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Europe rolls over, as US markets hit 13-month lows

New York Stock Exchange

Yesterday’s positive European session appears to have been a suckers rally coming as it has between a big decline on Monday and another hefty decline today. Today’s weakness appears to have been prompted by the sudden reversal seen in US markets overnight.


Today’s market price action has been driven by falling bond yields, and weaker commodity prices which are pointing to a market that is becoming more concerned about slowing growth, and sticky inflation, aka rising stagflation and, or recession risk.

We’re not being helped by big moves in cryptocurrencies which in turn could be creating further instability because of forced selling as investors try and meet cryptocurrency margin calls, by selling more traditional assets like shares.

The worst performers have been basic resources in the form of Glencore, Anglo American and Rio Tinto, while financials are also weaker with Hargreaves Lansdown weaker after reporting net new business of £2.5bn for the four-month period ending 30 April,. This was below market expectations, although net revenue came in above consensus at £196.5m. The company painted a picture of a cautious outlook, focussing on cost control and investment discipline, at a time when investors may have less money to invest as the cost-of-living squeeze bites in earnest.

Ocado shares are also lower, falling to their lowest level since May 2018, putting its market cap below that of Sainsbury, in what is a fairly symbolic move. In February 2021 Ocado's share price put its market cap within touching distance of Tesco, the UK’s number one food retailer, despite full year revenues that were a mere fraction of Tesco's £60bn, at £2.33bn.

Since then, valuations have become much more realistic with the enthusiasm for all things pandemic getting a sharp reality check. Today’s move is a sign that valuations in the more expensive areas of the market are becoming much more realistic. Once Ocado can show it can start making a profit, perhaps the shares can start heading higher again.

On a more positive note, BT Group shares are doing well as markets react to their latest numbers and outlook. Initial reaction to BT’s Q3 results in February was disappointing with the shares initially falling to 3-month lows, although they have recovered a little since then. There was some disappointment that the deal to sell BT Sport for £580m came to nought with the company announcing a new joint venture with Warner Brothers Discovery.

Today BT outlined the detail of the deal, transferring operation of the business to Warner Brothers, while receiving £93m as well as £540m by way of an earnout from the joint venture. This appears to give BT the best of both worlds, giving the company a decent cash boost, as well as taking away the day-to-day costs of running the business.

On the underlying full year numbers themselves full year revenues came in at £20.85bn, a decline of 2% and slightly below estimates of £20.91bn. Full year EBITDA came in at £7.58bn, which was in the middle of expectations, with the company announcing a final dividend of 7.7p per share on pre-tax profits of £1.96bn. BT left its 2023 guidance unchanged at £7.9bn adjusted EBITDA.

JD Sports shares are also outperforming after announcing Q1 trading in line with expectations, and that it expects to see full year adjusted headline profit before tax of £940m. 

Rolls-Royce shares are outperforming after reporting that it was trading in line with expectations, expressing optimism that the recovery in air travel would see improvements in its revenue generation over the course of the rest of the year. The only drag is the various restrictions currently in place in China which is impacting service revenue there. Even without that engine flying hours for this year to date are still 42% higher than a year ago. The sale of ITP Aero is expected to complete in H1 of this year for £2bn.    

Construction company Balfour Beatty has seen its shares slip back after reporting Q1 trading is in line with expectations. At the end of March, the Group order book was at £15.6bn which included the recent $698m construction contract for Fort Meade Maryland with overall trading in line with expectations.        


US markets have picked up where they left off yesterday, opening sharply lower after US headline PPI came in slightly higher than expected, even as core prices came in slightly weaker.

Core PPI fell from an upwardly adjusted record high of 9.6%, to 8.8%, while the headline number fell from a similarly adjusted high of 11.5% to 11%. While it is welcome that we are starting see some declines the reality is that inflation appears much stickier than was thought to be the case a few months ago. We are also starting to see weekly jobless claims starting to rise again

Disney’s Q2 results were a welcome surprise, bucking the trend seen by Netflix and other streaming providers, by growing their subscriber base to 137.7m, above expectations, from 129.8m, although both revenues and profits missed to the downside, due to higher spending costs on programming on Disney+ and Hulu. 

Revenues came in at $19.25bn, below estimates of $20.1bn. On the plus side parks saw a solid improvement with $6.7bn in revenue, and operating income of $1.76bn, although looking ahead Disney cited a potential hit of $350m due to the Covid closures of its Shanghai and Hong Kong theme parks in China. The company also warned on slower subscriber growth in H2 due to rising inflation hitting consumer incomes. Disney also said it is planning an ad supported tier of Disney+ in response to these concerns.

Electric vehicle maker Rivian’s Q1 numbers confirmed that the company had built 2,553 vehicles and delivered 1,227 of them. Production had been slowly stepped up during the quarter and management expressed confidence that this would see 4,000 vehicles produced in Q2. The company says it has 10k new pre-orders since raising prices in March. Q1 revenue came in at $95m which was below expectations of $131.2m, while reporting a loss of $1.6bn or $1.43c a share. The company reaffirmed its 25,000 target of annual vehicle sales despite supply chain bottlenecks which are currently acting as a headwind.

Tesla shares are also under pressure as the various production disruptions in China at its Shanghai factory raise concerns that it will meet its full year production targets.

Plant based meat provider Beyond Meat shares have slid back below their IPO price of $25, and to a record low, after reporting a disappointing set of numbers for Q1. When you consider the shares rose as high $239 post IPO this is a huge fall from grace, although not altogether surprising for a company that has annual revenue of less than $500m at its last set of annual accounts. Even with the share price at record lows it has a market cap of $1.5bn.  

Net revenues rose 1.2% to $109.5m, falling short of estimates of $112.2m. International net revenue fell 6.9% year on year, with weakness in food services contributing to a Q1 loss of $100.5m, or $1.58c a share. Margins also fell sharply falling to 0.2% from 30% a year ago. Management reiterated their full year revenue guidance of $560m to $620m, which would be a 25% increase on last year’s $466m.  

Coinbase shares have slid another 10% after adding a bankruptcy risk disclosure to its quarterly filing.


There was very little to cheer about this morning’s data drop for the UK economy, and as far as this year is concerned this morning’s numbers are likely to be as good as it gets on the growth front, with the pound continuing its exorable decline towards the 1.2000 area.

The economy contracted by -0.1% in March, while on the quarter we saw an expansion of 0.8%, below expectations of 1%. On the monthly GDP numbers January is the only month this year that has seen any economic expansion at all, and as far as the monthly numbers could well be the high water mark for this year.  

As far as the rest of the quarterly data was concerned exports declined 4.9%, while business investment fell 0.5%, and government spending declined -1.7%.

In the manufacturing part of the economy we also saw weakness as both manufacturing and industrial production contracted in March.

While the pressure on the pound has continued the euro has also come under pressure sliding below the April lows at 1.0460, and looks set to close in on the 2017 lows at 1.0340, on the way to a move towards parity with the US dollar.

The US dollar and Japanese yen have been the best performers today as the haven trade of choice.


The concerted move below $30k, as well as the 2021 lows in bitcoin, has the potential to see further losses towards $20k on the back of forced selling, from overleveraged players, although its notable that Ethereum while also falling is still well above its lows from last year.

After yesterday’s sharp move higher crude oil prices have slipped back after US inventories rose last week, although gasoline stockpiles declined, as US driving season gets underway. With gasoline prices at record highs in the US we could see lower demand as a result of this. Slow growth and stagflation concerns appear to be the primary driver on oil prices at the moment, alongside the inability to coalesce around a united position on a Russian oil embargo.

Despite the meltdown in assets like crypto currencies and equity markets gold prices are struggling to benefit from its traditional haven status. This is likely due to the strength of the US dollar, where interest rates now are higher, and likely to continue to remain so, despite the declines in yields we are seeing today.    


Despite what some are seeing as an earnings miss, along with news that the company has lost its FIFA franchise, video games maker Electronic Arts saw its shares spike higher on Tuesday night, driving yesterday’s volatility stats as a result Daily vol on the stock printed 186% against 76% on the month. Earnings remain a key driver here, with price action for Compass Group also being notably elevated, whilst Peloton is still in focus too after disappointing earlier in the week, daily vol reaching 487% versus a monthly print of 227%.

In commodities, US natural gas prices are surging once again, following that reversal from 13-year highs at the end of last week. Whilst supply problems in Europe are impacting the wider energy sector, this contract is being driven higher by weather in the US being warmer than expected for the time of year, leading to added electricity demands for air conditioning. In an already toppy market, this trend could continue for some time yet. Daily vol on US Nat Gas sat at 102%, up from 81% on the month.

Finally, crypto volatility continues to grow across the board. Bitcoin has plunged lower once again, smashing through that $30,000 level. Some commentators are flagging the fundamental risk faced by the crypto sector as a whole with the UST stable coin abandoning the one dollar peg, so ultimately this looks like structural reform having a widespread impact. Daily vol on Bitcoin sat at 137%, up from 67% on the month, whilst Solana posted 319% against 129% and Dogecoin sat at 278% against 122%.


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