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Drifting towards Powell as Jackson Hole begins

Fed chair Jay Powell

After an initially strong start, markets in Europe have retreated from their highs, as an initial boost from Asia markets, and the announcement of a new China stimulus program, gave way to some weakness as European gas prices continued to make new record highs.


While on the face of it the sum of $146bn in the new China stimulus package look impressive it’s hard to see how it can work if authorities continue to impose stop, start lockdowns in response to covid outbreaks. It's akin to constantly starting, stopping, and restarting a car, without doing any trips in between. Eventually you’ll get a flat battery.

CRH shares are making good gains today after the Irish construction company upped its guidance for the year, after a decent H1 performance. First half sales rose to $15bn, a 14% rise on last year, while EBITDA came in at $2.2bn, helping to generate a pre-tax profit of $1.2bn.

Full year guidance for EBITDA was raised to $5.5bn, although the company did warn of upward pressure on costs, it has been able to maintain and, in some cases, increase its margins.  

Harbour Energy is also having a good day, as the shares continue to recover after the damage caused by the announcement of the windfall tax in April. H1 revenues came in at $2.67bn, with profits after tax rising to $984m, up from $87m a year ago, helped in some part by the weakness of the pound. This puts it well on course to hit a full year revenue target of $5.18bn.  

The bulk of its revenue came from crude oil to the tune of $1.54bn, followed by gas which increased from $395m to $970m, with $857m of that revenue coming from its UK gas assets.

The company says it expects to spend $1.2bn in capex over the year, slightly down from the $1.3bn previously due to the delayed arrival of two drilling rigs in the UK. Harbour said that the new levy would mean increasing their tax liability to the order of $300m at a Brent price of $100 a barrel and a UK natural gas price of 200p/therm, with $170m of that expected to be paid in December 2022 and the balance in January 2023. This number is not currently reflected in their H1 numbers, but if it had been it would have come to $48m.

AstraZeneca shares are higher after three of its drugs, Ultomiris, Tagrisso and Lynparza were approved for use in Japan. Tagrisso is used in the treatment of early lung cancer, and Lynparza for early breast cancer.

On the downside, retailers are struggling despite a solid set of August retail sales numbers from the CBI, with weakness being seen in B&M European Retail, JD Sports and Next.


US markets opened modestly higher as attention continues to drift towards Fed chair Jay Powell’s speech tomorrow at Jackson Hole, which is due to hit the tape at 3pm UK time.

US Q2 GDP was modestly revised higher to -0.6%, while weekly jobless claims slipped back to 243k from 245k the previous week.  

Given recent warnings from Walmart and Target about high margin goods being shunned, Williams-Sonoma latest quarterly numbers were always likely to be a key bellwether for this narrative.

As a purveyor of these types of items the owner of Pottery Barn ought to be a good indicator of any sort of trend shift. Yesterday’s Q2 numbers showed little sign of that narrative with record revenues of $2.14bn, a rise of 11.3%, although gross margins came down from 44.1% a year ago to 43.5%. In Q1 margins were at 43.8%. Profits still came in ahead of expectations at $3.87c a share with the company reiterating its full year guidance of mid to high single digital annual net revenue growth, with the goal of increasing annual revenues to $10bn by 2024.

Earlier this month US chipmaker Nvidia slashed its revenue outlook to $6.7bn while saying it expected gross margins to fall to 43.7% from 65.1%, potentially impacting profits as well. The downgrade was attributed to a big drop in gaming revenue which is down 44% from Q1, to just over $2bn. Last night’s Q2 numbers confirmed that downgrade to guidance, with profits coming in at $0.52c a share and revenues coming in line at $6.7bn. For Q3 Nvidia was equally pessimistic about revenues downgrading their outlook to $5.9bn, a big drop from estimates of $6.92bn suggesting that the slowdown in sales was likely to continue.    

Snowflake shares look set to go from strength to strength today after Q2 revenues came in ahead of expectations, rising 83% to $497.2m, well above forecasts of $435m to $440m. Its biggest concern is its operating margins which appear to be weighing on its ability to generate a profit, as losses came in at $0.70c a share. For Q3 Snowflake upgraded its product revenue forecast to $500m to $505m while saying it expected to see this to rise to $1.92bn for the whole fiscal year. Snowflake has continued to grow its client base which now sits at 6,808, up from 6,322, in the previous quarter and 5,944 at the end of last year.

It’s been another set of poor numbers for Peloton in the wake of this week’s news that the company confirmed a deal with Amazon to make its products available on its store and US marketplace. Q4 revenues came in at $679m, which was at the lower end of their $675m to $700m forecast, while losses increased to $1.2bn for the quarter, although $415m of that is down to restructuring costs.

On an EBITDA basis the loss is still above the -$120m expected at -$288.7m.

For Q1 the outlook is no less disappointing with revenues expected to come in between $625m and $650m, well below expectations of $772m, although why anyone would think it would be higher than Q4 seems rather odd.

By its own admission Peloton goes on to say it expects the connected fitness market to remain challenging over the next fiscal year.

This makes the recent decision to reverse their recent price cuts all the more inexplicable, at a time when consumers are likely to be very price sensitive.

CEO Barry McCarthy went on to liken Peloton’s struggles to a struggling cargo ship, rather inviting more unfavourable comparisons, with the Titanic being one of the more obvious ones. Let’s hope he’s right given how challenging the outlook currently appears to be.

Tesla shares opened modestly higher as it began trading after its 3-1 stock split.


The US dollar has seen a bit of a sell-off ahead of tomorrow’s widely anticipated speech by Fed chairman Jay Powell. This appears to be the market performing an element of position tidying ahead of an event that could trigger an outsized reaction.

As Jackson Hole gets underway, today’s better than expected US data hasn’t prompted that much of a positive US dollar response. Kansas City Fed President Esther George appeared to be in a somewhat hawkish mood when she said that rates still had some way to go and that she wasn’t sure how much higher rates would need to go.

The Australian dollar is seeing the biggest reaction probably on the back of this morning’s announced China stimulus package on infrastructure.      


UK natural gas prices saw a brief spike to new record highs in early European trading before sliding off their highs.

Brent crude prices continue to be underpinned after comments from the head of OPEC floated the idea of a supply cut. With concerns over a global recession growing by the day this sort of posturing by OPEC comes across as risky, as well as potentially counterproductive if it drives a spike in prices which in turn causes demand destruction.

Gold prices are also rising on the back of today’s weaker US dollar tone, and the softness being seen in yields.

Copper prices are also edging higher on the back of the China stimulus story.  


Shares in US-listed Wrap Technologies added as much as 11% at one point in yesterday’s trade off the back of news that the company’s work with the LAPD would be extended for a further year. Although there was a modest retreat by the close, that in turn served to drive volatility in the stock to 494% on the day against 258% on the month.

Coffee prices have been quietly rising this week, with the Arabica contract advancing by around 15%. Volatility has been steadily increasing too, with concerns over the forthcoming harvest in Brazil weighing. Daily vol advanced to 60.63% against 51.59%, whilst there’s also read across into Robusta coffee where daily vol reached 41.33% against 33.36% on the month.

The Norwegian Kroner found itself the most active of the fiat currencies yesterday, although some erratic trade in thin Asian markets seems to have been the driver on USD/NOK. Daily vol advanced to 21.6%, up from 15.27% on the month as a result.

Notably, that bout of activity we have seen in crypto assets in recent days appears to be abating too, with monthly vol prints across the asset class coming in below the daily readings. Even EOS, which remains in favour and managed to tack on more than 10% in yesterday’s trade only printed 85.35% on the day, down from 90.79% on the month.

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