US dollar backed by Fed minutes as European markets drift higher

IIt’s a rambling session for European markets today. We saw a slight upward drift, mainly due to the recovery of US markets from their intraday lows yesterday, which helped to provide some support for prices.

Europe

The FTSE100 was helped by a resilient oil and gas sector, with a rebound in oil prices helping to support the broader index, led by BP and Shell. On the other hand, we are seeing a slowdown from a range of ex-dividend companies, including Abrdn, M&G, Aviva and HSBC.

It’s been a roller coaster ride for the AO World share price over the past two years. In 2021, shares hit an all-time high of 443p, as a pandemic buying spree sent shares soaring from 48.5p in the space of 9 months. It took a bit longer to go back and forth, with shares hitting record highs of 38.7p earlier this month, but we saw a slight rebound today. Today’s full year figures saw the company post a full annual pre-tax loss of £37m, compared to a profit of £20m a year ago.

Revenue also fell 6% to £1.56bn from a year ago, with the UK and German businesses posting declines. Comparisons to pre-pandemic turnover and the picture look brighter with revenue showing a decent increase, but the problem has been a sharp rise in costs which has seen net debt rise to £33m sterling. In July the company raised £40m to strengthen the balance sheet, while the decision was also made to close the business in Germany, which is estimated to cost £5m.

Regarding the outlook for 2023, AO says the first quarter has gone in line with expectations and that, on a full year basis, annual revenue is expected to be between £1 billion and £1.25 billion. That seems quite conservative, even with the loss of the German company. Turnover in the UK last year was £1.37 billion, so management has really low expectations in anticipation that the rising cost of living will likely lead to a slowdown in this type of expensive items.

After yesterday’s 60% drop cineworld shares have seen a modest rebound, but that needs to be seen in the context that it is now a penny share, having fallen to a new high of 7.8p in the rout of yesterday.

WE

US markets opened slightly lower today after weekly jobless claims slowed to 250,000 last week, and the latest Philadelphia Fed business survey saw a modest rebound in August. Sales of existing homes fell for the 6e months in a row in July, by -5.9%, a sign that while the American consumer is showing some resilience, the appetite for the move is simply not there.

Manchester United remains in the news on the continued chatter about the likelihood that the current owners are willing to sell a minority stake in the company. The latest name in the frame is Sir Jim Ratcliffe of Ineos, who has said in the past that he would be interested, although it would likely need to be more than a minority stake. Ratcliffe doesn’t strike me as the silent partner type.

When Cisco Systems reported a surprise drop in earnings in May, stocks fell sharply. The company cited the effect of Chinese lockdowns and other supply chain disruptions as they cut the fourth quarter revenue outlook to between -1% and -5.5%, from 5.7%.

As it turned out, that turned out to be far too pessimistic, as fourth quarter revenue was $13.1 billion, which was flat year-over-year, and earnings were 0. $.83 ca. Full-year revenue increased 3% to $51.6 billion. The supply chain disruptions the company cited in the third quarter did not prove to be as difficult as initially thought. For the new fiscal year, Cisco said it expects first-quarter revenue growth of between 2% and 4%, beating expectations, while earnings are expected to reach C$0.83.

Shares of Bed, Bath & Beyond fell on reports that activist investor Ryan Cohen is looking to sell his stake in the company, as he seeks to profit from the recent big move higher.

Effects

The Norwegian krone initially rose after Norges Bank raised rates 50 basis points today to their highest level in 10 years, while saying it expected to have to do more and could be raised again at the next meeting in September.

The sharp rise proved to be short-lived as the US Dollar reaffirmed itself, with the greenback hitting a new August intraday high, pushing the pound below the 1.2000 area and setting a new August low for the British currency.

Last night’s Fed minutes appear to have divided opinion on whether the Fed was hawkish or dovish.

Whatever your view, and with Jackson Hole next week, the rate outlook has to be weighed against reality to know if you think it’s credible that the Federal Reserve will start cutting rates next year. next.

The U.S. central bank has spent a lot of capital raising rates quite aggressively over the past few months, and while we can expect to see further rate hikes by the end of the year, there is little likely that we will suddenly see rates come down quickly in 2023, if inflation is still well above the Fed’s 2% target rate, which seems likely.

From a purely practical standpoint, headline inflation is expected to be much higher than the norm over the past few years, and that’s a mindset markets seem to be struggling to navigate. ‘adapt. This is perhaps a mindset that many traders today need time to adjust to given that they have spent most of the last 15 years conditioned to a low rate environment.

Goods

Brent crude oil prices rebounded from 6-month lows, following yesterday’s sharp drop in weekly inventories. Fears of tighter supply once Russian oil embargoes begin to take effect are also fueling today’s rebound, although the external prospect of Iranian oil returning to the market tempers some of those gains. .

Gold prices stabilized slightly after registering three successive daily declines, finding support in the $1,760 area. The resilience of the US Dollar is not helping prices at the moment, although today’s drop in yields has helped it out of its intraday lows.

Volatility

EOS turned out to be the star in terms of price action among cryptos on Wednesday after the token ended up riding a wave of optimism about the near-term outlook. The broader asset class still found support, but EOS’ gains were rather more pronounced as investors bought in to an impending hard fork, although the 20% rally ultimately proved unsustainable. The daily theft, however, grew to 153% against 80% for the month.

In commodities, grain prices are active again. Following last week’s upbeat USDA report, we’ve seen more of this theme in recent days in other major growing countries and it appears to be helping to push oat prices back down again. After peaking higher last week, the underlying is falling again, and the test may well be whether a break below the levels seen at the start of the month can result. The daily theft stands at 157% against 121% over the month.

In terms of fiat currencies, it was the Kiwi dollar that topped the chart following the Reserve Bank of New Zealand’s 50 basis point rate hike and hinted at two more similar moves. observed before the end of the year. This caused the Aussie dollar to fall quite steeply against the kiwi, although the pair quickly rebounded from those 1-month lows. The daily flight printed 8.79% against a month on month reading of 7.03%.

Finally, among CMC’s proprietary stock baskets, cannabis once again stood out, briefly testing nearly three-month highs yesterday before staging some kind of reversion. More legislation is still expected to pass in the US, both at the state and federal level, so as long as this holds, price support is likely to follow. Daily flight printed at 140% against 117% over the month.

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