Recent rise of the Delta variant in China is causing concern
Data emerging from China revealed that the nation’s service sector growth sped up in July, reaching its highest level since May.
However, the ongoing spread of the Delta variant of the coronavirus remains a concern and is posing a threat to a full recovery.
The Caixin /Markit services Purchasing Managers’ Index (PMI) rose to 54.9 in July, up by 4.6 from the month before. Any value above 50 represents monthly growth rather than contraction.
So far the recovery of the service sector in China has been outpaced by that of its manufacturing sector.
However, the more recent rise of the Delta variant is causing concern and leading to an element of uncertainty of China’s near-term outlook.
July figures suggested Covid-19 was successfully contained in the southern region of China, according to Wang Zhe, senior economist at Caixin Insight Group, however, he said the latest outbreak would be likely too negatively impact August’s PMI figures.
“The economy still faces enormous downward pressure, and we need to ensure business owners remain confident,” Wang said.
The FTSE 100 continues to fight back after a sell-off in mid-July, rising by 0.28% to 7,126 during the morning session on Wednesday.
“If it can break the 7,217 intraday high seen on 16 June, then the index would be trading at levels not seen since February 2020 when global markets started to crash as the pandemic spread,” says Russ Mould, investment director at AJ Bell.
“Hitting that level looks possible this summer in the absence of any major negative news to trouble investors,” Mould added.
“Sadly, it doesn’t take much to rattle the markets, and there are plenty of reasons to remain cautious, such as many stocks trading on elevated valuations and the Delta variant continuing to cause disruption.”
The UK market on Wednesday was supported by BP extending gains for a second day following yesterday’s results, while banks and housebuilders were also on the menu for investors.
“What’s interesting is how demand for certain industries has remained strong post-lockdowns. There was a feeling that some sectors would see a drop-off as life starts to return to normal, but in many cases that hasn’t happened,” said Mould.
FTSE 100 Top Movers
Taylor Wimpey (3.02%), Legal and General (2.26%) and Prudential (2.05%) are leading the way on the UK index less than two hours into trading.
Just Eat (-2.35%), Fresnillo (-2%) and Ocado (-0.99%) are trailing the pack on the FTSE 100.
FTSE 100
Taylor Wimpey, the homebuilder, has constructed a record number of homes over the past half-year, boosting the company’s revenue levels in the process.
Over the last six months the FTSE 100 company completed 7,303 homes, a substantial increase from 2,771 during the same period a year ago.
The additional 4,500 properties saw its revenue surge by 191.1% to £2.1bn.
Taylor Wimpey also confirmed it raised its full-year profit guidance as the average selling price rose by 7%.
Ryanair recently announced a recruitment drive for cabin crew for its UK bases
Ryanair, the budget UK airline, released figures for its flight traffic on Wednesday, proving that travellers leapt at the opportunity to go abroad in July as restrictions on travel eased.
9.3m passengers took Ryanair flights during July, more than double the 4.4m figure from June.
Ryanair operated over 61,000 flights in July with an 80% “load factor”, meaning 80% of the available seats were filled. This showed that the airline considered flying to be safer than in June, when the “load factor” was 72%.
The pandemic battered the airline industry, and specifically Ryanair, as the company lost around £900m.
The company made a net loss of €273m for Q1 ending in June, although it has said it could make a profit in Q2, and break even over the course of the year.
Ryanair recently announced a recruitment drive for cabin crew for its UK bases as the airline recovers from the Covid-19 pandemic.
The airline has renewed its partnership with Crewlink, a company which specialises in the recruitment and training of cabin crew.
The Ryanair share price is up by 0.12% during the morning session on Wednesday.
Taylor Wimpey (LON:TW), the homebuilder, has constructed a record number of homes over the past half-year, boosting the company’s revenue levels in the process.
Over the last six months the FTSE 100 company completed 7,303 homes, a substantial increase from 2,771 during the same period a year ago.
The additional 4,500 properties saw its revenue surge by 191.1% to £2.1bn.
Taylor Wimpey also confirmed it raised its full-year profit guidance as the average selling price rose by 7%.
The firm’s new expectation is that its operating profit for 2021 will exceed £820m, which exceeds the top end of its previous estimates.
The FTSE 100 company is expecting between 13,200 and 14,000 new house completions.
Taylor Wimpey’s construction levels were impacted last year by pandemic-induced restrictions causing supply chain issues across the world.
Laura Hoy, Equity Analyst at Hargreaves Lansdown. commented on Taylor Wimpey’s results and the wider housing market:
“Another set of strong results from the UK’s housebuilders adds to mounting evidence that the pandemic has been a tailwind for the housing market. Turns out being locked inside for months on end has caused many people to re-evaluate their current living situation. Add to that the rising popularity of working from home, and you have the perfect excuse to move house.”
“Over the past few months, there’ve been mutterings of a potential slowdown in the UK’s red-hot housing market—Halifax reported a small decline in house prices in June—but from Taylor Wimpey’s perspective things are still ticking over nicely. The group reported a double-digit rise in house prices, a strong forward order book, and cancelation rates in line with 2019 levels.”
“If things carry on like this, Taylor Wimpey could be one of the pandemic’s biggest winners. The group was bolder than some of its peers with an aggressive land buying strategy that will pay off if the market remains buoyant. Of course, the group will suffer if the economy stumbles in the wake of the pandemic, but so far the group is building from a strong base.”
Swedish investor Peter Gyllenhammar is building up a stake in First Property (LON: FPO), which was hit by a sharp share price decline following its full year results. There is upside for the property manager and investor, though, because of its strong balance sheet and recurring income.
Peter Gyllenhammar is predominantly a value investor so he must see value in First Property, which manages property funds and owns property directly in the UK, Poland and Romania. On 28 July, his shareholding passed 3% and the stake has been increased to 4.07%.
The share price fell to 26.5p during 26 June and i...
Senior officials at the Federal Reserve suggested that it could start to reign in its support for the economy by October if non-farm payroll figures increase, as expected, by between 800,000 and 1m.
“If they come in as strong as the last one, then I think you have made the progress you need,” the Federal Reserve Governor Christopher Waller told CNBC. “If they don’t, then I think you are probably going to have to push things back a couple of months.”
Analysts are expecting the yellow metal to move sideways throughout the week ahead of the announcement of employment figures.
Gold’s underwhelming performance is a reflection of other markets, as the US dollar remains weak, while bond yields are low.
“A larger allocation into gold from investors is unlikely to materialize unless growth assumptions continue to deteriorate, thereby reducing the risk of central bank action,” said Ole Hansen, head of commodity strategy at Saxo Bank to Kitco.
The Argo Blockchain share price(LON:ARB) is down by 3.47% on Tuesday as the bitcoin miner provided an operational update for July. Over the past five days of trading, the Argo Blockchain share price is hovering around the 130p level. It remains some way off its all-time-high of 284p reached in February. July was a busy month for both Argo and bitcoin, culminating in a renewed sense of optimism in the crypto market following the crash.
Operational Update
Argo’s mining output was up substantially in July to 225 bitcoin, compared to 167 the month before. It brings the company’s total bitcoin mined since the beginning of the year to 1108 bitcoin.
Based on daily foreign exchange rates and cryptocurrency prices during the month, mining revenue in July amounted to £5.6n ($7.79m), up from $6.05m the month before.
Argo Blockchain now owns 1,496 bitcoin as of the end of July.
Peter Wall, Chief Executive of Argo said: “I’m delighted that we have been able to capitalize on the reduction in global hash rate and mining difficulty this month to deliver these results at an impressive margin. We are also pleased to have broken ground at the Texas facility, and are excited about the opportunities that this development offers in allowing us to exercise greater control over our mining operations, to continue to utilize renewable power and to work with the local community in Texas to enact positive change.”
Bitcoin
As the bitcoin price pulled back over the last few days, investors will be curious over the direction of the cryptocurrency, and its impact on the Argo Blockchain share price.
At the time of writing, bitcoin is at £27,735, having been above £30,500 over the weekend.
Mark Warner, head of trading at BCB Group, gave Forbes his take, which will be well received by those with an eye on the Argo Blockchain share price.
“There are many sellers at $42,000, where longs have been trapped since 19 May, so we expect more resistance at this level. A confirmation of the breakout, by BTC retesting $34,500-$36,000, could provide buying opportunities for those who missed out.”
European stocks are currently best positioned to outperform the global equity market. That is the view of professional investors, ranging from pension, investment and hedge funds, according to data from Best Block and a Citigroup survey.
For years, US securities have been known to outperform broad indices, however, there may well be a changing of the guard.
It is only a new phenomenon. As recently as this spring, professional investors were of the view that US stocks offered the maximum possible returns.
However, Europe offers more investment opportunities in value stocks and cyclical investments, as well as assets that stand to benefit the most from a global economic recovery. In addition, European equities are also less vulnerable to concerns about inflation.
A survey among professional investors revealed that European shares were the most appealing investment, over raw materials and US equities.
Professional investors are not the only source suggesting an optimistic outlook for European shares. Google search engine data revealed a disproportionate weighting towards “European stocks” over “US stocks” too. The former received a Google Trend Score of 59, while “US stocks” scored just six, with 100 representing the highest possible search volume.
Having said that, US shares performed better last year. The NASDAQ gained 40.9% in a 365-day review, while the Dow Jones rose by 32.2%. By way of comparison, the EURONEXT 100 gained 29.1 %. That said, the tide could soon turn, according to the stock market experts.
The Euronext 100 Index, below, is the blue chip index of the pan-European exchange, Euronext NV. It comprises the largest and most liquid stocks traded on Euronext.
EU indices are leading the race when it comes to ESG credentials – although the leading indices from Germany, France and Italy still have much room for improvement, they are clearly ahead of major indices from the other G7 countries in terms of their temperature paths.
Major banks each have Price-to-Book ratio below one
Standard Chartered bank (LON:STAN) has reported a larger-than-expected increase in profits in the first half of the year, resumed interim dividend payments and confirmed a $250 million share buyback.
Thanks to an improvement in bad loans and the recovery from the coronavirus pandemic, Standard Chartered saw its H1 pre-tax profits rise by 57% to $2.56bn.
Analysts had made initial forecasts of $2.23bn.
Standard Chartered’s results confirm the trends shown over the past week by Barclays, Lloyds, NatWest and HSBC.
This is despite the in geographic and business mixes between the big five FTSE 100 lenders, says AJ Bell Investment Director Russ Mould.
However, the markets are not reflecting the seemingly bright outlook painted by the recent run of results.
“Investors are clearly unconvinced that the banks are out of the woods, as the shares of all five trade well below their official, stated net asset – or book – value per share,” Mould said.
This suggests that markets are either unsure on the banks’ ability to generate sustainable double-digit returns on equity, or they think the net asset values are too optimistic. Otherwise, it would mean the banks are very undervalued.
Standard Chartered has the lowest Price-to-Book ratio at 0.47, while Lloyds, at 0.83, has the highest.
The Price-to-Book ratio is calculated by dividing the company’s stock price per share by its book value per share.
A price to book ratio of less than one suggests that the market is valuing the company at less than the total value of its assets.
2021E
Q2 2021
2021E
2021E
P/E
Price/book
Dividend yield
Dividend cover
Standard Chartered
9.3 x
0.47 x
3.2%
3.32 x
Barclays
6.8 x
0.63 x
3.2%
4.53 x
HBSC
12.4 x
0.71 x
4.1%
1.95 x
NatWest Group
14.6 x
0.77 x
4.9%
1.40 x
Lloyds
7.7 x
0.83 x
3.8%
3.43 x
Standard Chartered’s profits were up sharply – thanks in the main to lower loan impairments or even their reversal – while net interest margins showed signs of stabilisation and loan growth showed some encouraging signs of momentum. Standard Chartered also declared an interim dividend and a second share buyback scheme.
“Similar trends were evident at Barclays, Lloyds, NatWest and HSBC, as all drew some benefit from the post-lockdown economic upturn, a return to some degree of consumer and business confidence and the absence of any fresh interest rate cuts from central banks,” said Mould.
Trident welcomes Paul Smith to the board as Non-Executive Chair
Trident Royalties (LON:TRR) released its Q2 operating results on Tuesday, bringing attention to a number of projects in which it has royalties.
In addition to asset level progress, the second quarter saw significant board changes and the strengthening of Trident Royalties’ balance sheet.
Trident’s asset level progress at a number of projects over which it holds royalties includes its commencement of pre-stripping of a new deposit in the royalty zone at Koolyanobbing.
The diversified mining royalty and streaming company outlined a 50% increase in indicated resources at the Lake Rebecca Gold Project with total resources now in excess of 1.1Moz.
Trident continued construction activities at the Warrawoona Gold Project, while there were positive indications for the forthcoming Feasibility Study for the Thacker Pass Lithium Project.
Finally, Trident confirmed a successful $73m equity fundraise to fast track the development of a standalone processing operation at the Mimbula Copper Project.
Trident welcomed Paul Smith to the board as Non-Executive Chair, coupled with a placement to Mr Smith of £1m at 40p per share. Mr Smith worked for Glencore Plc from 2011 until 2020, most recently as Head of Strategy with a focus on capital markets, mergers and acquisitions and capital allocation.
Second-quarter royalty payments amounted to US$381,808 from royalties over producing assets, namely Mimbula and Koolyanobbing.
Adam Davidson, Chief Executive Officer of Trident commented:
“Trident continues to make strong progress towards building the critical mass required to realise our strategy to offer investors an increasing source of revenue through a diversified portfolio of mining royalties.”
“This diversification is perhaps the key differentiator for Trident, as we look to broadly mirror the commodity exposure of the global mining sector, providing access not only to precious metals, but also base metals, bulk commodities and battery/technology metals.”
