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Sterling slides on growth concerns, FTSE 100 slips back from one-week high

St. Pauls Cathedral from the South Bank

European markets were on the cusp of some decent gains today, largely because of yesterday’s post Federal Reserve-inspired rebound in US markets, however the weak start to trading in the US is now starting to act as a drag as we head into the close, pulling the likes of the DAX and CAC 40 off their highest levels of the day.


As far as the FTSE 100 is concerned the slide in the pound below $1.2400, has given an added lift to the UK index, pushing it briefly back above the 7,600 level, before it too slipped back from its intraday highs.

The main drivers of today’s gains have been in energy once more with further gains in oil prices, as well as some decent Q1 numbers from oil giant Shell. Shell has finally seen its share price move back to its pre-pandemic levels after following in the footsteps of BP earlier this week by reporting a strong set of underlying profits for Q1. Underlying profits came in at $9.1bn, a 43% increase on the numbers for Q4, and beating expectations of $8.2bn, and the best quarter in over a decade. Earlier this year Shell said that its withdrawal from Russia and other related assets would cost it in the region of $4bn to $5bn, although they may be able to claw some of that back if they are successful in offloading them to either Sinopec or CNOOC in China, who appear to be interested in acquiring them. The oil company took a $3.9bn charge in this quarter in respect of this.

As with BP, Shell made a lot of money from its trading division, $1.1bn, a part of the business that struggled in Q4 losing $251m. Shell has also made big strides in reducing its net debt which pre-pandemic was over $75bn. In the last two years they’ve managed to cut that to $48.5bn. On capex Shell is spending a much higher amount than BP at between $23bn and $27bn, spending $5bn in Q1 and has also, been spending money in the area of renewables, completing the purchase of solar and energy storage developer Savion in the US at the end of last year, as well as winning bids with Scottish Power to develop 5GW of floating wind power in the UK in January this year.

Packaging company Mondi is also among the gainers after a strong Q1 update which showed that despite its withdrawal from Russia underlying EBITDA was €574m, up 63% from last year. Excluding Russia, this fell to €460m, with management taking the decision to divest these assets in a process which could take some time to complete. The net asset value of the Russian assets is estimated at €687m. The overall business has seen a solid performance across the board with higher prices not affecting demand for packaging and paper, and also helping to offset higher costs. Full year estimate for underlying EBITDA is unchanged at €110m.

Despite concerns about the health of the UK consumer Next has reported that Q1 full price sales were up 21.3% on the same period last year. In retail, when stores were closed this time last year, sales rose by 285%, while online sales fell 11%. Next kept its full year guidance for profits before tax intact at £850m. Sector peer Smurfit Kappa is also higher.  

Defence contractor BAE Systems has said Q1 trading is in line with expectations, while keeping full year guidance unchanged, with sales expected to see a rise of 2% to 4% from 2021 levels, and underlying EPS growth of 4% to 6%.

Housebuilder Barratt Developments has said it remains on track to deliver on its full year goals, with £4.38bn of fully forward sold sales up to 1 May, with year-end cash expected to be between £1bn and £1.1bn. On track to deliver 18k and 18.25k total home completions for the year.

On the downside banking stocks are under pressure on concerns over the economic outlook in the UK after the Bank of England’s gloomy economic forecasts, with NatWest Group and Lloyds both under pressure.


After a strong finish last night US markets look set to give up all their post Fed gains after opening lower earlier today. The Nasdaq 100 is leading the way lower, while weekly jobless claims posted a surprise rise to 200k from 181k the week before.

On the earnings front e-commerce companies are getting hammered after eBay, Shopify and Etsy all reported disappointing revenues and/or guidance numbers. For Q1 eBay reported revenues and profits in line with expectations, however management lowered guidance for Q2 and the rest of the year, citing a weaker macro backdrop. Full year revenue was downgraded from $10.35bn to $9.75bn, while Q2 was lowered to $2.4bn from $2.53bn.  

Shopify also reported Q1 results that fell short of expectations. Revenues rose by 22% to $1.2bn, missing estimates of $1.25bn, while the company also announced it would be paying $2.1bn to acquire logistics start-up Deliverr. Etsy on the other hand posted a positive set of Q1 numbers, however its Q2 guidance was less compelling, with revenues estimated to come in well short of $629m consensus, at between $540m and $590m.

Twitter shares are on the up on reports that Elon Musk has managed to obtain $7.1bn in new funding for his acquisition of the social media company, bringing the prospect of a successful acquisition much closer.


The pound has sunk to its lowest levels since July 2020, after the Bank of England raised interest rates by 25bps to 1%, in line with expectations, although three members of the monetary policy committee did push for a 50bps hike. This wasn’t what sparked the weakness in the pound, it was the changes in the economic forecasts, which pointed to a potential recession by year end, and the warnings that rates may not rise as high as markets had been expecting in the months ahead.

The MPC set out a bleak outlook, revising their inflation forecasts higher, with headline inflation expected to peak in Q4 at 10.2%, which would be a 40-year high, before it starts to fall back. While this year’s GDP forecast was left unchanged at 3.75%, despite a predicted Q4 contraction of around 1%, the bank revised its 2023 GDP forecasts down to a -0.25% contraction. The MPC also predicted that inflation would start to fall back to target in around 2 years.

After sinking sharply yesterday to a one-week low, the US dollar has bounced back strongly with decent gains across the board, as it looks to wipe out most of its losses from yesterday. The rebound in the US dollar, as well as yields appears to be predicated on the belief that the US economy is still in the best place economically, even with a Fed that looks set to hike another 3-4 times this year.


Crude oil prices have continued to edge higher, after OPEC+ agreed to continue their gradualist approach to increasing production of 432k extra barrels a month, despite the threat that the EU Russian oil embargo could begin by the end of the year. Concerns over weaker Chinese demand don’t appear to be cutting through with Brent prices rising to a two-week high. OPEC+ pushed back on calls to increase its output cap by saying that it isn’t responsible for geopolitics and supply disruptions. This seems a rather naïve argument if their failure to act causes demand destruction, and a global slump.

Prices got an extra lift on reports that the Biden administration was looking for bids to buy 60m barrels of crude oil as the US government looks to replenish its oil reserves.  

Gold prices have managed to rebound somewhat after the Federal Reserve dialled back market expectations of more aggressive rate hikes in the months ahead. By ruling out the prospect of a 75bps rise markets were caught slightly off side, prompting a sharp fall in US 2-year yields at the same time as pulling gold off two-month lows.  


The Federal Reserve’s monetary policy update yesterday was closely followed and even though it came in as forecast with its most aggressive move in 22 years, the overriding sentiment was that it could have been worse and there was no acceleration of the hawkish bias. As a result, the news proved to be negative for the greenback and positive for stocks, with smaller cap US plays in the Russell 2000 being a clear stand out. Daily vol came in at 36.25% against 26.92% on the month. Many will now be watching the Bank of England to see how it responds later today.

As for fiat currencies impacted by the move, US dollar v kiwi was a standout, with the greenback adding around 1.5% off the news. Price action here may have been exaggerated by falling employment growth in New Zealand too, but daily vol was bumped out to 20.67% on the pair against 11.78% on the month.

Tron was notable out amongst cryptos with reports of good product development progress seeming to lend some support here, leaving the asset to trade in a 20% range against the US Dollar yesterday, with most of that being on the upside. The trend was typical for the sector, but daily vol ended up at 112% against 79% on the month.

Finally, shares in fast fashion retailer Boohoo took a beating yesterday in response to earnings, which illustrated the impact of higher purchase prices and shipping costs on the business. This is set to provide additional headwinds in the near term and with markets focusing on this rather than the company’s belief it can grow market share in the years ahead, price action was elevated on Wednesday. Daily vol advanced to 248% against 128% on the month.

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