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Crypto meltdown and inflation concerns roil equity markets

Bitcoin crashes 30%

Having posted a new record high only yesterday, the DAX has slid for the second day in succession along with the rest of Europe’s markets. The FTSE 100 has also fallen back sharply towards last week’s lows over concern that supply chain, as well as worker shortages, could threaten the economic recovery. As a consequence this could mean that inflationary pressures might become more persistent in the longer term.

While stock market investors appear to be concerned about increasing inflation risk, given that appears to be today’s narrative, bond markets appear less so if US 10-year yields are any guide to today’s price action. They are slightly lower. That said, weakness in commodity prices isn’t exactly helping sentiment either, after Chinese authorities suggested curbs on aggressive increases in prices which has clobbered the mining sector, with the likes of Antofagasta, Anglo American, BHP, Rio Tinto and Glencore all down heavily.

Ferguson is one of the better performers today after reporting a 24.5% rise in Q3 revenues, while trading profits rose to $579m, from $350.4m a year ago, helped by the strong rebound in the US as the economy there continues its reopening process. Management also raised the outlook for the full year with an expectation of profits in the range of $2bn to $2.1bn.   

BAE Systems has painted a fairly positive picture outlook wise, saying that orders are ahead of expectations, with new contracts across all their businesses. The company reiterated its full-year guidance.

Homeware retailer Dunelm has continued to show its resilience with another strong quarter, despite its stores being closed for most of this year. Q4 sales rose 59% on a two-year basis against 2019 levels, with decent growth in its home delivery and click-and-collect channels. In the period since stores reopened, demand has also been good, and as a result the business has upgraded its guidance for full-year profits to come in above £148m.

Premier Foods full-year results have seen the share price slip back, after initially opening higher even as pre-tax profits beat estimates, coming in at £122.8m. The company also proposed a final dividend of 1p a share, for the first time in 13 years.  

Pub chains have been hit hard by the pandemic with the likes of Mitchells & Butlers and Marstons thankful that they can finally start on a new reopening process. All Bar One owner Mitchells & Butlers reported a first half loss of £124m on revenues of £219m, while Marstons reported H1 revenues of £55m and a loss of £122.4m. Both businesses expect to see a better second half, in the hope that both can reduce debt levels which have surged over the last 12 months as a result of the pandemic-enforced closures, with both down heavily in today’s sell-off.

The travel sector is also under pressure, despite the EU announcing new travel rules which would allow non-quarantined travel for vaccinated tourists from countries deemed safe in a move that could see the US go on a white list. This is no doubt a positive move, but a lot also depends on whether US tourists would be able to do the same thing on their return to the US. At the moment that doesn’t look likely, which perhaps helps explain why airline shares aren’t higher, even if TUI is.


Having seen a modest decline yesterday, US markets have picked up where they left off opening sharply lower, with big tech in particular seeing some of the heaviest losses, as US stocks look to close lower for the third day in a row.

A big decline in bitcoin is hitting Tesla shares, along with Coinbase which has plunged below its $250 IPO indicative price to a record low close to $200. Tesla has fallen sharply, already below its 200-day moving average, and has also broken below its long-term trend line from the March 2020 lows, opening up the prospect of further losses if it breaks below March lows at $540.

Walmart set a fairly high bar yesterday when their Q1 numbers blew through expectations, however it looks like Target has flown right over it after they also smashed expectations in numbers released just before the open. Q1 sales rose 22.9% well above expectations of 10.1%, while revenues came in at $24.2bn. Net income rose to $2.1bn, up from $284m a year ago, as shoppers spent more money on the likes of homeware as well as clothing, with average basket sizes rising 5%, while store and website traffic went up 17%. The most popular options for customers were click-and-collect, as well as home delivery, with sales on the same-day service rising over 90% over the quarter.

It seems in little doubt that Target’s position in the middle of the US retail pack has seen it gain lots of new customers at the lower and upper end of the income stream in the US, as consumers spend their stimulus benefits. Target also raised its outlook for Q2 saying that it sees operating margins of 7.9%, with positive single-digit sales growth over the rest of the year.

We’ll also get to see the latest Federal Reserve minutes later this evening, however given that they were from last month, and pre-payrolls surprise, they probably won’t tell us that much. We already know from the recent utterances of various Fed policymakers over the economic outlook, including vice-chair Richard Clarida, that a taper is some way off, so it’s tempting to suggest that they probably won’t tell us anything that we don’t already know, given how chatty various FOMC members have already been over the past few days.     


FX markets have more or less shrugged off today’s turbulence in stock and commodity markets, although the US dollar is slightly better bid, rallying from three-month lows, with the Japanese yen also higher from some haven flows.

The pound shrugged off today’s headline CPI inflation number for April which saw a big rise to 1.5%, coming in as expected, with a rebound in prices for energy, clothing and other household utilities, helping push the headline rate higher. While the jump from 0.7% to 1.5% looks a large one we still remain well below the Bank of England’s 2% inflation target, and while negative rates are now off the table, that doesn’t mean that we will see rate rise in the immediate future. Ten years ago, we saw an inflation spike to 5%, which the central bank completely ignored and which within a year fell back sharply.

There was a sharp rise in PPI input price inflation which rose to 9.9%, and the highest level in over 4 years, as the cost of transport equipment, metal and non-metallic minerals pushed prices higher. As a leading indicator this could well be a harbinger of higher headline CPI in the months ahead, unless businesses choose to absorb the higher costs.


The failure to move above the previous peaks for Brent crude oil prices has seen another retreat from the $70 a barrel mark which has so far capped recent upside. A number of factors have been blamed including the prospect that Iranian oil might find its way back onto the market, as talks between the US and Iran look to revive the nuclear deal that was cast aside by the previous US administration. The inflation narrative is also prompting some concern, with US 10-year yields edging back up again.

Cryptocurrencies have gone into full blown meltdown with ethereum falling 40% at one point today, while bitcoin prices have slumped below $40,000 as the sell-off gains further traction, after Chinese regulators took steps to discourage the use of crypto. In a statement, the Peoples Bank of China said that cryptocurrencies should not be used or accepted as a means of payment. This isn’t the first time that China has tried to curb the use of cryptocurrencies, given that it's in their interests to do so if they want to promote their own digital currency.

Copper prices have also rolled over after it was reported that Chinese regulators were looking to implement curbs on an "unreasonable commodity price rise." Gold prices hit their highest levels since early January on the back of today’s sell-off in equity markets.

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