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FTSE 100 lags again as DAX and CAC 40 set new records

London Cornhill at night

European markets have continued to go from strength to strength today with the DAX and CAC 40 both accelerating to new record highs.

Europe

It’s been another day of underperformance for the FTSE 100 with AstraZeneca once again acting as the biggest drag. Today’s weakness could be because of today’s announcement by Pfizer that would let generic drug makers produce cheap versions of its new Covid 19 pill for lower income nations. The FTSE 250 is also struggling for gains.

On the plus side markets appear to like today’s H1 numbers from Vodafone which have beaten market expectations. The latest Q2 numbers have built on the progress made in the first half of the year, adding to the €11.1bn in revenues for Q1 with an improvement to €11.39bn pushing H1 revenues up to €22.49bn, beating expectations of €22.1bn.

This was a 5% improvement on the same period last year driven primarily by a decent performance in Germany which saw a rise of 1.2% in service revenue. On the back of these numbers Vodafone has guided expectations to full year adjusted EBITDA to the top end of its forecast range, moving to between €15.2bn to €15.4bn, while adjusting its free cash flow forecast upwards to €5.3bn.

Land Securities is also doing well after announcing a return to profit of £275m, compared to a loss last year of £835m. Rents in its Central London portfolio have remained resilient, and while rental income was down 3.8% to £282m, the value of its land portfolio saw an increase to £11bn. The dividend was also raised to 15.5p per share, with the payment of a second interim dividend of 8.5p. The CEO statement expressed optimism that yields would remain resilient and office utilisation to improve over time from the current 55% of pre-Covid levels it is currently at.

Sector peer, British Land is also getting an uplift on the back of today’s update.

Wagamama’s owner Restaurant Group has seen its shares surge to a one month high, as it reaps the benefits of the return to eating out, as well as the return of passenger traffic to airports around the country. Another factor in the rebound in revenues could well be an uplift from its outlets in areas where there are big screen multiplexes, and the rebound in bookings seen in October by Cineworld, whose shares have given up all their gains from yesterday. This is likely to have prompted a decent increase in footfall in these areas as customers grab a meal before going to watch a film. Management increased the range of full year 2021 EBITDA to between £73m and £79m.

Diageo shares have pushed up to new record highs, after upgrading its full year guidance for 2022. The company says it expects to see organic net sales growth of 16% in the first half of 2022. In addition to that, over the period from 2023 to 2025, expectations are for organic net sales growth of 5% to 7%, while expecting to grow operating profits in a range of 6% to 9%.

Imperial Brands latest numbers have seen the company post a 0.7% rise in full year revenue, coming in at £32.79bn, helping to boost operating profits by 15.2% to £3.14bn. There would appear to be a distinct lack of enthusiasm around these numbers, with the shares slipping back.

US

US markets have opened modestly positive even as US retail sales rose 1.7% in October, beating expectations of 1.5%, and confounding the recent consumer confidence surveys which showed that US consumers were becoming increasingly pessimistic about the outlook.

The October numbers were the third successive monthly gain for retail sales at the same time as consumer confidence appears to be struggling, while we’ve also seen decent numbers from Home Depot and Walmart. This comes across as a complete mismatch and suggests that consumer confidence numbers are about as much use as a chocolate teapot. Industrial and manufacturing production for October also posted better-than-expected gains of 1.6% and 1.2% respectively.

Home Depot’s share price has seen significant gains already this year, posting big beats on revenues and profits in Q1 and Q2. In today’s Q3 numbers the company has managed to repeat the trick, sending the shares even higher, and while the numbers haven’t matched what we saw in Q2, when revenues came in at $41.12bn, they still beat expectations, coming in at $36.82bn, while profits came in at $3.92c a share of $4.13bn. Same store sales rose 9.8%, well above expectations of 2%, with the average ticket size rising over 12%, to $82.38c a visit.

Walmart has also followed suit with a similarly decent set of Q3 numbers raising its full year EPS guidance to $6.40c a share. Q3 EPS came in at $1.45c a share on revenues of $140.53bn, compared to $134.7bn a year ago. US same store sales ex-fuel rose 9.9%, and e-commerce sales rose by 8%. For Q4 the retailer expects to grow sales by another 5%, however the shares have slipped back modestly.

Boeing has seen its shares slip back despite winning another order at the Dubai Air show, this time for 72 737MAX jets from India’s Akasa Air which is based out of Mumbai, in a deal worth $9bn.

NVIDIA shares have shrugged off the news that the UK government has ordered a security review into its acquisition of ARM Holdings.

Tesla shares, having seen three successive days of declines, are in focus again today, after JPMorgan Chase said it would be suing the company for $162m in relation to some warrant transactions. In another disclosure it’s been reported CEO Elon Musk sold another 934k shares yesterday, valued at about $930m.

Meanwhile Rivian Automotive continues to go from strength to strength, its shares more than doubling from its $78 IPO price, and is now worth more than Volkswagen, yet we’re told the shares aren’t in a bubble?

FX

The pound has seen a modest uplift after UK ILO unemployment data for the 3 months to September fell by more than expected, falling back to 4.3%, with the single month rate for September, falling to a post pandemic low of 3.9%. Once again markets are looking at the possibility of a Bank of England rate rise as soon as next month, and with UK CPI set to head towards 4% in tomorrow’s inflation numbers the central bank is running out of excuses not to, given their continued articulation and concern over rising prices.

The euro has continued to slide to fresh 16-month lows, after US retail sales beat expectations, rising for the third month in a row, and fuelling the belief that the US central bank is behind the curve, and might have to tighten a bit quicker than is currently expected.

Commodities

Gold prices, having briefly hit 5-month highs earlier today, have slipped back a touch, after the US rebounded on the back of this afternoons better than expected economic data on retail sales and industrial production.        

The price of crude oil can’t seem to make up its mind at the moment, it continues to whipsaw around, however it does appear to be at risk of slipping lower, if it were to break below the 50-day MA at $81 a barrel on Brent. Concerns over demand and rising infection rates in Europe are acting as a brake on further gains in the short term, even as European natural gas prices surged after Germany put a delay on ratification of the Nord Stream 2 pipeline.

There’s been a wholesale sell off in cryptocurrencies today, with Bitcoin briefly falling below $60 and Ethereum hitting a one month low on several differing reports, with some citing tax changes in the latest US infrastructure bill, which require new reporting requirements on the part of crypto brokerages.          


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