After four days of declines it finally looked like the FTSE 100 might finish the week on the up, unfortunately the news flow from Europe had other ideas, after Austria imposed another lockdown as well as mandating compulsory vaccine uptake for its population from 1st February 2022.
Europe
With Germany also imposing new restrictions, any thoughts that the vaccines would offer a way to a more normal Christmas period appear to have gone up in smoke for now, in Europe at least, although there is a nagging fear this could ripple out across the region.
Markets haven’t reacted well to today’s news and while the declines are moderate, we are after all still within all-time highs for the DAX and CAC 40, we’ve seen the travel and leisure sector get a renewed clobbering, with the likes of IAG, easyJet, Wizz Air and Ryanair all sharply lower, while Rolls-Royce is also slipping back towards one-month lows.
Ryanair is also in the news after confirming its delisting from the London Stock Exchange.
On the flip side, lockdown winners, which have underperformed this year, have received a decent uplift, along with the health care sector.
Ocado is one such company, leading the FTSE 100 higher, although the shares were already on the up after an upgrade from Deutsche Bank who lifted the price target on its retail partner Marks and Spencer, citing the potential for a possible bid. Online electronics retailer AO World is also higher
Markets seem somewhat underwhelmed by the news that Unilever has finally agreed a €4.5bn price tag to sell its tea business to CVC. This is likely down to the fact that it’s been priced in for a while now.
B&Q owner Kingfisher latest Q3 sales numbers have seen a drop of 2.4% from last year, coming in at £3.2bn, but still came in higher than expected, and remain well above pre-pandemic levels. Last year's numbers were always likely to be a huge bar given the boost seen in the numbers as consumers stayed at home and spent their surplus cash on home improvements. The retailer said it expects second half sales and full year adjusted pre-tax profit to come in at the higher end of its guidance, however markets appear unimpressed, with shares falling sharply. Once again, the Screwfix business has outperformed growing sales by 4%, while B&Q sales declined 5.2%.
US
US markets have opened mixed with the Dow slightly softer, and the Nasdaq higher as investors try and make sense of what recent events might mean for various sectors.
Another IPO surged out of the blocks yesterday as restaurant chain Sweetgreen raised $364m after selling 13m shares at $28 a share, valuing the LA business at $5.8bn, well above its last valuation in January, of $1.64bn, when it last raised funds from shareholders. The shares briefly doubled in value surging to a high of $56, before retreating, and have continued to fall today. The company, which has 140 restaurants in 13 US states made a loss of $100m last year, and for the current year to date is down $87m on revenues of $243m.
Williams Sonoma shares have come under pressure despite a decent set of Q3 numbers. Q3 revenue came in at just over $2bn, while profits beat expectations, coming in at $3.32c a share. Sales rose 16.9% year in year, while the retailer said it expects to see a rise in full year revenues of 22-23%. Once again, its ecommerce sales have been a solid driver behind the resilience of the business, accounting for 67% of sales. Concern over inventory shortfalls may well be behind today’s pullback, despite decent sales growth across all its brands, with West Elm and Pottery Barn standing out.
Moderna, BioNTech and Pfizer shares have received a lift on the news that the FDA has granted emergency authorisation for booster vaccinations for all adults in the US.
We’ve seen the share prices of Rivian and Lucid Group rebound a touch after heavy losses over the past couple of days. Apple shares also in focus after it announced that it was accelerating its work on its own electric car, with the aim of focussing on a fully autonomous self-driving vehicle.
FX
UK retail sales picked up in October as consumers brought forward their Christmas spending. October sales rose 1.6% excluding fuel, smashing expectations of 0.6%, while September retail sales were adjusted higher to -0.4%. Fuel sales were slightly more subdued which isn’t too surprising given that most people probably had filled up their petrol tanks in September.
The pound has held up well despite a surge in the US dollar on the back of today’s predominantly risk-off market, which has seen the US dollar push back towards the highs of this week. Some of this week’s sterling gains have been tempered by comments from Bank of England chief economist Huw Pill who said a decision on a rate rise in December was still finely balanced.
The euro has also come under pressure on a combination of some dovish comments from ECB President Christine Lagarde, who more or less ruled out any type of hawkish pivot on monetary policy, and today’s events out of Austria and Germany, sinking to a 16-month low against the US dollar. It also slipped to a six year low against the Swiss franc, which isn’t likely to go down too well at the Swiss National Bank.
Commodities
Crude oil prices have slipped back sharply, Brent prices hitting their lowest levels in 6 weeks after today’s lockdown news out of Europe, as concerns over demand start to weigh on prices.
Brent crude prices are now on course to decline for the fourth week in succession, offering some respite to consumers who have seen fuel prices rise to record levels in the past few weeks. If we get further lockdowns then markets will have to reassess recent supply and demand dynamics, which could result in further weakness.
The recent declines also offer hope that the recent rise in energy prices may well be running out of steam, although the jury remains out on natural gas prices in Europe.
Gold prices have remained steady, despite a sharp fall in US treasury yields, although the fall in bond yields is being driven less by diminishing concerns about inflation, than today’s more risk off environment for stocks.
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