The end of the month and quarter was somewhat subdued for European stocks in today’s session, as we look back on a quarter that saw some pretty decent gains across the board, despite the various lockouts and restrictions.
The main focus of the markets has been on the prospects for economic reopening and, although this prospect is much closer to the US and UK, Europe is expected to achieve this eventually, although that optimism may well dissipate if we don’t. get progress on vaccinations, as well as evidence of slowing infections.
This prospect seems even more distant than ever, given reports from across the Channel that suggest France may have to enter another lockdown, as President Macron prepares to appear on French television. tonight and break the bad news.
While the stock markets had a good quarter, the bond markets did not, with sharp declines in the price of long-term bonds, generating significantly higher returns in the UK and US.
At the end of last year UK gilt yields were 0.197% and are now above 0.8% while US 10-year yields were 0.913% and are now above 1, 7%. Fortunately, these upward moves were contained in the long run, although borrowing costs also edged up on the 2-year paper, with UK yields falling from -0.16% to 0.08%.
Oil prices have also seen strong gains, with Brent rising 25% so far this year, and although the energy sector is down today, much of the rebound seen in markets stock market this year is the result of rising commodity prices, with copper also rose more than 10%.
Among the best performers today, there are Hikma Pharmaceuticals, which is higher thanks to a broker upgrade from Jefferies.
Swedish retailer H&M saw its shares retreat today after reporting a Skr 1.39 billion loss, which, although slightly better than expected, has been eclipsed by recent headlines from China which have seen the brand, with Others, swept up in a storm following a statement the company made last year, which expressed concern over the use of forced labor in Xinjiang. Management said about 20 of its stores in China had been closed due to the backlash and they still wanted to do business in the region.
The various lockdowns took a toll on the retailer’s revenue, with around 1,800 stores temporarily closed, but optimism about a reopening that boosted sales in March showed signs of improvement, up 55%. Gross margins were also below 47.6%, down from 51%, as the company sought to differentiate and move its stock.
When it was announced earlier this year that Deliveroo was looking to list in London, there was a lot of enthusiasm for a company that isn’t too different from its peers like Just Eat Takeaway and Uber Eats.
Early indications of an exceptional valuation were quickly reduced due to concerns about labor practices, a lack of profits, and a two-class structure for stocks, which quickly shattered early optimism, prompting management to adjust the IPO price range down, as a number of major investors have said they will not buy the shares.
This lack of confidence in the business model quickly translated into a disastrous first day of trading for the newly listed company, which saw stocks slide more than 30% in the first 15 minutes of trading, before trading. is not interrupted.
It looks like the litany of negative headlines has taken its toll over the past few days, denting confidence in what remains a well-supported company.
If today’s price action is any indication of investor enthusiasm for profitability, cash flow, and growth prospects as we move towards an economic reopening, then today’s weakness hui may well be a harbinger of further declines in an industry that has been doing quite well. in the past 12 months.
Today’s weakness was not helped by a similar poor performance at Just Eat Takeaway, whose stocks are languishing, just above their 10-month lows.
Much has been said about what this tells us about London as an IPO hub compared to the United States, given the stock decline, but any IPO is about trust and context under -jacent. It’s hard to see how much better this IPO could have done in the United States given the current environment. Of course, the pricing could have been much more realistic which could have made a difference to the overall result, but that’s a whole other question.
U.S. markets opened slightly higher today as investors seek more details on the upcoming roughly $ 3 billion infrastructure plan, details of which have been leaked all day and which will likely be exposed later. during the day, by President Biden.
ADP’s latest payroll report for March showed 517k new jobs were added while February’s number was revised up from 117k to 176k.
The latest Chicago PMI numbers showed another decent expansion to 66.1, well above expectations of 61.
On the company’s earnings, Walgreens released second quarter numbers that were better than expected. After releasing better-than-expected numbers in the first quarter with revenue increasing 5.7% to $ 36.31 billion and profits also beating expectations at $ 1.22 in shares, they appear to have repeated the same turn twice, with second quarter profits of 1.40ca in action, while also increasing their guidance for the entire year.
The ramping up of the vaccine’s deployment in the United States is helping to offset weak performance in other areas due to weak sales of cold and flu drugs and lower sales in its UK Boots operation.
BioNTech shares are also higher again following well-received figures from yesterday’s fourth trimester, after a trial in children ages 12 to 15 reported 100% joint effectiveness Pfizer Vaccine against covid19.
After their big sale this week Discovery stocks continue to rebound as a number of brokers start to turn positive and see some value, although the jury is out ViacomCBS.
The euro continued to look soggy after the latest inflation data for March fell below expectations. Higher energy prices along with weak base effects should translate into a sharp rise, but these risks were found to be overestimated as the headline CPI rose to 1.3%, while base prices rose. are in fact weakened, falling back to 0.9% from 1.1%.
The single currency hit its lowest level against the US dollar in 4e In November of last year, as yield spreads widened in favor of the US dollar, as it also collapsed against the pound for similar reasons.
The US dollar continued to gain momentum, posting three successive monthly gains as the history of the US recovery threatens to leave the history of the European recovery in the dust.
After experiencing such a strong Q1, crude oil prices have started to retreat from their recent highs, ahead of tomorrow’s OPEC + meeting, which could see members extend production restrictions for another month in June. The situation in Europe seems to have prompted a reassessment of the short-term demand outlook despite the blockage of the Suez Canal which raises concerns about short-term supply. The latest inventory data seems to show that inventory is declining again, as consumption begins to rise and the driving season in the United States is about to begin, the current decline in gasoline inventories will likely limit any. significant drop.
While Bitcoin had a really strong quarter, gold prices had a nightmare, on course for its worst quarterly performance in years, pushed lower by rising US yields and a stronger US dollar. , while the appeal of the yellow metal as a refuge is blunted. by increasingly accepting cryptocurrencies as a form of value, for investors who seem much less risk averse.
Disclaimer: CMC Markets is an execution service provider only. The material (whether or not it states opinions) is for general information purposes only and does not take into account your personal circumstances or goals. Nothing in this document is (or should be taken as) financial, investment or other advice to be relied upon. No opinion given in the Material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any particular person. The material has not been prepared in accordance with legal requirements aimed at promoting the independence of investment research. While we are not specifically precluded from processing before providing this material, we do not seek to take advantage of the material before it is released.