European markets have rebounded strongly today, with the FTSE 100 reversing all its Monday losses, while we appear to be seeing a more tempered reaction in the DAX which still remains well below its Friday close.
Europe
It could be that a reluctance on the part of governments to impose new strict lockdown measures this side of Christmas, might be helping sentiment on the margins, however one can’t help feeling this might be down to the fact that even if restrictions were imposed there is little likelihood they would be observed by increasingly pandemic-weary populations. There is perhaps a feeling that any new measures might be easier to push through after the Christmas festivities have passed.
A rebound in commodity prices is helping to foster a rebound in the big caps of basic resources and oil and gas, however we’re also seeing decent gains in consumer discretionary as well. Among today’s gainers JD Sports has seen a solid day on the back of last night’s strong numbers from Nike, while the beleaguered travel and leisure sector has also seen strong gains, with easyJet, Ryanair, IAG and TUI all outperforming, having shrugged off the worst of yesterday’s sell-off.
Housebuilders are also gaining after data from HMRC showed that house sales rebounded in November, after a bit of a lull in October, with Barratt Developments, Taylor Wimpey and Persimmon leading the way. Some of the big decliners yesterday have also rebounded with the likes of Premier Inn owner Whitbread rebounding along with events company Informa.
US
After yesterday’s declines, US markets have had a much more positive vibe today as sentiment continues to ebb and flow, as we look to break a chain of three successive days of losses.
Nike shares are leading the Dow higher after Q2 sales beat expectations. The numbers were especially good considering the China business saw a 20% fall in sales. These declines were offset by a strong performance from the business in North America. While Nike’s Q1 numbers were hit by factory shutdowns in Vietnam there was widespread optimism that this would be short-lived.
Last night Nike saw Q2 revenues come in better than expected, at $11.36bn, albeit below the levels in Q1. Direct sales continued to improve, rising 9% to $4.7bn, cementing Nike’s reputation as a retailer in its own right. Profits came in at $0.83 a share, while gross margins improved to 45.9%. The reopening of its Vietnam factories has seen output recover to 80% of pre shutdown levels, raising expectations of a much-improved performance in Q3.
Airlines are continuing to recover after managing to escape the worst of yesterday’s sell off, with American Airlines and United up for the second day in a row. Disney shares are also back in favour, although they are the worst performer on the Dow year to date, down over 15%.
FX
The pound was able to shrug off a pretty poor set of CBI retail sales numbers, which unsurprisingly given the uncertainty over Omicron, saw sales volumes slide from 39 in November to 8, in the latest December numbers. This is unlikely to improve much over the next few weeks, especially if we do get the announcement of new restrictions after Christmas.
The Norwegian krone is also on the up, rising in lockstep with the rebounding oil price.
Commodities
The more positive mood in equity markets today has manifested itself into a recovery in crude oil prices, although caution remains the overriding sentiment in the current environment. While governments are being somewhat restrained when it comes to new restrictions, this may change if infections continue to rise sharply, and this appears to be capping the upside.
Gold has barely moved in the last two days trading slightly lower from its Friday close in amongst all the moves we’ve seen in global equity markets.
