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Services data pulls stocks off their lows

Clothing boosts UK retail sales

It’s been a lacklustre end to what has been a negative week for European stocks, with concerns about surging covid-19 infection rates in Asia weighing on sentiment over the past few days.

Sentiment has improved slightly as the day has progressed given some of this morning’s economic data, however enthusiasm has been tempered somewhat by last night's reports that President Biden was looking at ramping up capital gains tax on Americans with annual income in excess of $1m. This revelation shouldn’t have been too much of a surprise, however the likelihood of it happening in the near term is someway off given the complexities of US politics, assuming it happens at all.

As we head into the weekend, we still look set to finish the day lower, however we’re well off the lows of the day, with the FTSE 100 finding support from basic resource stocks, on the back of firmer metals prices, with Rio Tinto and Evraz leading the way. Financials are also slightly higher, led by NatWest Group and Lloyds Banking Group ahead of their Q1 numbers next week.

Transport services company FirstGroup, which runs a range of rail and bus services across the UK, including the Great Western Railway, South West Trains and Croydon Tramlink, announced that it is selling its North American contract divisions of First Student and First Transit to EQT Infrastructure for $4.6bn. This will allow the company to shore up its finances, with the shares rising over 10% on the news.

In further signs that demand is returning, and companies feel more confident about the outlook, Daimler said it is raising its full-year margin outlook in its Mercedes-Benz division, to between 10% and 12%. On the downside, healthcare is the worst performing sector, with Hikma and AstraZeneca lagging behind.


US markets appear to be recovering some of their equilibrium after yesterday’s losses, helped by strong economic data, from March new home sales and solid PMI’s, with the Russell 2000 leading the way, however its unlikely to be enough to prevent the first weekly loss since mid-March.

Snap shares have seen a big jump in early trading after reporting a 66% rise in Q1 revenue while also seeing daily active users rise to 280m, beating expectations of 275.4m, while average revenue per user rose 36% to $2.74 per user.

Consumer goods company Kimberly-Clark has seen its share price slide after warning weaker than expected profits and sales for Q1, and revised its full year guidance down, citing supply chain issues and higher costs. To offset some of this the company announced that it was raising prices at the end of last month, on a number of key products, starting in June this year.  

Intel Q1 chip makers have generally been good at generating profits with demand for gadgets driving the profits of the likes of Apple, Samsung and PC makers. Last year Intel turned over a record $77.9bn, the fifth record year in a row with Q4 again being its strongest quarter, however its expectations for 2021 have been set a little lower. Q1 revenues came in at $18.57bn, which was pretty much in line with expectations, helped by decent PC sales, and expects Q2 to be lower at $17.8bn, though this is slightly ahead of expectations, although profits are predicted to be a little lower. Margins have been a major problem for Intel in recent years, with the pandemic not helping, and with new CEO Pat Gelsinger announcing a $20bn investment in new manufacturing capacity these could continue to be a drag. Nonetheless Intel raised its full year guidance to EPS of $4.60c, on sales of $72.5bn.

Coinbase shares hit another record low at $283 today, putting it almost $100 below where it first started trading just over a week ago when it launched to much fanfare. Weakness in bitcoin along with a whole host of other crypto currencies appears to be weighing, as a loss of momentum and profit taking prompts bitcoin to fall below $50k on reports that the Biden administration is looking at substantially increasing the rate of capital gains tax.


The US dollar has had a poor week and is also down on the day, as we look ahead to next week's Federal Reserve rate decision.

There was little reaction from the pound to the latest retail sales and public finances numbers for March. More consumer spending in the areas of household goods, in anticipation of lockdown measures being eased, with decent sales at garden centres, as well as in clothing sales which also saw a big rebound, after falling back in February. These numbers bode well for further gains in April as the UK economy reopens. The public finances data however showed another big rise in borrowing in March, with another £27.3bn, pushing the total amount borrowed in the fiscal year, to over £300bn, the highest number since the end of World War 2.

The latest flash PMI numbers for April also painted a robust picture with services activity hitting a six and a half year high at 60.1, while manufacturing rose to 60.7, an 8-month high. UK companies were reporting higher demand for both goods and services, which in turn was seeing some cost push inflation, while the jobs market was also looking good with firms being encouraged to take on extra staff at a rate not seen in over three and a half years. All in all, optimism was high with the only question being whether or not what we are seeing is sustainable.

The euro has continued to look well supported, on course for its third successive weekly gain, after this morning’s latest flash PMI numbers showed another improvement in economic activity, as French services activity edged back into expansion for the first time in 8 months. The euro’s bid tone was reinforced this afternoon after it was reported that some members on the governing council want to look at tapering asset purchases at the next meeting in June.      


Crude oil prices have picked on the back of this today’s better than expected flash PMI numbers for April. The main takeaway from the PMI numbers has been a significant increase in economic activity as businesses in Europe, and the US adapt to a new paradigm of working around Covid restrictions, as well as optimism that the continued loosening of restrictions in the UK and US will herald a strong rebound in Q2.   

We’ve seen big declines in both bitcoin and ethereum in the past couple of days, with the losses accelerating on the back of yesterday’s reports that the US administration was looking at doubling capital gains tax rates.

Apart from gold and silver, metals prices are continuing to look strong, on the back of the economic recovery story, with copper closing back in on its record peaks from February, palladium hitting new record highs and platinum prices also higher on the day.

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