Stocks are in recovery mode as investors are energised by the prospect of further stimulus, a rebound in US retail sales and on hopes of a ‘major breakthrough’ treatment for serious cases of coronavirus. The Fed’s decision to buy individual corporate bonds and hopes the White House will swing a $1tn infrastructure package continue to help lift the boats. US retail sales jumped 17.7 per cent in May from the previous month, but still remain down sharply on a year-over-year basis – remember sharp rebounds are to be expected after the easing of lockdown, it does mean things are peachy.
Scientists in the UK found a cheap and widely available steroid, dexamethasone, reduces mortality rates among hospitalisations for covid-19. Meanwhile AstraZeneca says it will have a vaccine ready by October that will protect people for one year. With pharma back in focus, revisit our recent special feature on where the industry is with its coronavirus progress.
Meanwhile investors are shrugging off fears of a ‘second wave’ as we see rising numbers of cases in the US and an outbreak in Beijing that has prompted the Chinese authorities to introduce new travel restrictions. Markets also seem unconcerned by a confrontation between India and China that left several soldiers dead on both sides. Whilst investors will need to monitor the situation closely, I would not expect any serious escalation to impact financial markets. China’s foreign ministry said this morning the overall situation is stable and controllable.
European equities surged three per cent yesterday, while Wall Street rose 2 per cent. This morning stocks in Europe extended gains with the FTSE 100 advancing back to 6,300 and the DAX above 12,400. The S&P 500 yesterday closed a point above the 3,123 level that we talked about, which was the Thursday opening daily high. Futures indicate a higher open as stocks in Europe open up firmly.
UK Company Announcements
| Company | Announcement |
| Boohoo (BOO) | The online fashion retailer announced the acquisition of the online businesses and intellectual property of the Oasis and Warehouse brands for £5.25m. The group experienced a 45 per cent boost to revenues in its three months to 31 May, posting turnover of £368m. |
| William Hill (WMH) | William Hill has raised £224m in gross proceeds via a share placing. |
| Severfield (SFR) | The structural steelwork specialist registered a 4.5 per cent lift to full year pre-tax profits, rising to £25.8m. But Severfield warned that clients are delaying investment decisions in response to the coronavirus outbreak. |
| Berkeley (BKG) | Pre-tax profits dropped by more than a third for the high-end housebuilder during the year to April as several Central London developments were completed the prior year and the average selling price declined. |
| Kingfisher (KGF) | Pre-tax profits nosedived by two-thirds in 2019/20. But shares climbed up as much as 5 per cent on the news that sales grew by more than a fifth in the second quarter of 2020/21. |
| SSE (SSE) | Shares in the energy group were boosted this morning after management declared a final dividend of 56p a share, taking the annual total to 80p, as it continues to target 80p plus increases in line with RPI inflation until 2023. It also announced further investment in renewables, including in the 443MW Viking onshore wind farm. |
| Domino's (DOM) | Increased sales have been more than offset by significant costs incurred during lockdown– meaning first-half cash profits are expected to be slightly lower year-over-year. The shares were down 10 per cent this morning. |
| Wincanton (WIN) | Revenue rose 5 per cent to £1.2bn in the year to 31 March, while statutory pre-tax profit dropped 10 per cent to £44m. This came amid a £9m impairment on its ‘industrial and transport’ division from Covid-19 disruption. |
| Serco (SRP) | The shares jumped 16 per cent in early trading after the group said it expects underlying trading profit of £75m-80m for the six months to 30 June, a 50 per cent increase from a year earlier. It has also reinstated and increased its annual guidance, pointing to underlying trading profit of £135m-150m for the full year. |
| Galliford Try (GFRD) | The group has secured an £85m contract from Argent Related to build two mixed-use residential buildings in Tottenham Hale comprising 281 homes. |
Data this morning showed UK inflation at a miserly 0.5 per cent, which was in line with expectations, but again signals the very deflationary impact of the pandemic right now. But as previously discussed, there may be a large dose of inflation coming round the bend. The Bank of England will tomorrow almost certainly announce more QE, likely increasing purchases by at least £100bn. Numbers yesterday pointed to a looming unemployment crisis in the UK as businesses slash jobs over the coming months.
In FX, the majors are holding their ranges. GBPUSD moved back under 1.26 having broken down at the 200-day moving average at 1.2690 yesterday, looking potentially to test the 100-day line around 1.2530 before a retest of Monday’s lows around 1.2450 as a near-term support. EURUSD pulled back under 1.13 having again bounced off the 23.6 per cent Fib level around 1.1230 yesterday.
Crude oil rose on the turnaround in risk sentiment and gained further support after the International Energy Agency raised its oil demand outlook by 0.5m bpd to 91.7 million bpd. Near-term there are still pressures though - API inventories showed a rise of almost 4m barrels. EIA figures today may show a slight build – but as noted last week the consensus estimates for these prints have been quite wide of the market over the last couple of months. Whilst risk is bid right now as equities climb, a rise in cases in the US and China may dampen hopes for an immediate rebound in oil demand.
