Stocks handed back some of yesterday’s gains amid a sluggish trading session. 

Europe

The mixed data from China overnight ensured that equities got off to a negative start. On a quarterly basis, the Chinese economy grew by 11.5%, and that was a massive rebound from -9.8% registered in the first quarter. The June retail sales figures showed there was negative growth of 1.8%, and that undershot the 0.3% forecast. Some people questioned the headline growth reading in light of the poor retail sales numbers – which have been in negative territory in the quarter in question - hence why stocks didn’t drive higher on the back of the growth number.  

The uninteresting update from the ECB didn’t inspire traders. Rates were kept on hold, and so was the PEPP – meeting forecasts. Christine Lagarde, ECB chief, said the rate of the bond buying has eased a little, but she added that unless there is a big surprise in terms of an economic rebound, the full stimulus package will be used. European governments are divided over the €750 billion rescue fund, as some are in favour the 2:1 grant to loan ratio, while others are opposed. Getting approval would be crucial to the region’s recovery. Ms Lagarde said the ECB is working on the assumption that it will be approved.     

SSE is one of the best performers on the FTSE 100 today. The pandemic has impacted the business and the energy provider said that it expects profit to take a hit of £150-£250 million. Despite the disruption from the health crisis, the company will stick to its five year dividend plan to 2022/23, and in November it intends to pay an interim dividend of 24.4p. In this environment, it is refreshing to hear that a company is still pressing ahead with its pay-out plans. Seeing as there is a feeling that we are over the worst of the pandemic, it seems unlikely the group will deviate from its dividend policy now. SSE also confirmed it is pressing ahead with its £7.5 billion capital expenditure plan for low-carbon projects in the next five years.       

GVC Holdings announced that it expects first half EBITDA to be between £340 million and £350 million, and that would be a decline from the £366.6 million posted last year. The expected earnings figure isn’t too bad when you consider how much disruption was caused by the lockdowns. In the six month period, total net gaming revenue fell by 11%, and the halting of sporting events was blamed for the drop. In the time frame, total online revenue increased by 19%, thanks to 31% rise in gaming. The retail unit – high-street division – was a different story. The retail business in the UK and Europe fell by 50% and 48% respectively in terms of revenue. Now that things are going back to normal, the firm has seen an increase in the sports business, and it has almost back to pre-pandemic levels. Kenny Alexander has been in the top job for 13 years, and today he announced he will be stepping down. Shay Segev, the COO, will take over as CEO.

Experian, the credit data company, confirmed that first quarter revenue slipped by 2%, while the forecast was for a fall of between 5% and 10%. The North American business outperformed as revenue increased by 4%. Looking ahead to the second quarter, the group anticipates revenue growth to be –5% to 0.0%.  

From 22 July, RBS will be known as NatWest Group, subject to approval. The move is aimed at casting-off the old image of the bailed-out bank, which had its fair share of scandals, such as PPI and LIBOR rigging. The finance house has come on leaps and bounds since the dark days of 2008, but the name change seems superficial.  

US

The mood on Wall Street is a little downbeat as big tech is underperforming once again. After a great run for several months, it seems the buzz surrounding the tech sector has faded.  

The US labour market is still slowing improving. The jobless claims reading fell from 1.31 million to 1.3 million, but economists were expecting 1.25 million. It was the fifteenth week in a row the reading declined. The continuing claims metric fell from 17.76 million to 17.33 million – the reading suggests that roughly 430,000 people returned to the labour market. It is fair to say the jobless rate is still stubbornly high. The Philly Fed manufacturing reading for July was 24.1 and that cooled from June’s 27.5. The headline retail sales reading for June was 7.5%, the record 17.7% in May was revised up to 18.2%, so US consumers are clearly keen to spend. All the reports point to a continued economic recovery.  

Morgan Stanley posted great second quarter figures, but you wouldn’t know it to look at the share price, it's only up 3% on the day. Revenue hit a record $13.4 billion, and equity analysts were expecting $10.4 billion. Earnings were a record $3.2 billion. EPS were $1.96, which smashed the $1.12 forecast. Bond trading revenue surged by almost 170%, investment banking fees increased by 39% and equity trading revenue rose by 23%.

Bank of America shares are in the red today following the release of its second quarter numbers. The bank set aside $4 billion for bad debt provisions. EPS in the three month period was 37 cents, which easily topped the 27 cents forecast. Revenue came in at $22.5 billion, and that was slightly ahead of the consensus estimate. Like its peers it benefitted from the extreme volatility seen in the financial markets earlier this year. Bond trading revenue increased by 50%, while the equities division saw a 7% rise Investment banking fees rose by 57%. The lower interest rate environment hurt the company as interest income fell by 11%.

Twitter shares are in the red as a number of high profile accounts were hacked. Elon Musk and Bill Gates were among the well-known individuals that were targeted. The social media giant was quick to intervene, but the security breach has chipped away at traders’ confidence in the group.

FX

GBP/USD is only up slightly on the day despite the raft of economic indications from the UK and the US. The British jobless claimant count in June fell by 28,100, which points to some people going back to work. The May report was revised up to 566,400 from 528,900. The fall in June pales in comparison with the May metric, as the rate of people re-joining the work force is likely to be painfully slow. Ultimately, people get furloughed or lose their jobs at a much quicker rate than they start working again.

EUR/USD has been lifted by the dip in the US dollar. The strength of the single currency recently has been heavily dependent on the greenback’s slide. The lack of surprises from the ECB’s update was a factor in the currency pair’s muted move.   

Commodities

Brent crude and WTI are in the red as OPEC+ members have agreed to ease off from the deep productions cuts from next month. In May, the group cut output by 9.7 million barrels per day as a way of putting a floor under the price. The tough cuts, combined with higher demand as economies have reopened has helped the energy market. The news that the body will scale back its cuts to a reduction of 7.7 million barrels per day, wasn’t exactly a surprise. There is a possibility that output will only be rolled back to a decline of 8.3-8.1 million barrels per day, as nations that didn’t fully comply with previous cuts will have to make up the difference.    

Gold traded in a small range today, and that was connected to the low volatility in the US dollar. The inverse relationship between the metal and the greenback has been strong recently. Gold hit its highest level in over eight and a half years last week, and since then it has lacked direction.  


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