Europe
European markets have been a bit of a mixed bag today with the DAX and FTSE100 making new records, however the CAC40 has struggled.
The apparent indecision that appeared prevalent around the 7,450 area yesterday was conspicuous by its absence today as the FTSE100 moved sharply higher through the 7,500 area, driven primarily by a positive market reaction to the latest full year results from telecoms giant Vodafone (LON:VOD).
The latest full year results for the UK mobile telecoms giant showed a €6.1bn loss as a result of writing down the value of its underperforming Indian unit. The past few years have also been notable for underperformance in its European operations, however there is some optimism that the recovery being seen here could well act as a significant value add after years of underperformance.
On the plus side, an increase in the dividend and a significant improvement in its cash flow has seen the shares jump sharply to their highest levels in six months, as previous concerns about the sustainability of the payout proved to be unfounded.
Consumer goods companies have also had a good day with Reckitt Benckiser (LON:RB) and Unilever (LON:ULVR) both pushing higher, with Unilever making new record highs after yesterday’s acquisition of the personal care portfolio of Colombian consumer goods company Quala.
EasyJet (LON:EZJ) shares hit a little bit of turbulence after the company reported a bigger than expected first half loss of £212m, with a large part of that down to a weaker pound, though today’s decline does need to be put into context of the fact that the shares are up over 20% year to date, and well above their February lows.
Also disappointing was business support group DCC (LON:DCC), despite reporting a 23.7% rise in profits and full year revenues. The declines seem all the more inexplicable given the 16.3% rise in the dividend, however the shares are still up over 15% year to date.
US
US markets have continued where they left off yesterday with the S&P500 opening at a new record high as investors choose to ignore the political theatre that continues to dominate proceedings in Washington, as another storm involving President Trump dominates the political discourse.
Financial markets are for now able to look past a lot of this but it does beg the question as to when we’ll start to see the new Trump administration start implement policy in any meaningful way. The focus at the moment seems to be on the media looking for new fires to start, while the US administration concentrate on putting them out, while the President sits on the sidelines fanning the flames.
On the earnings front in a rare success for the retail sector with Home Depot (NYSE:HD) managing to beat expectations, in its Q1 trading update with like for like sales rising 5.5%, while also boosting its full year forecasts.
Dicks Sporting Goods on the other hand continued the disappointing retail outlook as it reported same sales growth below market expectations. It wasn’t all bad though as profits rose to $58.2m, and the company grew its market share in a difficult retail environment.
The latest housing data appeared to show a bit of a slowdown in April, following on a March decline of 6.6%, as housing starts fell 2.6%. Building permits also declined 2.5%.
FX
The US dollar has continued to come under pressure today as expectations of over US interest rates rises continue to weigh on the greenback. While markets continue to expect a rate rise in June, expectations around future rises are being tempered by recent weakness in economic data as well as some concern about political turmoil in Washington DC as another media storm hits the Trump presidency over what Mr Trump may or may not have divulged to the Russian foreign minister Sergei Lavrov. The US dollar index is now back at levels last seen the day after the Presidential election in November.
As a result the euro has hit its highest level in six months above the 1.1000 level, helped by a sharp jump in its trade balance numbers for March to €23.1bn, and a significant improvement in the latest ZEW expectations for May.
The pound on the other hand has struggled to make gains despite the latest inflation data coming in slightly above expectations at 2.7%, a four year high, with core prices also rising to 2.4%. Given this sudden rise it becomes that much more important that tomorrow’s wages data is able to keep up to mitigate further strain on consumer budgets.
It has been suggested that this morning’s ruling by the European Court of Justice that a free trade agreement with Singapore would need ratification by all EU member parliaments has increased the barriers to a successful UK/EU trade deal making a quick turnaround highly unlikely, also hit the pound. While that may be true it would also mean that going forward the likelihood of the EU concluding any sort of new trade deal with any other third party that much more difficult as well, suggesting that its hardly a zero sum game.
Commodities
Oil prices have continued to edge higher ahead of this month’s OPEC meeting, and on a report from the IEA that global oil markets are continuing to rebalance. While this may well be true we’re still seeing evidence that output increased in April led by Nigeria and Saudi Arabia.
Gold has continued to edge higher on the back of a weakening of the US dollar.
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