Europe

At one point today European markets were down heavily, with the FTSE100 and DAX hitting five-week lows, as inflation concerns once again weighed on sentiment, however these lows proved to be short-lived, with the rest of the day spent clawing the bulk, or all of the losses back, with the FTSE100 unperforming due to its heavy basic resources weighting, where most of today's losses have been concentrated.   

In an extremely fickle environment markets are continuing to wrestle with the dilemma as to whether the current bout of rising inflation prints is transitory in nature.

US PPI for April only served to reinforce this inflationist narrative, however it is still very difficult to put aside how much base effects are exerting upward pressure on the overall numbers.

The worst performers in the UK market have been energy and basic resources on the back of a slide in energy prices, and base metals prices.

Anglo American, Rio Tinto and Fresnillo are amongst the biggest decliners, along with BP and Royal Dutch Shell, as oil prices slumped on the resumption of the Colonial pipeline.  

Rolls Royce shares have traded between negative and positive territory today on scepticism that they will be able to meet their (EFH) engine flying hours target of 55% of 2019, after today’s update that the first four months of this year that large engine flying hours were at 40% of 2019 levels, supported by demand for cargo as well as the maintenance of key routes. This leaves them a lot of ground to catch up over the rest of the year.    

BT Group shares have fallen sharply after full year results came in slightly shy of expectations. With the shares having risen over 30% from their February lows, the bar was high for a good set of numbers, so the shares were always ripe for a pullback. Today’s disappointing Q4 miss which saw EBITDA fall short has seen some profit taking kick in.

Full year pre-tax profits came in at £1.8bn, a 23% decline on last year, while revenues declined 7% to £21.33bn. BT also said it would be looking at increasing its target for the rollout of high-speed fibre broadband by 5m, to 25m homes by 2026. To do this it said it was open to a joint venture in order to achieve this goal.

Burberry shares are also seeing losses, after a bit of a mixed bag of full year numbers. Full year revenues came in at £2.34bn, as adjusted pre-tax profits came in at £365.7m, both above expectations, as China sales improved. There was disappointment over its guidance with respect to margins for the upcoming year, with management citing headwinds in the form of increased investment and expenses normalisation.

Money manager Hargreaves Lansdown is also under pressure despite revealing a strong year for client growth and assets under management. There may be a concern that after such a strong year for client growth and assets under management, dealing volumes might start to slow as the economy starts to reopen.

M&G is higher on reports that it was the subject of bid interest earlier this year from Schroders.

Scottish Mortgage Investment Trust is also rising along with the Nasdaq which appears to be finding some buyers, after three days of declines.  

In timing that can only be described as lousy, given the recent weakness in tech stocks, Canadian chip and semiconductor maker Alphawave has seen its shares drop sharply on its debut in London today.

The company has raised £856m after pricing at 410p per share, selling 360m new shares listing around 28% of the business, as it looks to open a new headquarters and R&D centre in Cambridge as part of its overseas expansion.

This is a disappointing outcome given the high expectations and valuation, raising questions about the pricing once again. Having seen Deliveroo plunge and Darktrace surge in the wake of their pricing, it turns out that arriving at an optimum valuation might not be as easy as it seems. Either that or it could simply be a case of more luck than judgement in these uncertain and choppy times.

Ultimately, it probably boils down to one thing. It’s worth whatever someone is prepared to pay for it.  

In terms of its numbers, bookings for this year are already in excess of all of 2020, at over $80m, with the company making its money by way of a royalty every time a product using its technology, or IP, is sold.

The company believes that turnover can rise to over $240m by the end of 2023, having recently signed deals with the likes of Samsung and TSMC.

US

US markets appear to be trying to create some sort of base after the declines of the last few days, opening higher, despite the latest US PPI numbers for April coming in above expectations, rising 6.2%.

On a positive note, weekly jobless claims continued to fall, coming in at 473k, down from 507k the previous week.

Tesla shares moved to within touching distance of the 200-day MA and for now appear to be holding above it, despite CEO Elon Musk’s handbrake turn on Bitcoin last night. His expressions of concern over the energy footprint of Bitcoin ring a little hollow given they have been widely discussed for months, which suggests that perhaps he has recognised a possible contradiction over Tesla’s claims to be environmentally friendly, against his support for energy intensive crypto.  

Online car retailer Vroom saw its shares rise after reporting revenues above expectations in Q1, coming in at $591.1m, while also reporting a lower-than-expected loss of $0.57c a share. Its e-commerce sales increased by 96%, which helped to boost profits by 123%.

Total expenses also increased, rising 87% year on year to $109m, from $58.4m, with outbound logistics seeing a 165% rise.

Later today we’ll also be getting Q1 numbers from Coinbase and Airbnb, as well as Q2 numbers from Disney.

There’s certainly been no shortage of interest around crypto currencies these past few years and the decision to sell shares in one of the biggest crypto exchanges generated a great deal of interest, with the likes of bitcoin and Ethereum trading at record levels in days.

In its most recent update Coinbase announced that it expects to make between $730m to $800m in this quarter, so we’ll see how close to that we get. The company said it had 56m verified users and its latest results showed the company turned over $1.8bn in the first three months of its fiscal year.

As for Disney, with their theme parks reopening last month is the worst over for the Mouse House. We’ll see later this evening.   

FX

After starting the day on the front foot, the US dollar has started to slide back from its recent highs. It would appear that there was little surprise in the fact that US PPI was going to come in hotter than expected, while weekly jobless claims have continued to improve, dropping below 500k for the first-time post first lockdown.

Commodities

Commodity prices have come under pressure today after China’s state council said it would take action to cope with fast increases in commodity prices. This appears to have set off a sharp fall in iron ore and steel rebar prices, which in turn has seen copper prices drift back.

Crude oil prices have also come under pressure on demand concerns in Asia, as well as the announcement that the US Colonial pipeline had reopened and supply was restarting, taking the sting out of concern about supply shortages.

Cryptos have been choppy today, with bitcoin briefly hitting a two month low just above $46k, before recovering back above $50k, after Tesla CEO Elon Musk performed an about turn on accepting the crypto token as payment for the company’s electric cars.  

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