UK and Europe
Multiple markets closed for Ascension Day made for lacklustre trading in Europe as confidence instilled by a rise in the price of oil was offset by global growth concerns brought about by a slowdown in China’s service sector.
The FTSE 100 spent most of the day with narrow gains as corporate earnings came in mixed. Decent earnings figures from BT (LON:BT), RSA (LON:RSA) and Morrisons (LON:MRW) just about trumped poorly-received results from Rolls Royce (LON:RR), Centrica (LON:CNA) and Inmarsat (LON:ISA).
Shares of Morrisons rose by 2% after the supermarket reported a rise in same-store sales for a second quarter, the first time that’s happened in nearly four years. Total sales fell because of the sell-off of Morrisons’ convenience store business. Online shopping is helping drive a return to sales growth and new initiatives from Chief Exec David Potts, including its partnerships with Ocado (LON:OCDO) and Amazon (NASDAQ:AMZN) strengthen the chance of that trend continuing.
BT shares rose by over 3% after results topped expectations and the company promised to invest £6bn in faster broadband and mobile services. The broadband investment is a big upfront cost but means a breakup is less likely. The results come off the back of another competitive tailwind for BT’s mobile ambitions as the European Commission stands likely to block the merger of Hutchinson’s Three and O2.
Shares of Centrica plummeted 9% after it announced a plan to sell 350m new shares worth £770m in a rights issue.
US
Generally positive corporate results helped US stocks rise in early trading, though low trading volumes in Europe and a surpassingly big jump in weekly jobless claims capped gains.
Shares of Tesla (NASDAQ:TSLA) went from positive 4% pre-market before slumping into -4% losses after reporting its first quarter earnings. Founder and CEO Elon Musk said the company plans to sell a million cars a year by 2020. Jim Chanos, a prominent short-seller highlighted executives leaving the company and previously missed production targets as negative for Tesla shares.
US-listed (but not indexed) Chinese internet giant Alibaba (NYSE:BABA) saw its shares rise over 4% after reporting a surge in revenues generated through its mobile advertising business.
FX
Commodity currencies gained against the dollar on Thursday whilst the greenback outshone the European and Japanese currencies. The dollar gave back some early gains after US jobless claims spiked to the highest in 16 months.
The markets took the ECB monthly bulletin as bearish for the euro after the central bank said it would was “essential to maintain an appropriate degree of monetary accommodation as long as needed to underpin the recovery and accelerate the return of inflation.”
Sterling clawed back early losses brought on by data that showed a slowdown in the service sector in April. The service sector weakness is another knock to the confidence in the strength of the UK economy leading up to the referendum. The surprise drop to 52.3 on the UK services PMI, the lowest in three years suggests growth of just 0.1% in the second quarter.
Manufacturing has been slowing down globally but services have proven more robust, so the downturn appears UK-specific. Uncertainty over the referendum is an obvious differentiator that could explain the underperformance of the UK service sector, though the living-wage has hit services companies disproportionally hard.
Commodities
Gold dropped in early hours but recovered off the lows thanks to an upswing in crude prices and weak US economic data. Silver snapped a three-day losing streak but remains below $18 per oz.
Saudi Arabia raising its prices for crude exports to Asia, a wildfire limiting Canadian output and disrupted supplies from Libya have buoyed crude prices, snapping a four-day losing streak. The supply setbacks are temporary but do offset concern of rising OPEC supplies and place the focus back on US oil production at its lowest in eight months.
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