Europe
It’s been a fairly solid session for European stocks, with the DAX breaking above its September peaks and posting its best levels since February, while we have slipped off the highs of the day for the FTSE100, and the FTSE250 is back above the 20,000 level for the first time in over a week.
The prevailing feeling remains one of optimism over the prospect of a US stimulus deal, a landing zone for a UK/EU trade deal, and on the margins some better than expected flash PMIs which are seeing stock markets push up close to multi week or multi month highs.
Dixons Carphone (LON:DC) has shrugged off the closure of a lot of its store real estate and posted a rise in revenues of 3.1% year on year to £4.86bn, driven by a 145% rise in online sales in the UK and Ireland, offsetting the sales loss from enforced store closures, helping push the shares to their best levels in six months.
In terms of current trading like for like sales are up 16% over 6 weeks to 12th December, while mobile has continued to be a drag, with revenues down 54%
The mobile division has continued to be the biggest drag on the wider business, with a big decline in revenues of 54% to £384m, down from £830m in the same period a year ago.
Mobile losses are expected to remain an overall drag, however, given that it only makes up just under 20% of total revenues, the gains were seen in on line have more than made up for that.
In all other areas of the business revenue growth came in well above 10%, with group adjusted profits before tax coming in at £89m, a big increase from last year’s £2m.
The business has seen an increase in Covid related costs which has impacted on profits to the tune of £155m, which includes £15m protective measures for staff and customers, however, this has been offset by £800m of additional sales online.
Since the record March lows the shares have recovered a good proportion of their lost ground year to date, but still remain 13% down on the year, however, a good pre-Christmas period and the news about a vaccine means that the outlook is much more positive than it was a couple of months ago, despite the November lockdowns.
Wagamama’s owner Restaurant Group shares have had a decent day after a bondholder update showed that sales fell by 20% to £70.3m in the 13 weeks to September, compared with a year earlier. Like for like sales, however, rose by 7.4% due to a huge rise in delivery and takeaway offers, while earnings rose 8% to £18.1m, due to cost reductions on rents.
BP (LON:BP) has taken further steps to green up its business by taking a majority stake in Finite Carbon, which is the largest provider of forest carbon offsets in the US. Finite Carbon has 50 projects covering 3 million acres in the US and generates over a third of all compliance offset supply in the state of California, as well as providing more than $500m in revenue for landowners. The increased investment from BP is expected to add $1bn to this by 2030.
Oilfield services provider Petrofac (LON:PFC) has said that current trading is in line with expectations, with the rebound in oil prices helping on the margins, however, it also went on to say that it expected profits for 2020 to be materially lower than in 2019, and group revenues to be in the region of $4bn.
It said it would also be taking additional measures to increase cost savings in 2021 to $250m.
Travis Perkins (LON:TPK), also owners of the Wickes brand has reported on its latest trading performance, for October and November, with a rise in LFL sales of 8.6%, primarily driven by a 32.4% increase in Toolstation sales.
The company has also said it will be repaying its business rates relief of about £50m. This decision appears to have come about as a result of the recent boost to its finances in November that saw the group raise £250m by way of a five-year public bond. The company also said the subsequent repayment of the business rates assistance would reduce EBITDA for 2020.
Bunzl (LON:BNZL) shares have slipped sharply after the company said that despite an 8% increase in group revenue for this year, it expects revenue in 2021 to be lower than the current year, with minimal benefit from the larger Covid related orders that have boosted this year’s numbers.
US
US markets opened higher today despite a disappointing retail sales number for November, which showed a decline of 1.1%, well in excess of expectations. This weak reading is likely to increase the pressure on US lawmakers in passing a new US economic aid package, with the October numbers also being revised lower, from 0.3% to -0.1%.
This weakness in the latest data does appear to be concentrating minds with reports that US leaders are closer to a deal than at any time in the last six months, with reports of a $748bn deal, which would include help for small business and the unemployed.
On the flip side the latest manufacturing and services PMIs were slightly better than expected.
Moderna (NASDAQ:MRNA) shares are under pressure after Morgan Stanley (NYSE:MS) became the latest broker to downgrade the company after a strong run of gains over the last few months. One of the main reasons appears to be the realisation that a lot of the upside is more or less priced in.
FX
The euro received a lift on the back of surprise improvements in the latest French and German flash services PMI numbers which rebounded from their weak November reading, by a much bigger margin than expected. While unexpectedly positive these numbers need to come with a health warning given the tighter restrictions being imposed over the rest of this month, which could drag these numbers back down when the final numbers are released in January.
The pound is also gaining ground, hitting its best levels in over two years against the US dollar, though the gains have been tempered somewhat, with the 1.3550 area a key barrier to a move towards 1.4000. The latest inflation numbers showed a surprise slowdown in headline CPI in November with clothing and food being the main drag. This was probably down to heavy discounting on the part of some retailers with reports that Boohoo was selling some items of clothing for as little as 8p.
Commodities
Gold prices have continued their recent rebound hitting their highest levels in a week, on the back of a weaker US dollar, as well as the prospect that we’ll see the US Federal Reserve reinforce its dovish outlook for the US economy. Today’s weak US retail sales data are also an additional catalyst for a firmer gold price.
Bitcoin prices have hit new record highs today, over $20k for the first time ever, breaking above the previous record of $19,400, as the cryptocurrency continues to gain favour as an asset class of choice amongst more mainstream investment names.
Oil prices have edged back up after the latest inventory data showed a bigger than expected draw of 3.14m barrels.
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
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 specific person. "