The FTSE 100 has continued to make new record highs today, coming within touching distance of the 8,000 level, before slipping back after the US consumer price index (CPI) reading came in slightly hotter than expected.
Europe
The telecoms sector helped to drive today’s move to new highs after Liberty Global announced it had taken a 4.9% stake in Vodafone, saying that the recent share price declines meant that the business was undervalued. This has also translated into gains for the wider sector with BT Group also higher, given that it has been subject to stake building from outside investors, with Altice being one of the biggest.
Coca Cola HBC shares have jumped to three-month highs after reporting full year results that came in better than expected. Net sales revenues rose by 14.2% to €9.2bn, even as net profits fell by 24% to €415.4m. Lower margins impacted on profits despite higher prices softening some of the impact. The dividend was increased by 9.9% to €0.78c a share.
TUI shares are higher after the travel company reported an upbeat outlook for the summer season. Q1 revenues were at €3.8bn a rise of €1.4bn on a year ago with 1m more customer bookings. The average load factor was 85% with underlying EBIT losses of €153m. For the summer bookings are currently at 8.7m and are trending ahead of 2019 levels, by about 10% for the summer season, despite higher prices.
This has translated into strength in the likes of easyJet which was on the receiving end of a broker upgrade from Deutsche Bank. The more optimistic outlook for holidays painted by TUI this morning won’t have hurt given that easyJet’s own holidays business was able to turn a profit in its most recent trading update, as well as upgrading its growth outlook to circa 50% year on year.
The more defensive areas of the index have acted as a drag with underperformance in utilities and healthcare.
US
US markets opened lower, chopping between negative and positive territory, as 2-year yields pushed to new three-month highs at 4.6%, after US CPI for January came in slightly above expectations, at 6.4%. This was a modest decline from December’s 6.5%, but above expectations of 6.2%. Core prices were also stickier than expected, slipping from 5.7% to 5.6% due to upward revisions to previous months.
The month-on-month numbers were in line with expectations, at 0.5%, but one thing is apparent from today’s numbers, while inflation is coming down, its coming down slower than expected, which won’t give the Fed confidence that it is on top of the inflation problem. It also means that the prospect of a slowdown in rate hikes is still some way away, and that another 25bps rate hike in March is probably a done deal.
Data analysis company Palantir has seen its shares push higher after reporting its first ever quarterly profit of $0.01 a share in its Q4 numbers, while revenues of $508.6m also came in ahead of expectations. The company also said it expected that 2023 would see its first ever annual profit.
US automaker Ford has announced it is cutting 3,800 jobs in Europe with 1,300 of those in the UK over the next three years. The motor company has blamed the shift towards electric vehicles, which is set to complete by 2035.
Coca-Cola’s latest Q4 numbers have shown that consumer appetite for soft drinks has remained strong, with revenues of $10.13bn, and profits of $0.45 a share. The increase in revenues has come about despite a decline in volumes of 1%, as higher costs impact margins. On the outlook, Coca-Cola said it expects 2023 revenue growth of between 7% and 8%.
FX
The pound edged to its highest levels in over a week, after a bigger than expected rise in average weekly earnings for the 3 months to December to 6.7%. The resilience of these numbers is likely to filter through to an expectation that the Bank of England will have to hike interest rates further in the coming months to keep a lid on increasing inflationary pressure.
What was also notable was that payrolled employees rose by 102,000 in January, which in turn reinforces the tight nature of the UK labour market, with headline inflation still in double-digit territory. Private sector pay continues to lead with an average of 7.3%, compared to 4.2% in the public sector.
Some of the gains in the pound dissipated in the wake of today’s US CPI numbers which came in slightly hotter than expected, prompting a rebound in the US dollar during the afternoon session.
Commodities
Crude oil prices have slipped back from their highest levels in two weeks after the US government said it would release more crude oil from its Strategic Petroleum Reserve, as it looks to keep a lid on prices. The EIA also added to the pressure on prices saying it expected record production from US shale resources in March.
Gold prices initially pushed higher in the aftermath of the inflation report, however the move higher in yields, and the rebound in the US dollar has seen prices slip back from the highs of the day.
Volatility
Short-term price action was broadly subdued on Monday, but once again there were pockets of volatility to be found. One such example here was Li Auto, the Chinese EV maker, which is expected to report earnings next week. There’s also a bankruptcy hearing against a part owned JV slated and again clearing this will likely be seen as good news for the stock. One day volatility stood at 111.37% against 87.61% on the month.
Fiat currencies saw little of note. In cryptocurrencies, litecoin proved to be something of an outlier, with the coin falling as far as 6.5% at one point during the day, before finding a degree of support. One day volatility on LTC/USD sat at 70.16% against 55.83% on the month.
Chinese stocks saw something of a wobble first thing on Monday, with the deteriorating diplomatic situation between Beijing and Washington taking a toll here. However the downside proved to be short lived and the Hong Kong index of Chinese shares at one point rallied close on 3%. Daily volatility on the index – the most active in the asset class – sat at 33.81% against 30.99% on the month.
And rounding off with natural gas prices, optimism that Europe may have successfully navigated the crisis caused by cutting off supplies from Russia is helping drive underlying prices even lower. The reopening of a large export terminal in Texas is adding to the downside here as well, with prices now at lows not seen in almost 18 months. One day volatility on US Natural Gas is 84.18% against 81.99% for the month.
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