New record for the DAX as German industrial data rebounds
01:00, 08 May 2013
· By Sales Trading
European markets have continued to move higher today with the DAX once more pushing to record highs above 8,200 after German industrial production data followed on from yesterday’s factory orders data by rebounding strongly in March, beating expectations of a minor decline.
The FTSE100 has also hit multi year highs closing in the 6,600 level as it looks to close in on levels last seen in 2007 when it was trading at 6,750.
The mood had already been initially positive after Chinese trade data surprised to the upside with exports showing a particularly strong recovery despite some doubt being expressed about the accuracy of the figures; investors continue to push stocks higher on the basis that some recovery is better than no recovery at all.
On the earnings front the data has been a little mixed with Asia focussed UK bank Standard Chartered sliding back sharply after reporting a decline in operating profits for the first quarter. Higher loan impairments compared to a year ago also hit margins.
Also sliding back is Chilean copper miner Antofagasta as it went ex-dividend along with BP and Kingfisher.
On the plus side the technology sector is higher led by software group Sage after reporting a rise in first half profit of 6%, before exceptional items. With the exceptional item the firm made a loss but announced a special dividend and an increase in the interim dividend payout.
UK retailer Next is also a gainer after reporting an increase in sales despite the recent cold weather, with their on-line Directory service helping keep the stock on its upward trajectory. Sainsbury on the other hand is under pressure today despite a rise in the dividend, and announcing it would be taking full ownership of Sainsbury Bank from Lloyds Banking Group for £248m.
After their record closes last US markets opened slightly lower today as investors adopted a more prudent approach and booked some profits.
Stocks in focus include Disney which beat Q2 earnings expectations, coming in at $0.79c a share on revenues of $10.55bn.
JC Penney is also in focus as the company outlined its outlook for the current year, adjusting its revenue outlook lower as same store sales continue to decline.
Electronic Arts, the video game maker posted earnings of $0.55c a share missing expectations of $0.57c, though sales came in slightly higher. The company revised its full year outlook lower which could well prompt some profit taking in early trade.
Cyber security continues to be lucrative if Symantec’s results are anything to go by as the company beat expectations by some distance on increased revenues. The slightly lower guidance though could see some knee jerk disappointment in the share price.
The big news though is the retirement of Sir Alex Ferguson as manager of Manchester United which has seen the shares open sharply lower in US trading, down 5% at one point, with strong speculation suggesting that current Everton manager David Moyes will be his likely replacement. Given Sir Alex’s influence over the club over the last 27 years it will take big shoes to fill the void left by his absence. The key question for investors is likely to be can any replacement live up to the high expectations that goes with such a high profile position, in what has become a massive global brand, particularly in Asia.
The pound has slipped back, particularly against the euro after the latest BRC retail sales data showed a sharp fall in April of 2.2%. While this has been blamed on the recent cold weather and an earlier Easter this has prompted some sterling selling particularly against the euro. Offsetting that though we saw that Halifax house prices gained 1.1% in April, while sterling traders remain cautious ahead of tomorrow’s monthly rate setting meeting from the Bank of England.
The euro gained support from the better than expected German Industrial production data for March which rose 1.2%, beating expectations of a 0.1% decline. It also gained some ground on comments from the ECB’s Mersch who suggested that the bank may look at securitising SME loans in an attempt to encourage lending.
The Norwegian krone jumped sharply after the Norges Bank kept rates unchanged while also stating that a rate cut wasn’t even considered, which suggests that despite slowing inflation the bank remains concerned about the effect of low interest rates on property prices, more than a rise in the krone.
The Swedish krona followed suit despite comments from finance minister Anders Borg that the recent strength of the krona merited concern. The wording was careful though given he said it could become an issue, suggesting it wasn’t an issue at the moment.
The worst performer has been the New Zealand dollar after the Reserve Bank confirmed that they had recently been active in intervening in the market to weaken the currency in an attempt to slow down the rise in the cost of its exports.
Crude oil prices have been pretty much unmoved on today’s improvement in Chinese and German data, though we are near one week highs and there remains some scepticism about the strength behind the recovery in recent data. Inventories remain at fairly high levels which could well serve to limit the upside with Brent prices in particular finding the air a bit thin above the $105 level.
Gold prices have found some support as more and more central banks joining the easing party, however the lack of a rebound is a concern as recent improvements in economic data steer investors away from the safe haven appeal of the yellow metal. If we can stay above the $1,440 lows of earlier this month we should remain fairly well supported, however if we break below $1,440 we could see further losses towards the $1,400 area.
Copper, on the other hand has continued its recent progress higher in the wake of this morning’s Chinese data, hitting two week highs.
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