Wall St hits new highs, Europe looks to von der Leyen election
Equities squeezing out new ATHs, just about. Amid a hotly-anticipated
earnings season that’s only just starting US stocks are still firming up
with the three major indices notching fresh record closes Monday. The S&P
500 ended at 3,014 points to make a modest gain, whilst the Dow eked out a 27pt
rise to finish at 27,359 and the Nasdaq added 0.2% to close at 8,258. Asia has
been mixed overnight with nothing really to drive direction. Europe looks
Citigroup posted decent numbers, with a headline EPS
beat. But this was flattered by a one off IPO. Net interest margin declined,
though, cementing the view that lower rates will pressure financials.
Banks reporting today including JP Morgan and Goldman.
US retail sales will be eyed for consumer demand and what
that may mean for Fed policy once we get this July cut out the way.
Trade – some blustering from Trump but nothing new. Talks between Japan and Korea haven’t gone well.
The Reserve Bank of Australia is leaving the market in doubt it’s got its foot on the easing pedal and is quite happy to keep it there. Expect further cuts unless we see a big rebound in the next two months. Chinese slowing undoubtedly weighing on the bank’s thinking. AUDUSD susceptible to downside risk here if the RBA outpaces the Fed but now is firming on the 70 handle. Failed to break out above 70 so far though so this is looking like a resistance level.
Europe – we will find out tonight if compromise pick Ursula
von der Leyen is voted in as Commission President. If she fails it would be big
a blow for the main centrtist groupings and further indicate the splintering
within European politics. Make no mistake, she is no certainty. She needs 347
MEPs to back her but with the major centrist grouping not what it once was, and
the Greens and Socialists against, there is a risk of falling short.
Failure to select Leyen would reawaken slumbering Euro
political risk, introduce further uncertainty around the status of Europe,
cohesion around various internal political and economic issues (Italy) and
throw the EC into turmoil at a critical point for Brexit.
Or she’ll scrape through and we’ll just keep calm and carry
on. EURUSD struggling to catch bid and looks susceptible to downside moves
again having failed to hold 1.1270. Potential head and shoulders formed to
drive price action back into the 1.11 level?
Ryanair – uncertainty over Boeing 737 MAX aircraft
has shattered Ryanair’s 2020 planning. Management say they’ll be basing
schedules for next year on having about half the MAX planes they thought they
would have. So summer 2020 will be planned around 30 MAX aircraft versus the 58
they’d been banking on.
This will significantly affect passenger growth, which
management says will be fall to around 3% for summer 2020 against 7% previously
expected. Full year to March 2021 traffic now seen at 157m against 162m previously
We may also see decline in passenger growth this year as
Ryanair is planning to cut capacity ahead of the 2019 winter season in
It’s not all bad – stripping out a load of excess capacity
should boost pricing power and lift margins for others, as well as for Ryanair.
Again scheduling problems at Ryanair seem set to benefit rivals. Shares up
across the board.
Burberry – the big question facing Burberry has been
to what extent the Chinese consumer is reining in their luxury buying. So are
they feeling the pinch? Not so much, it seems, with Burberry saying sales
growth in mainland China rose in the mid-teens percentage in the first quarter,
boosting Asia Pacific region growth to high single digits. Strong retail sales
figures from China proved a good guide.
The weak pound boosted tourist spend in Burberry in its home
market. Growth in the Americas was flat.
Response to the new Ricardo Tisci products has been
positive. It’s now 50% of the offer and helped lift overall comparable store sales
up 4%. Outlook unchanged, expect profits and further acceleration in sales
growth to come through in the second half.
A.G. Barr – Relying on the Scottish weather for sales
is not much of a strategy…A nasty little profits warning this morning. Not so
little in fact – management expects profits to be down by up to 20% this year
and revenues down 10% in the first half. There is an element of strategy shift
– from the heavy focus on volume last year and back to value now. But this only
explains some of the trouble. It’s not been such a good summer in Scotland and
northern England versus last year and management are pointing to ‘brand
challenges’ for Rubicon and Rockstar. H1 performance has been well short of
expectations. This is a surprising development and undoubtedly will disappoint