Europe
Markets in Europe have continued to focus on the recovery narrative, putting aside concerns over recent events in the US and last week’s block trade blow out, as well as the economic picture in Europe which continues to look dire as infection rates rise further.
Financials are leading the gainers, despite concern about their exposure to the Archegos Capital blow up, with Credit Suisse lower again, with the rest of the sector gaining on the back of higher yields led by the likes of Barclays whose shares are back up close to last week’s high and their best levels in over a year. Lloyds Banking Group shares are also higher, still below their pre pandemic peaks but still looking good for further gains and making new one-year highs.
UK banking shares have underperformed their European and US counterparts over the past 12 months and it’s a little hard to understand why. Unlike their European counterparts they have largely repaired their balance sheets, and with an economic reopening in the offing, there is the distinct possibility that some of the provisions set aside over the last 12 months may well not be needed. European banks on the other hand are still having to cope with weak demand, a weak fiscal response from EU authorities and negative interest rates.
We’ve also seen the likes of IAG, EasyJet and Ryanair post decent gains, despite concerns about rising infections in Europe. There was more bad news for AstraZeneca after Germany said it would once again be reassessing the vaccine after reports of more thrombosis cases, while also saying that they only recommend it for men and women of 60 or over. This is hardly likely to re-build confidence in a vaccine that already has a self-inflicted PR problem in Germany, and where infections and deaths are still rising.
While the FTSE100 has once again underperformed, falling shy of the 6,800 level, the DAX has again set new record highs today, busting through the 15,000 level for the first time ever, once again driven by the likes of Volkswagen, who today named their US electric car division, Voltswagen.
Royal Mail shares have really delivered for shareholders this year, the shares are up over 50% year to date, and this morning there was more good news after the company announced a one-off dividend of 10p a share. While the pandemic has presented the wider business with a number of challenges, the parcels business has performed very well with annual profits across the whole business expected to come in around £700m. Today’s announcement of a special dividend could well be an early indication of the managements thinking about its future dividend policy when the company reports its full year numbers in May.
Irn Bru maker AG Barr’s latest full year numbers have seen the shares drop sharply, wiping out the gains seen on Monday. Profits before tax fell to £32.8m with revenues also lower at £227m, as the closure of pubs hit sales, however there is the hope that the reopening of pubs and hospitality over the summer will see a decent uplift as the UK economy returns to normal.
In a sign that expectations about IPO’s are starting to get scaled back Deliveroo announced that its IPO was expecting to price at 390p at the very low end of expectations, as major investors cool on their expectations on an IPO that was highly anticipated, and where there is now a very real risk, we could see prices fall back when it finally launches.
US
US markets have started the session on the back foot again despite closing well off their lows in yesterday’s trading. The hangover from the fallout of Friday’s $20bn margin call may well be being put to one side in Europe, but it continues to hang over US markets like a bad smell.
This perhaps shouldn’t be too surprising given that valuations in the US are a little bit higher, and there is a concern that there could well be a further shake out as we head into the end of the month and the quarter, with the Nasdaq bearing the brunt of the bearish sentiment.
ViacomCBS and Discovery appear to be showing signs of a potential base after some big losses over the last few days, having seen a rebound off the 200-day MA and investors looking at the longer-term case in a sector that has a number of big players but where both companies are coming from a fairly low base.
On the data front US consumer confidence for March has seen another significant uplift rising to 109.7, well above expectations, as the vaccine rollout, along with the prospect of another $1,200 in stimulus payments pushed US confidence levels to a one year high.
BionTech also announced its latest numbers this morning, sending the shares up over 5% in early US trading, with full year revenues estimated to be €345.4m for the three months ended 31st December last year, compared to €28m for the same period in 2019. For the full year total revenues were €482.3m compared to €108.9m. For the full year cost of sales also rose coming in at €59.3m, up from €17.4m, with €41m of that coming in the last quarter. In terms of profits the company managed to post a net profit of €15.2m compared to a loss of €179.2m in 2019.
In terms of the outlook for 2021 R&D expenses are expected to surge to over €750m, with cash and equivalents rising to €1.2bn, a net increase of €736m a year ago. The company also said it was looking to deliver 2.5bn doses over the course of the year, an increase of 25%.
The ARK Space Exploration and Innovation ETF also started its first day of trading in a rather subdued fashion, with its 39 constituents containing some familiar and obvious names, along with some not so obvious ones. The likes of Virgin Galactic, Boeing, Airbus, and Thales make some sort of sense, however its harder to see the case for the likes of Amazon, Alibaba and Netflix to name but three.
FX
The US dollar has continued to go from strength to strength, driven by higher treasury yields and a consumer confidence number for March that blasted through event the most optimistic of expectations.
The greenback rose above 110.00 against the Japanese yen for the first time in over a year, while on its trade weighted index it has risen to its highest level since early November, pushing the euro below the 1.1750 level in the process, opening up the prospect of a further move towards 1.1600.
The euro is continuing to look like the black sheep of the currency family, unwanted and unloved, and one of the worst performers against the US dollar over the last six months, along with the Swiss franc and Japanese yen.
Commodities
Gold prices are back below the $1,700 an ounce level and back to levels last seen on 9th March, as US 10-year yields climbed to their best levels since January last year above 1.75%. .
Oil prices have continued to drift lower as concerns over tighter supply diminish now that the Suez Canal is set to reopen.
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