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FTSE 100 slips back, as DAX and CAC 40 set new record highs

FTSE100 chart

It’s been a mixed start to the week for markets in Europe, with the FTSE 100 underperforming once again due to weaker metals prices, with Anglo American, Rio Tinto, Glencore and BHP all acting as a big drag.

Europe update

The DAX, on the other hand has continued to edge higher making new record highs along with the CAC 40, which has outperformed.

Avast shares have rallied further after NortonLifeLock satisfied US regulators around its proposed acquisition of the UK listed business, paving the way for approval by Avast shareholders later this week, giving the US company access to a 435m+ user base, and 18 offices worldwide.  

Royal Dutch Shell shares are higher after the company announced that it is looking to simplify its share structure, eliminating the current A/B dual share setup, as well as aligning its tax residency with the UK, where it will hold all further board meetings. While the government in the Netherlands have expressed surprise at today’s decision, it probably shouldn’t be too much of a shock given the recent decision by a Dutch court to rule that the company must reduce its carbon emissions by 45% by the end of the decade. A recent decision by the Netherlands government to change the tax treatment on its B shares may well have also played a part. If so, it’s an expensive own-goal for the Netherlands government, even as the UK government plans to up its own corporation tax rate to 26%. At a time when there were dire warnings of what would happen to a lot of the UK’s blue-chip dual listing shares due to Brexit, it’s rather hard not to suppress an ironic smile at how this chain of events has unfolded.

AstraZeneca shares are also rebounding, reversing some of the big losses we saw on Friday, on reports that its Epiccure heart drug phase II trial, which it is developing in partnership with Moderna, had demonstrated safety in early testing.

Cineworld’s latest trading update is clear evidence of a significant improvement in sentiment around cinema visits over the summer months, culminating in October, which saw a 127% increase in revenues from 2019 levels. The fact that this surge coincided with the release of the James Bond film can’t have been a coincidence and while the rebound probably isn’t solely attributable to just that film release, it certainly can’t have hurt, pushing the shares up to their highest levels in over a month.  

Outsourcing company Serco Group today updated its full year guidance, saying that due to several one-off factors, that full year revenue would be £100m better than expected at around £4.4bn, and that underlying trading profits would not be less than £225m, up from £200m.

US market update

After seeing a bit of a pause last week, US markets have started on the front foot today, setting aside some of last week’s concern that rising prices will impact company earnings.

Today’s latest Empire manufacturing survey for November showed that economic activity continued to recover, with increases in new orders, employment, and prices paid.

Tesla shares have come under further pressure after CEO Elon Musk hinted he was considering further sales of his stock holdings, in a Twitter exchange with Democrat senator Bernie Sanders.   

FX update

The US dollar has slipped back a touch today, giving up ground to the likes of the Australian dollar, and the pound. The pound has seen a bit of a lift after comments today from various UK policymakers, including Bank of England governor Andrew Bailey that the MPC was becoming increasingly concerned about current levels of inflation, however that the key determinant of a possible move in policy was expected to be the labour market, and whether the end of furlough is likely to push the headline rate up.

If tomorrow’s unemployment data don’t show any signs of this happening, then speculation about a December rate rise is likely to increase, especially if we get further falls, which is what is being forecast in tomorrow’s ILO unemployment data, which is expected to fall to 4.4% from 4.5%. The claimant count for October is also likely to be closely watched as well, for further declines from the 5.2% in September.

The euro has also come under pressure, sinking to a fresh 15 month low, after ECB president Christine Lagarde said the central bank didn’t envisage raising rates at all next year, due to the view that current levels of inflation were likely to be transitory.

Commodities update

Having finished lower for the second week in succession, crude oil prices have remained under pressure, with US prices slipping back below $80 a barrel, while Brent prices are looking to retest the 50-day MA in a sign that the various fresh lockdowns being implemented across Europe could see demand slow sharply, as we head into winter.

While the Biden administration has been mulling an SPR release to force oil prices lower, it would appear the virus may well be doing the job for him in Europe, with Austria ordering a lockdown of the unvaccinated and Ireland urging people to work from home again. In Germany there is talk of them going down a similar route to Austria.

Gold prices, having briefly hit five-month highs earlier today, have slipped back a touch after US 10-year yields pushed above 1.6%.

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