It’s been a fairly positive session for markets in Europe with the FTSE 100 making a fresh 20 month high, and the Stoxx 600 and German DAX again setting new record peaks.
Europe
Mining stocks have helped underpin the FTSE 100’s advance, helped by firmer copper and precious metals prices lifting the likes of BHP, Rio Tinto and Anglo American.
We’ve also seen a cracking update from Auto Trader Group, whose shares have surged to the top of the FTSE 100 after reporting record revenue of £215.4m for its H1 numbers, a rise of 82%, which has helped to push operating profits up to a record of £151.7m, with the company declaring an interim dividend of 2.7p per share. With used car prices rising sharply and in a lot of cases appreciating in value, customers are choosing to bypass dealers and cash in online by selling and buying directly.
Having announced the intention to return up to £4bn to shareholders by next June, as well as delivering a decent set of H1 numbers, Aviva CEO Amanda Blanc will be hoping that the trend of decent numbers will continue in H2. Today’s Q3 numbers seem to suggest that will be the case, with net flows of £7.3bn into its savings and retirement business, a rise of 21%.
House builder Taylor Wimpey has followed Persimmon earlier this week reporting that they remain on track to deliver full year results in line with expectations. As of 8th November, the current order book sits at £2.8bn, representing 10,643 homes. Management said that house price inflation was still offsetting build cost inflation meaning that margins were being maintained.
Luxury fashion house Burberry’s H1 numbers have seen the company report that revenues are back at pre-Covid-19 levels. Revenues fell slightly short of expectations at £1.21bn, although the miss was tiny, with an expectation of £1.22bn, though that hasn’t stopped the shares from dropping back sharply.
Rather perversely pre-tax profits were better than expected, coming in at £180m, with the company announcing a dividend of 11.6p a share, along with the restarting of the share buyback program of £150m. There was a time when profits beating expectations was a good thing. Not these days it would seem, despite the company maintaining its full year guidance, with business in Asia strong despite the various lockdowns in China and restrictions that were intermittently in place across the region.
B&M European shares are also lower after reporting first half interim results that saw revenues beat expectations. Revenues rose to £2.27bn while pre-tax profits came in at £241.4m, while declaring a dividend of 5p per share.
It’s not been a great day for Johnson Matthey shares after the company issued a profits warning, while also announcing it was looking to exit its battery materials business, due to the difficulty in generating decent returns Its H1 results are expected to come in at the lower end of market expectations, due to supply chain disruptions.
US
US markets are seeing a bit of a rebound after yesterday’s sharp selloff, probably helped by the fact that the US bond market is closed for Veteran’s Day.
Disney shares slid after the bell after growth in new subscribers slowed in Q4, with only 2.1m signing up for Disney+, pushing total subscribers up to 118.1m, well below expectations of 119.6m. This is disappointing given that the service is still very much a loss leader, it lost $630m in this quarter, with management warning that it would take some time for subscriber numbers to start accelerating again. Profits also missed expectations, coming in at $0.37 a share, well below $0.48 which was expected. Q4 sales came in at $18.5bn, below expectations of $18.8bn. Theme Park revenues also came in short, while profits came in at $640m, over $200m below expectations.
Tesla shares finished the day higher after it was confirmed that Elon Musk had started selling stock in response to his twitter poll earlier this week. So far, he has sold $5bn of stock according to regulatory filings.
Rivian came out of the traps at $106 a share yesterday as it IPO’d at a significant premium to its $78 issue price, thus giving it a higher valuation than the likes of GM and Ford, which is seriously mind boggling when it hasn’t even earned any discernible revenue yet. While the backing of Ford, who have a 12% stake, is welcome in terms of expertise, its also a no-brainer for them, given that it only cost them $820m back in 2019, which is small change. Their stake is certainly worth much more now, about $10bn, which isn’t too bad a return. More importantly it gives them another arrow in the quiver when it comes to the transition to electric vehicles, as well as a nice cash windfall if they decide to cash in.
FX
The US dollar has continued to gain ground, against a basket of currencies moving through the 95.00 area and a 15-month high, as the sharp rise in inflation raises the prospect that the Fed might well have to bring forward the prospect of rate rises, as a response to further sharp rises in prices.
The pound slid to its lowest level against the US dollar since December last year after Q3 GDP came in below expectations at 1.3%, although the monthly GDP number came in better than expected at 0.6%, as the economy slowly came off the “pingdemic” leash that had constrained it in July and August. While some have expressed disappointment over the quarterly number falling short of expectations, the fact that the September GDP number was so strong and the economy was behaving like the handbrake was on in July and August due to various isolation rules, suggests we could see an upward adjustment in the coming weeks, as more recent data becomes available.
As far as today’s weakness is concerned the pound has held up quite well, relative to the likes of the commodity currencies of the New Zealand, Canadian and Australian dollar, who have all suffered the most against the resurgent greenback, with the AUD getting hit by a sharp drop in employment and a rise in the unemployment rate.
The euro has also slipped to its lowest levels this year, and since July 2020, as the prospect of a change in policy by the ECB moves further out.
Commodities
Gold and silver prices have continued their surge higher from yesterday, with silver prices on course to test the 200-day MA, for the first time since early August.
Copper prices have also rebounded, pulling away from the 200-day MA, as concerns over tight supply served to help support prices.
Crude oil prices are treading water after a big sell-off yesterday as talk of an SPR release weighs on the price in the short term, although it’s not immediately clear what effect such a release might have apart from keeping a lid on prices. It’s hard to see them weakening materially in the near term.
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