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Nyheter

Stocks dented by yield woes, all eyes on Powell

Worries about firmer government bond yields are weighing on stocks again. 

Europe

The Asian session saw painful losses thanks to the declines witnessed last night in the US and that has seeped into the sentiment in this part of the world, although the declines are moderate. Today’s bearish moves in European markets breaks their three day winning streak. In London, banks are handing back some of the impressive gains they racked up yesterday on account of the optimism injected into the market by the Budget. Copper has tumbled and that has dragged mining stocks like Rio Tinto, Glencore and BHP Group into the red.          

Aviva has been carrying out an asset disposal programme in recent months as it wants to focus on its core markets, the UK, Ireland and Canada. Between September and December it has spun off assets with the view to building up its cash position. The operations in Singapore, Hong Kong and Vietnam were sold off, as was its entire stake in Vita – a joint venture with Italy’s UBI Banca. It has agreed to sell its French business too. This morning, it was confirmed it will sell Aviva Italy for €873 million. In the first half of 2021, the insurance group intends to reduce its debt by £1.7 billion. Full year operating profit dipped by 0.7% to £3.16 billion, easily beating the £2.73 billion. Operating profit from its core markets was £2.49 billion, down from £2.55 billion. The final dividend was 14p, bringing the total annual pay-out to 21p.   

B&M European Retail issued a bullish trading update. The discount retailer upped its full year EBITDA guidance to £590-£620 million, from the £540-£570 million range that was announced in early January. Retailers saw a jump in activity on account of the pandemic but B&M had an extra advantage as cheaper outlets tend to outperform during times of economic uncertainty as shoppers seek out bargains.

CRH delivered a 5% rise in full year EBITDA to $4.6 billion. In the 12 month period, total sales dropped from $28.1 billion to $27.6 billion. The building materials group said that it is well positioned to take advantage of growth opportunities that lie ahead. Its net debt/EBITDA ratio is 1.3X, the lowest level in 10 years, so this should make the group more nimble. CRH lifted its full year dividend by 25% to 115 and it resumed its share buyback scheme with a purchase of $0.3 billion. CRH’s commitment to increasing returns to shareholders should make the stock more attractive to income seeking investors. 

Melrose is a turnaround group, whereby it acquires an underperforming asset, introduces changes and then sells it off. In 2018, it acquired the aerospace group GKN. Obviously 2020 was a brutal year for the sector in question. This morning, Melrose cautioned the aerospace industry is some way off a recovery while global travel remains restricted. Restructuring at GKN is likely to lift group trading profit by roughly £125 million in 2021. Challenges still remain but the business was trading at the top end of management expectations in the second half of 2020. Melrose has started the process to sell Nortek Air Management, the division is performing well but there is no guarantee it will be sold. The planned asset sale come at a time when full year operating profit fell by 69% to £340 million. 

Entain, the parent of Ladbrokes, posted full revenue of £3.6 billion. Operating profit ticked up slightly to £529.5 million. Underlying earnings, strips out exceptional items, and it increased by 11% to £843.1 million, the online operation saw a 50% jump in earnings. The gaming group anticipates that online activity will cool once betting shops are allowed to re-open. Earlier this year it knocked back a takeover approach from MGM. Its net debt is £1.766 billion and its balance sheet is flexible to support its growth strategy. It sounds like Entain is keeping its options open with respect to its own expansion. No dividend was declared but it will consider payments down the line.  

Deliveroo announced that it plans to float on the London market, there is talk it could list as early as next week. Online shopping and deliveries have become big business, the food delivery company saw demand take off on account of the pandemic. Just Eat Takeaway is already listed in London. Last year, Just Eat merged with Grub Hub to create the largest food delivery group in the world outside of China. In Uber’s latest quarterly update, Uber Eats gross bookings surged by 130% on an annual basis so consumers clearly have a healthy appetite for food delivery services.    

US

Traders are turning their backs on stocks in the face of firmer yields, and there are worries the US 10-year yield could seek to retest the highs seen in late February. Fed boss, Jerome Powell, is due to speak at an event hosted by the Wall Street journal shortly after 5pm (UK time). The growing concerns that higher inflation is on the horizon and the subsequent rise in bond yields have impacted the equity markets lately. It is likely the central banker will address those worries but in recent speeches he hasn’t been too troubled by the issues. The Fed has a balancing act on its hands as it won’t want to tighten policy anytime soon, while at the same time it won’t want to give off the impression that policy will stay extremely loose forever.

US initial jobless claims increased from the revised 736,000 to 745,000. Yesterday’s ADP employment update underwhelmed investors as 117,000 jobs were added in February and that was a big miss on the 200,000 forecast.    

Vroom shares hit the skids following on from the release of its fourth quarter update last night. The online car vendor lost $60.7 million in the three month period. That equated to an adjusted loss per share of 44 cents, while equity analysts had predicted a loss per share of 37 cents. Revenue was $405.8 million, slightly ahead of estimates. The outlook weighed on the stock as the group expects the first quarter loss per share to be 61 cents.

Snowflake issued mixed fourth quarter numbers last night. The loss per share was 70 cents, while revenue was $190.5 million, ahead of the $178.5 million that equity analysts were expecting. The full year revenue guidance is $1-$1.02 billion and that is basically in line with predictions made by analysts.   

Marvell Technology shares are in the red as the chipmaker cautioned that supplies might remain tight until 2022. The mild warning is in light of the US government’s imposed restrictions on certain Chinese customers.         

FX

The US dollar index is up on the session as it seems the mild rebound in the 10-year yield is helping the currency. In recent months the dollar has been a popular safe-haven play, seeing the US equity markets have retreated recently, it is possible the dollar’s demand has risen as a result. Things are looking more positive on the health front as President Biden said there will be enough vaccine supplies to vaccinate every adult in the country by May – two months ahead of schedule. The vaccine update feeds into the recovery story. 

The CMC GBP Index hit a one week high. Yesterday’s Budget instilled confidence in traders that the government’s support schemes should give the economy the much needed help it requires to get back on its feet when the restrictions have been rolled back. The UK’s vaccine roll out programme is one of the best in the world and as the nation edges towards unwinding its restrictions, sterling’s demand is likely to grow.

Bitcoin is currently below the $50,000 mark, a level it has danced around today.          

Commodities

Gold has recovered from its nine month low as the firmer US dollar hasn’t stopped the yellow metal from moving higher. The pullback in gold might just be down to short covering or a bit of bargain hunting. 

The big freeze in Texas was blamed for the enormous jump in US oil stockpiles yesterday as 56% of the refinery capacity was put out of commission by the adverse weather. Oil’s volatility has cooled even though the OPEC+ meeting is taking place today. The price has risen as there was talk that Russia is contemplating maintaining existing output cuts rather than seeking to lift production. Some analysts are expecting the overall body might seek to increase output by 500 000 b/d and the Saudi’s might trim their existing voluntary cut.    


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