Europe

European stocks have undergone another week of choppiness without actually going anywhere, finishing the week on the back foot in the process. The DAX and Stoxx600 may well have posted new record highs, however in the last four weeks we’ve barely gone anywhere, and look set to finish the week firmly in the red.

Today’s price action has seen the FTSE100 drop below 7,000 this afternoon predominantly as a result of weakness in the basic resources sector and weaker metals prices, with Glencore, Rio Tinto and Anglo American all falling back. The sector wasn’t helped by a disappointing production report from Rio Tinto which suggested the miner would struggle to hit its iron ore guidance after a tough quarter, hampered by labour shortages and bad weather.  

It’s not been a great week for the travel and leisure sector, as we look ahead to next week’s so called economic reopening, with big falls in airline stocks, while hospitality hasn’t fared much better, with Cineworld hitting its lowest levels this year, while pubs have also had a disappointing week.

The new vague rules, or guidance around mask wearing, and rising infection rates mean that next week’s reopening isn’t likely to change that much in terms of day-to-day living, except by shifting the burden of responsibility from government deciding how and where to work with the virus, and on to the private sector, and the private individual.

Today we are seeing a bit of an end of week pullback in the weakest sectors, with a bit of a rebound in hospitality, notably Premier Inn owner Whitbread, and Holiday Inn owner Intercontinental Hotels amongst the best performers.

Rolls Royce is getting a respite after four days of declines, along with international airlines which are getting an end of week bounce, on reports that the US is looking at reviewing the European travel ban in the next few days, after German Chancellor Angela Merkel raised the issue with US President Biden.

Cineworld also appears to have found a bit of a floor, rebounding today. after five successive daily declines, at the end of its worst weekly performance since March.    

The luxury sector has seen some decent numbers over the past 24 hours, however share price reaction has been somewhat muted.  

Burberry shares have slipped back despite Q1 sales beating expectations, with comparable store sales rising 90% vs last year. Retail revenue for the 13 weeks to the end of June came in at £479m a rise of 86%, driven by a much younger cohort of shoppers, however full year guidance was left unchanged. This may help explain why the shares have fallen back, which suggests that there may be some doubt that the current rate of improvement can be maintained. There was also no further detail on how the CEO search was going, or whether creative designer Riccardo Tisci was staying.

Richemont shares have also struggled despite seeing a doubling of Q1 sales, with a strong performance in its North American market

It’s been a stellar week for AI cyber firm Darktrace with the shares hitting another record high today after reporting yesterday that it expects to see annual revenue growth of at least 40%.

US

US markets opened higher after US retail sales for June came in better than expected, rising 0.6%, against an expectation of a decline of -0.3%, with the Nasdaq hoping to close out a ninth week of gains. These gains appear to be evaporating as we head into the end of the European trading day.

This week’s earnings reports have by and large been positive but attention is now shifting to what comes next in terms of the outlook, and here the picture is less clear. There was a great deal of optimism over the summer reopening, however as we look ahead to the rest of the year and look at how Delta variant infections are rising some of that optimism prompting the question as to where we go next for Q3 earnings expectations.

Moderna shares have hit fresh record highs on reports it is on course to join the S&P500 from 21st July, relacing Alexion Pharmaceuticals which is being bought by AstraZeneca.

Didi shares are lower after China sent state security police into its premises as part of a wider cybersecurity probe.  

FX

This week appears to have marked a shift amongst some central banks to begin paring back monetary stimulus. Both the RBNZ and Bank of Canada have signalled the beginning of the end of their bond buying programs.

The NZD has been the best performing currency this week on the basis of that shift by the RBNZ. With concerns about rising inflation increasing, pressure is now starting to build on the Bank of England and Federal Reserve to look at doing the same if the data continues to point in that direction.

This shift appears to be helping to push the US dollar higher towards the top end of its recent range, sending the pound below $1.3800 to its lowest levels this week.

Commodities

Brent crude prices appear to have hit a short-term peak, which is likely to be welcome news for those concerned about inflation concerns. Rising virus cases, as well as the prospect of an OPEC+ agreement to boost supply has seen prices post their worst week since March.

Gold prices have slipped back from their peaks this week, as 10-year US yields start to show signs of putting in a short-term base just below 1.3%, however they still look on course to post their fourth successive weekly gain.

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