture for the sum of £210m and a sale price of 110p. This was much lower than the price that was being touted back in May of £300m when it was previously reported to be in discussions with the same counterparty.

Even when considering the darkening economic outlook this criminally undervalues the business, which at its peak had a market cap of £1.3bn. Having put in all the hard work in turning the business around it appears that current management have given up. Given the low price there might be a counterbid, however it would still be a risk in the current climate, which means that Authentic Brands may well have picked up a juicy bargain, with an annual turnover of over double the price they have agreed to pay for it.   

Darktraceshares are in focus on reports that it is in talks with private equity fund Thoma Bravo, although no figure has been attributed to the discussions. In 2019 Thoma Bravo bought out antivirus company Sophos, taking it private. This latest move by Thoma Bravo would put the company very much at the forefront of the consolidation being seen in the cybersecurity market, which has already seen Norton LifeLock move on Avast.


Having finished very much on the highs of the day yesterday, US markets opened slightly lower, despite the modestly firmer tone in European markets. The latest US housing starts for July saw yet another disappointing set of numbers, declining by 9.6%, although June was revised higher by 4.4% to a 2.4% gain. 

Despite a US housing market that appears to be in the doldrums Home Depot’s Q2 earnings were a pretty solid set of numbers. Revenue came in at $43.79bn as same store sales rose by 5.8%, and profits came in at $5.05c a share. While revenues were better than expected total transaction volumes slid back to 467.4m even as average ticket values rose to $90.

Despite these upbeat numbers and with the full year outlook affirmed, the shares have slipped back, over concerns over falling customer numbers, and higher than expected inventory levels.  

Having got their bad news in early, back in May and July, there was always a chance that in low balling expectations, today’s Walmart Q2 numbers would come in better than expected. As a strategy in managing expectations, it appears to have worked with the US retailer reporting Q2 revenues of $152.86bn, and profits of $1.77c a share.

The retailer maintained its outlook for the second half of the year, while improving its full year guidance for EPS to a decline of 9-11% from 11-13%. For Q3 Walmart said it expects to see revenues of $147.55bn and profits of $1.31c a share on slightly lower operating margins of 3.6%. Walmart also announced that it is set to make Paramount+ available to its Walmart+ subscribers from September to further take the fight to Amazon in the battle for annual or monthly subscription services.


The US dollar is edging back up again benefitting from its position as the best of a bad bunch when it comes to how well the global economy is doing.

The weakness in the latest Chinese economic data, along with rising power prices in Europe is helping to push money into the greenback and out of everything else. This move appears to be unfolding on the basis that the US economy is likely to remain in better shape, as we head into the second half of the year.

The pound underwent a mixed reaction to the latest unemployment and wages numbers for the three months to June. Unemployment remained steady at 3.8%, while wages including bonuses fell back to 5.1% from 6.4% in May. With UK inflation already at 9.4% it doesn’t take a genius to see that wages in real terms are falling, even as broader commodity prices have fallen back sharply from their highs of earlier this year, with prices

Vacancies also fell as older people returned to the workforce, but they remain high at over 1.2m, which suggests that the labour market continues to remain tight.

The main outlier remains natural gas prices which are still rising as countries look to buy up supply to fill their winter storage. This in turn will mean that inflation is likely to become much more embedded and thus make further rate rises more likely, with the Bank of England next set to meet in September, as we look to another 50bps rate rise. 


Brent crude oil prices have remained under pressure in the aftermath of yesterday’s disappointing economic numbers from China. There has been renewed chatter that Iranian oil could be on the brink of returning to the market, however the bar to this happening quickly remains high, and in the short term unlikely. The Iran story is always the dog that doesn’t bark when it comes to chatter of a return of supply.

UK natural gas prices have continued to push higher, up over 10% on the day, and close to levels last seen in March. European gas prices have also been rising and look set to post a record close.

Gold prices appear to have stabilised after falling sharply yesterday on the back of a stronger US dollar, and ahead of the release of the latest Fed minutes which are due tomorrow. Firmer US yields are also hindering the upside with the yellow metal hitting a one week low.


Cannabis stocks were back in focus on Monday after weekend media reports across the Atlantic appeared to add confidence to the idea that US legislation on decriminalising recreational use may pass into law as soon as the year end. With some estimates suggesting that this could open a $100bn opportunity, support for the sector followed. CMC’s proprietary basket of cannabis growers’ stocks advanced above 1,000 for the first time since late May, with daily vol coming in at 155% against 114% on the month.

Elevated price action was also seen at the stock specific level, with Sundial Growers one of the most active stocks on the day. Early gains were close on 20% before a reversion kicked in, but daily vol printed 339% against 184%. As we have noted previously, activity here is likely to remain elevated given the clear fundamental messages which will continue to emerge for the sector.

There’s a little more activity in digital assets than we’ve seen of late with Dogecoin rallying around 10% yesterday before giving back half of those gains. Waning recession fears in the US appear to be driving renewed interest in risk assets, with the whip-sawing movement in the coin lifting daily vol to 98% against 78% over the month.

Finally, a surprise rate cut from the People’s Bank of China saw the Yuan slide against the dollar. Weaker than expected economic data out of Beijing left the greenback to advance to levels not seen since mid-May. Daily vol came in at 6.18% against 5.25% on the month.


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