Time to recap
Stock markets in the US and Europe have rallied again as investors grip onto hopes of a strong economic recovery this year.
The Dow Jones industrial average hit a fresh all-time high over 32,000 points, and tech stocks continued to recover from their recent slide. The Nasdaq Composite has dipped a little, but is currently up 49 points or 0.4% at 13,123.
The rally came after the latest US CPI report showed that core inflation dropped last month, to 1.3%.
The headline measure of inflation rose to 1.7%, a one-year high, lifted by higher gasoline prices. But analysts said there was little sign that the US economy was overheating – an issue which had caused market ructions last month.
The US housing market also saw weaker demand last week, with mortgage approvals dipping.
But with the Biden White House pushing through a $1.9trn stimulus package, investors and economists expect US growth to recover strongly.
The Bank of Canada left interest rates at record lows, and warned that there’s plenty of spare economic capacity to be utilised, despite recent signs of recovery.
A tie-up with Nintendo proved particularly successful…. while Lego also grew sales strongly in China.
Video gaming platform Roblox, who also boomed last year, has made a successful debut on the New York stock exchange today – surging 43% over its reference price.
But Hong Kong’s Cathay Pacific suffered a grim year, reporting its biggest annual loss ever earlier today.
In the UK….
The Restaurant Group, the owner of the Frankie & Benny’s and Wagamama chains, is looking to raise £175m as it continues to struggle with the impact of Covid-19.
Restaurant chain Jollibee is launching a £50m expansion across the UK and Europe — good news for fans of fried chicken….
….while takeaway operator Just Eat reported a jump in revenues and losses last year.
Royal Mail hiked its profit forecast, after seeing a jump in letters volumes in recent weeks.
In the retail world, Next bought a 25% stake in the Reiss fashion brand for £33m.
And UK homebuyers are being offered the chance to fix their mortgage repayments for 40 years…..
After four hours of price discovery, Roblox shares have begun trading on the New York stock market.
And they’ve opened at $64.50 per share, sharply above the $45 reference price set for today’s direct listing, showing strong demand for the video gaming platform.
Hundreds of email addresses for the UK’s leading business bosses have been accidentally shared due to an apparent gaffe by the Department for Business, Energy and Industrial Strategy (BEIS), my colleague Rob Davies reports.
The error, which appears to put BEIS in breach of GDPR rules governing the use of private data, occurred while the department was gathering suggestions for the 2022 new year honours list.
It shows that the chief executives of firms including Serco, which has received criticism over its £37bn test and trace contract, have been invited to nominate staff for honours.
BEIS approached more than 500 captains of industry, inviting them to submit nominations from the world of business and finance.
But instead of using the bcc (blind carbon copy) option, which disguises the recipients of a bulk email, the department used the cc option, meaning that everyone in the chain could see each other’s addresses…
Here’s the full story:
Video games retailer GameStop is having another remarkable session, which has seen its shares briefly halted.
First it surged over $300 per share, then slumped below $200, and is now back at $257 – up 4% on the day….
UK borrowers are being given the chance to lock their mortgage repayments at the same level for up to 40 years with the launch of the longest fixed-rate deal on the market.
The lender Habito plans to launch a range of mortgages for borrowers with a 10% deposit that offers fixed-rate terms of up to four decades. The rates are based on the size of the deposit and how long the borrower wants to repay their mortgage.
Someone taking the 40-year option with a 40% deposit will fix at 4.2%, while a borrower with just 10% to put down will pay 5.35%….
The combination of traditional plastic toy bricks with digital games such as Super Mario helped the toymaker Lego achieve double-digit growth in sales, revenue and profit in 2020.
Families spending more time together during the coronavirus pandemic sparked strong consumer demand for Lego products, pushing the business to double-digit growth for the first time since its growth spurt came to an end in 2017, when its sales and profits fell.
Consumer sales climbed by more than a fifth in 2019, while Lego’s operating profit rose by 19% to almost 13bn Danish kroner (£1.5bn).
The family-owned business grew its market share globally, including in its 12 largest markets in 2020, outpacing growth recorded for toys in general, which was about 10%, according to the market research firm NPD….
The London stock market couldn’t match the excitement on Wall Street today, with the main indices finishing the day roughly where they started.
The FTSE 100 has closed 4 points lower at 6725 points, while the mid-cap FTSE 250 gained 24 points to 21,406.
Just Eat was the top riser on the FTSE 100, after predicting it would grow its UK market share this year after a bumper 2020.
But mining companies continued to drag the index down.
European markets had a better session, with the Stoxx 600 gaining 0.4% to a new one-year high. Germany’s DAX hit a new record high, up 0.7%, extending its recent gains.
David Madden of CMC Markets sums up the day:
In a similar fashion to yesterday, the overall mood in European equity markets is positive but the FTSE 100 is underperforming in comparison with the major indices in mainland Europe.
The subdued activity in government bond yields is helping equities again. Mining stocks like BHP Group, Anglo American and Rio Tinto are weighing on the index. Financials like, Standard Chartered, Barclays, and Prudential are also hurting the UK market. The DAX 30 registered a record high, partially due to a well-received update from Adidas.
Traders are largely content to buy into equity markets as hopes circulate in regards to the US’s $1.9 trillion spending plans and the global economic recovery story.
Shares in UK broadcaster ITV have dropped 3.8% today, after Piers Morgan departed its breakfast show Good Morning Britain.
Morgan left the show last night after broadcasting regulator Ofcom received more than 41,000 complaints over his comments about the Duchess of Sussex’s mental health.
He had earlier stormed off the GMB set, after co-presenter Alex Beresford criticised him for continuing to “trash” Meghan.
Morgan was a big ratings driver for GMB, so his exit could worry investors. On the other hand, ITV yesterday reported signs of a strong recovery in advertising, after a sharp fall in profits last year.
Neil Wilson of Markets.com explains:
Investors may be a little worried about the loss of ratings for GMB – it wasn’t exactly doing that well before he joined and its primetime slot will have repercussions for ads. Love or loathe, Morgan boosted ratings. It could also be that investors are worried about an investigation over comments made by Morgan on air.
Shares were hit yesterday after it revealed the way in which lockdowns have hit ad revenues, but indicated things are picking up and Studios can drive new growth.
DB [Deutsche Bank] today calls it a buy. You cannot be owning ITV and worry about one host, can you?
Over in Ottawa, Ontario, the Bank of Canada has left interest rates on hold at their record lows of 0.25%, despite signs of economic recovery.
It also reiterated that it doesn’t expect to raise them until the economy has recovered from the pandemic and economic slack has been absorbed – which it doesn’t see happening until 2023.
That’s not a surprise, but it does illustrate that central bankers are keen not to tighten policy anytime soon.
The BoC acknowledges that Canada’s economy is proving “more resilient than anticipated” to the second wave of Covid-19. It now expects the economy to grow this quarter, having forecast a contraction in January.
However, it warns:
Despite the stronger near-term outlook, there is still considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.
The labour market is a long way from recovery, with employment still well below pre-COVID levels. Low-wage workers, young people and women have borne the brunt of the job losses. The spread of more transmissible variants of the virus poses the largest downside risk to activity, as localized outbreaks and restrictions could restrain growth and add choppiness to the recovery.
If you’ve a hunger for fried chicken, there will soon be another purveyor in central London, this time one with an Asian twist.
Restaurant chain Jollibee, founded in the Philippines in 1978, is to open a flagship branch in the capital’s Leicester Square later this year, followed by seven other outlets around the UK by the end of the year in places such as Edinburgh and Cardiff.
The expansion, expected to lead to the creation of 1,350 new jobs, is part of a £30m investment in the UK, combined with a £20m investment in Europe, including its first Spanish branch in Madrid. Jollibee, which first opened in Earl’s Court in west London in 2018, opened two new restaurants in Liverpool and Leicester during 2020.
Dennis Flores, president of international business at Jollibee, said the company is dedicated to growing the brand in the UK and Europe.
“We adapted our approach to appeal to a young British demographic which meant building a premium, inviting space with a touch of our distinctive Asian heritage.
The pandemic may have been a setback, but it will not deter us from pursuing our vision for Jollibee in the UK and the rest of Europe.”
The chain is especially targeting fast food fans in their 20s. While its most loyal customers are Filipino, Jollibee said that 70% of its customers in its Leicester and Liverpool branches are British. Jollibee is banking on a return to eating out when Covid restrictions ease.
“Community spirit and hospitality are central to both Jollibee as a brand and the Filipino culture. When restrictions are lifted, we know our customers will want to return to their normal social lives, and restaurants play a key role in that,” said Adam Parkinson, VP of Europe at Jollibee.
Every sector of the S&P 500 index (a broader index than the Dow) is up so far this session.
Energy, financials and discretionary consumer firms are the top-performing sectors.
The Dow has now hit a fresh intraday record high, and is currently up 320 points, or 1%, at 32,153 points.
Roblox have rung the opening bell…..and Wall Street has opened higher.
Stocks are rallying as February’s subdued US inflation report calms worries that rising interest rates could dent the recovery.
The Dow is being led by Walgreen Boots Alliance (+3.2%), followed by airline maker Boeing (+2.8%) and investment bank Goldman Sachs (+2%)
The Nasdaq is adding to its biggest gains in four months yesterday. Tesla has jumped 3.5%, having surged almost 20% on Tuesday.
Here’s the early prices:
John Leiper, chief investment officer at Tavistock Wealth, suggests US inflation will push higher this year, though, which could hit the markets.
US inflation rose to its highest level in a year in February, up 0.3% from 1.4% to 1.7% annualised. That is good news for the economy but the rise in inflation won’t stop here as we are now approaching a three-month run where decade-low monthly readings drop out of the rolling calculation. The real test will come in the second half of 2021 when rising inflation expectations and the release of pent-up demand contribute to a spike in the headline rate which we believe can hit 4%. We’ve reached that level, or come close to it, several times before, in the late 1980s, 2000, 2005, 2007 and 2011 and on each occasion, inflation reversed course quite precipitously, typically alongside a fall in equities.
To summarise, today’s number is consistent with rising commodity prices and input cost inflation flagged in last week’s PMI numbers. Jerome Powell has made it clear he wants higher inflation and is willing to run the economy hot to get there. We think he will but there is a real risk the Fed has backed itself into a corner and may need to reign-in stimulus faster and quicker than expected which increases the chance of a volatile market reaction later this year.”
Today’s Wall Street opening bell is being rung by computer game platform Roblox.
Roblox is listing on the New York stock exchange today, in one should be one of the most anticipated offerings this year.
Roblox was valued at roughly $30bn in January, in its last financing round. As well as letting people play games, Roblox’s platform also allows users to create their own games.
Its popularity has soared under the lockdown, particularly with younger gamers, while developers were expected to share $250m in payouts last year.
If you know a tween or teen, there’s a good chance they’re one of the many obsessed with Roblox, an MMO game platform that lets the users themselves program games that can be played by all Roblox users. The company originally launched in 2004 and saw its user base skyrocket as the pandemic and lockdowns bit last year. (It saw its share of controversy too.) The iOS version of the game alone went from $1 billion in player spending revenue in November 2019 to $2 billion by October 2020. Roblox is also available on Windows, macOS, Android, and Xbox One.
The company raised $29.5 billion in January, reports CNBC, which help set its stock price at $45 today. However, it’s important to note that today’s Roblox offering isn’t an IPO. Rather it’s a direct listing. That means no new shares in the company are being created and sold. Instead, existing shares of the company are being offered. This means there’s no guarantee that new investors can get in at $45. By the time the bell rings this morning, the shares could be much higher–or lower.
Neil Birrell, chief investment officer at Premier Miton Investors, says there’s no sign of inflation pressures building…
“US CPI was in line with expectations for February. Whilst markets are fretting about inflation that might lie ahead, there is no sign of it in the present.
The prices of vehicles, clothes and transport were all lower month on month, which suggests that core inflation is not on the move yet; these are key elements of the data.”
…but Andrew Hunter of Capital Economics thinks prices will push higher as the US economy reopens.
The continued weakness of core prices is hard to square with the recent recovery in demand, as plummeting virus cases have allowed most states to begin easing restrictions. But with the high-frequency data showing that restaurant dining and air travel are now rebounding rapidly, it’s surely only a matter of time before prices in those most-affected services sectors start to pick up.
More generally, with the imminent fiscal stimulus set to turbo-charge demand, at a time when many sectors are already facing severe supply constraints, and with a variety of survey indicators pointing to rising price pressures, we still think inflation will rebound rapidly over the coming months.
US government bond prices strengthened after the inflation report hit the wires, pulling down Treasury yields.
That suggests that inflationary worries have indeed eased, following the dip in core inflation to 1.3% per year, from 1.4%.
Wall Street future also moved higher.
Economists and investors say February’s inflation report shows that the US economy isn’t overheating.
Here’s Greg Daco of Oxford Economics:
CNN’s Paul La Monica reckons this could ease inflation worries:
Macrostrategist George Pearkes concurs:
Just in: inflation across the US rose to 1.7% per year in February, its highest level in a year.
That’s in line with forecasts, with consumer prices rising by 0.4% in February alone, up from 0.3% in January.
Gasoline prices pushed up the cost of living, according to the Bureau of Labor Statistics.
But core inflation remains subdued – rising by only 0.1% in February, and by 1.3% year-on-year. That’s down from 1.4% per year in January, and weaker than expected.
That could reassure markets that inflationary price pressures aren’t building yet.
The BLS explains:
The gasoline index continued to increase, rising 6.4 percent in February and accounting for over half of the seasonally adjusted increase in the all items index.
The electricity and natural gas indexes also increased, and the energy index rose 3.9 percent over the month.
The food index rose 0.2 percent in February, with the index for food at home and the index for food away from home both rising. The index for all items less food and energy rose 0.1 percent in February.
Mortgage applications in the US dropped by 1.3% last week, as rising interest rates weighed on demand.
The decline was driven by a fall in demand to refinance home loans (rather than for a new purchase), as CNBC explains:
Applications to refinance a home loan fell 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. They were also 43% lower compared with the same week one year ago.
That is the first year-over-year drop since March 8, 2019. Last year at this time mortgage rates fell dramatically as fears of the coronavirus hit financial markets. That caused a large spike in refinance demand, hence this year’s comparison.