Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Dollar on The Slide, European Stocks Slip In Early Trade

By Neil WilsonMarket OverviewJan 13, 2022 09:16
uk.investing.com/analysis/dollar-on-the-slide-european-stocks-slip-in-early-trade-200507363
Dollar on The Slide, European Stocks Slip In Early Trade
By Neil Wilson   |  Jan 13, 2022 09:16
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

European stocks were slightly weaker in early trade after yesterday’s rally. We had a solid session for the FTSE 100 on Wednesday, marking a new pandemic high at 7,565. This morning trading a little lighter but no signs of fright. 

US CPI came in at a 40-year high of 7% but market reaction was muted as it was largely in line, albeit the core reading was a bit higher than expected. At first the absence of any upside surprise to the headline number left risk bid: Nasdaq 100 futures rose, the dollar declined. NDX turned lower after the first hour of the cash trade to go lower, the dollar kept on falling, taking out the first 23.6% Fib support at 95.20.  

In the end stocks rallied and the three major Wall Street indices ended higher, but the price action suggests ongoing uncertainty re the Fed and inflation. ARK Innovation ETF (NYSE:ARKK) fell, megacap quality names lifted boats – Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) both +1%. Tesla (NASDAQ:TSLA) up almost 4% – couple of PT upgrades in the last two days helping bulls feel good about themselves again. 

Whilst stocks managed to end the day higher, the dollar kept on falling. US Dollar Index here breaking key trend support, moving close to the 100-day line, where support could emerge at 94.60. US PPI inflation and unemployment claims are the main data points to watch today. Weakness in the dollar could continue for some time if markets are confident in the global recovery, but US inflation/Fed cloud the outlook.

Dollar Index Daily Chart
Dollar Index Daily Chart

EURUSD rallied and broke free from its narrow two-month range, taking a 1.14 handle. The shift in USD positioning seems clear but the Fed may yet surprise with a more aggressive cycle. The cross is just pausing in its advance at the 23.6% retracement of the decline since the start of 2021.

EUR/USD Daily Chart
EUR/USD Daily Chart

GBP/USD took at 1.37 handle, bulls still charging. 1.38 remains in focus. 

GBP/USD Daily Chart
GBP/USD Daily Chart

Fresh two-month highs for oil after a big drawdown in US inventories. WTI rose above $82, path to $85 remains open, though that’s maybe where it tops again and momentum fades. Prices a tad cooler this morning but $82 holds.

Crude Oil Futures Daily Chart
Crude Oil Futures Daily Chart

Deluge of corporate earnings in the UK today...time to wade through some of the highlights. Retailers have been strong thus far and Tesco (LON:TSCO) and Marks have continued the theme, although the anticipated full-year profit upgrades were rather mild and shares dipped in early trade. Investors were primed for a bit more, but should note that every little helps.

TSCO - Tesco numbers don’t disappoint, overall, despite tough comparative year ago figs. Market share the best in four years, strong Clubcard membership, and Christmas sales up over 9% over 2019, +2.7% vs last year. Given lockdowns last year this is impressive. Booker sales +20% as the restaurant trade bounced back despite the impact of Omicron + convenience stores doing well. Profit outlook improves – management say they expect full-year profit ‘slightly above’ the top-end of the previous £2.5bn to £2.6bn guidance. But UK Q3 LFL of +0.2% was short of the +0.6% expected. Shares dipped over 1%; typical post-earnings results pattern for Tesco. How Tesco uses its scale and Clubcard to weather pricing + inflation headwinds will be key to the year ahead, though it comes into it in very strong shape. Investors should be mindful that Tesco is starting to throw off a lot of cash and dividend yields are attractive.

MKS - Marks and Spencer (LON:MKS) delivered more good progress over Christmas. Food sales increased 12.4% as the good momentum in-store continued over Christmas. Impressively, in the update to MKS says the business generated its ‘highest ever Christmas sales’, with December growth in line with the performance for the quarter, Clothing & Home sales increased 3.2%, but within this full price sales grew by 45%. Store sales down 10% but online +50% is in the right place. International sales increased 5.1%, thanks to a doubling in the online component. 

Having previously, at the time of the half-year results in Nov, raised the full year profit outlook to ‘in the region of £500m’ from the £300m-£350m range set out in May, management now say they expect full year profit before tax and adjusting items of ‘at least £500m’. Not a material upgrade as such but one that will keep investors focused on the long-term and hope that it means a return of the dividend when FY results are announced later in the year. Shares are up 85% in the last year, recovering in tandem with a much stronger retail performance. Shares dropped 4% this morning, perhaps on a milder-than-hoped-for profit outlook. A lot of the good news – as reflected in the rally for the shares in recent months – had been baked in after November’s major profit upgrade. Today’s update continues to the good news story but does not shift the narrative materially.

Elsewhere... Halfords (LON:HFD) stuck to guidance for the full year (-3% in early trade), Dechra Pharmaceuticals (LON:DPH) +1.7% with results in line. Hays (LON:HAYS) +1% after reporting a record quarter with fees up 37%. Perfect conditions for recruiters with staffing shortages everywhere. Countryside Properties (LON:CSPC) -15%, said trading below expectations; CEO Iain McPherson to step down 

Dollar on The Slide, European Stocks Slip In Early Trade
 

Related Articles

Neil Wilson
Innovation Under Pressure By Neil Wilson - May 25, 2022

Speaking to a couple of knowledgeable sorts yesterday and a recurring theme emerged: what is true innovation? What is a truly impactful stock? Is another streaming app really...

Dollar on The Slide, European Stocks Slip In Early Trade

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
saide ikhlas
saide ikhlas Jan 13, 2022 11:53
Saved. See Saved Items.
This comment has already been saved in your Saved Items
saide ikhlas
saide ikhlas Jan 13, 2022 11:53
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email