Proactive Investors -
- FTSE 100 up 4 points at 8,277
- UK public deficit higher than expected in July
- National Express (LON:MCG) owner Mobico impresses with results
FTSE 100 flailing
The FTSE 100's gains have dwindled in the past half hour, now almost back to flat for the day.
Meanwhile, the FTSE 250 had been moving higher, up 98 points or 0.5% at 21,084.21
US futures have also picked up, with the S&P 500 and Nasdaq called 0.2% higher, with Dow Jones futures up 0.15%.
Cineworld update
The US backers of Cineworld Group (LON:CINE) are proposing to invest £35 million in modernising a smaller UK cinema estate if a rescue plan is successful.
This is a report from Sky News, which says doubts are growing about the ability of unhappy landlords to block the proposals, which are to be voted on by creditors next month.
Cineworld filed for Chapter 11 bankruptcy in the US in 2022 due to the weight of its massive debt pile, later delisting its shares from the London Stock Exchange after a restructuring agreement meant lenders took control while shareholders got nothing.
Sky said backers have proposed in a document to Cineworld creditors that they will boost investment to try and catch up with rivals, though the rescue plan will also lead to the closure of dozens of UK multiplexes.
Swift exits after providing economic stimulus
Taylor Swift’s recent shows in London, Edinburgh, Liverpool and Cardiff are estimated to have dealt a £1 billion boost to the UK economy after the singer performed the last of 15 concerts across the country last night.
This marked the end of the European leg of Swift’s tour, with five nights at Wembley coming after concerts in Edinburgh, Liverpool and Cardiff in June.
According to Hospitality Data Insights, sales at hotels, bars and restaurants within three miles of Wembley averaged £1 million over Swift’s five-night stint in London.
No little spending on helicopters and fuel must also be added to that, if reports are true.
have it on good authority that taylor swift is taking a helicopter from a manor in the cotswolds to wembley and back every day atm lol— Ed (@ted_pen) August 18, 2024
Another quiet start for New York expected
US stocks are set for another tepid start, futures markets are saying.
Dow Jones and S&P 500 futures are both just above flat and Nasdaq 100 futures are just below.
Meanwhile, the FTSE 100 and 250 in London are both up 0.2%, slightly lagging European counterparts.
EUR/USD at highest since early 2022
The euro has broken above $1.10, up 2.7% over the past six months to $1.113 last night - the highest in over a year, and Deutsche Bank (ETR:DBKGn) thinks this is down to two things in the past month.
"First, the sharp repricing in Fed expectations," says George Saravelos, head of FX research at the bank, who says forex is more sensitive to terminal rate expectations rather than the exact timing of each central bank’s easing.
"August has not only seen the market price a fast Fed easing cycle but a deeper one too. In turn, relative FX moves have been aligned with this repricing in terminal rates."
Second, he says there has been an "incredibly sharp" unwind in FX carry trades, with the best performing currencies since the July peak in equities being JPY, CHF and SEK as well as low-yielding Asia FX pairs most notably CNH.
Carry trades involve investors borrowing currency at a low cost to help achieve greater returns by investing in another country.
"There is also the drop in Republican market-implied electoral success probabilities following Kamala Harris’ strong polling numbers," says Saravelos, who thinks a Trump presidency would be bullish on the dollar.
In coming months he says Deutsche's house forecasts include a far shallower easing cycle than the market is pricing, as US data continues to outperform the rest of the world.
"What is most notable in recent days is that despite the sharp recovery in risk assets – in line with our own soft landing views of the US economy – FX carry has failed to follow (see graph below).
"We are not convinced this decoupling can last. As long as the dollar’s relative high-yielding position is not undermined by the Fed, positive risk appetite should ultimately be supportive of carry and the dollar as has been the case throughout the last twelve months."
In all, he says the dollar is approaching the bottom end of its “higher for longer” three-year range and Fed pricing at the upper end of dovishness, "we do not see sufficient evidence to be convinced of a sustained break in EUR/USD above 1.10 in H2".
UK watchdog shelves Apple/Google probes
As well as waving through the final approval needed for the Barratt-Redrow merger to be completed, the UK's competition watchdog has also shelved its investigations into Apple (NASDAQ:AAPL)'s App Store and the Google (NASDAQ:GOOGL) Play Store.
Today the CMA said on the Apple probe: "Case closed on the grounds of administrative priorities", adding the same on Google but also that its decision is "not to accept commitments" from the Silicon Valley giant.
The CMA said it "remains concerned that Google and Apple are using their market positions via the Play Store and App Store respectively to set terms which may be unfair to UK app developers and which may restrict competition and consumer choice, potentially leading to higher prices and reduced choice for app users".
It plans instead to look into competition concerns under the new Digital Markets, Competition and Consumers Act passed in May, though which has yet to come into force.
JD Sports and miners lift FTSE
The FTSE 100 is starting to pick up a little now, up into the teens, moving 0.2% higher, while European markets are up too.
JD Sports Fashion PLC (LON:JD) is the top riser in the index, up 2.4% ahead of its results tomorrow.
UBS says they expect 3% LFL growth with a "reassuring tone on its performance in North America, despite softer trends for its key vendor, Nike (NYSE:NKE). The key focus will be on its PBT guidance, which is likely to be raised to reflect the Hibbett acquisition."
Miners Rio Tinto (LON:RIO) and Anglo American (JO:AGLJ) are next, both up 2%.
Iron ore prices have bounced back from the recent two-year low to around $94 a tonne amid speculation of potential stimulus measures from China, SP Angel analyst John Meyer points out, noting that increased bond issuance is expected to support the property sector.
Despite this, overall pessimism persists, Meyer says, with Citi predicting a drop to $85/t due to China's economic transition away from steel-intensive construction and the market remaining wary after warnings from China’s largest steelmaker, Baowu, about prolonged weakness in steel pricing.
Copper is holding steady after hedge funds cut bullish positions, Meyer adds, having not moved much for some time now.
He notes that China’s copper production and imports have both increased, while exports have declined and despite disruptions like a railway derailment in Angola that is affecting copper shipments from the DRC, China continues to increase its copper imports from there significantly.
Demand in China is expected to grow modestly, with the Yangshan premium recovering after a dip earlier in the year.
Tit-for-tat-for-Temu
More tit-for-tat from China, but this time it's between two companies and it's not just catty but also it's gone legal.
Fast-fashion giant Shein has launched a legal attack on online marketplace Temu in the US.
In a complaint filed in the District Court of Columbia, the fashion site's legal team accused Temu of using an "illegal business model to build a massive counterfeiting and infringement machine in the US".
Temu is also accused of using Shein's trademarks in sponsored ads and creating fake social media accounts impersonating Shein to mislead customers.
Spicy!