There were some positive moves at the start of trading on Tuesday for European stock markets. The FTSE 100 rose around 1% as it looked to reclaim some of yesterday’s losses, whilst shares in Frankfurt and Paris were up around 1.5% as all sectors rallied.
Asian stocks were mixed overnight as the situation in Ukraine weighed, but some news on the wires is helping lift risk sentiment and sent oil down more than $1 in short order. Risk currencies also caught the tailwind as GBP and EUR advanced against the USD. EURCHF rallied on the news.
Headlines from Interfax flashed saying that a number of drills have finished and Russian troops are expected to return to bases; some units of Russia’s western and southern military districts have started returning to bases. “This seems to be helping risk catch some more bid in early trade, [it] shows risks of trading headlines and shows market sensitivity to the situation over there,” observed Neil Wilson, Chief Market Analyst at Markets.com. “[It is] far from clear what is going on – beware.”
Without further substantial news coming out of Ukraine – note that many analysts see a potential Russian invasion scenario for Wednesday, while others are looking to Sunday, after the Beijing Olympics safely close – some traders in Europe are buying back into stocks.
Mining profits from BHP and Glencore
The Armchair Trader pick BHP declared a record $7.6bn dividend as it reported a 57% jump in underlying attributable profit of $9.7bn in the six months to December. Glencore, another of our picks, also declared a $3.4bn dividend and £550m share buyback plan on a record profit. In an inflationary environment of shortages, hard assets are worth owning it seems.
BHP saw EBITDA rise 33% YoY in the second half of 2021, which was largely due to the increase in commodity prices and somewhat negatively impacted by volume and inflation dynamics. EBITDA generation for BHP remained strong on disciplined cost-control, which our network of specialists has highlighted as one of the miner’s major competitive advantages against other iron ore producers.
“Our experts suggest that as one of the leanest iron ore producers globally, there are relatively few cost optimisation opportunities available to the company, though automation opportunities could result in unit cost benefits of roughly 5-10% longer-term,” noted Anthony de Ruijter, a Senior Associate with research firm Third Bridge. “Outside of this, our experts expect unit costs to remain below USD16-17 per tonne.”
UK wage increases struggling against inflation
The latest UK wages and employment data makes for some interesting reading. While wage data has come with significant caveats in recent times, the ONS now says that the ‘base effects’ have largely smoothed out. “This means we have the first clear reading of wage growth for some time,” said Victor Tokoudes, CEO of investment app Plum. “And it is not fantastic news. Wages grew at around 4.3%, which nominally sounds good, but compared against inflation actually still means people’s wage packets are worth less over time.”
The ONS also pointed out an interesting trend which has reached new records – job-to-job moves are higher than ever. The so-called ‘Great Resignation’ far from being an anecdotal experience, would appear to be a real phenomenon, at least in the UK.
European stocks closed off the lows on Monday but still had a bruising session. US stocks were also broadly lower, though again well above the session lows. The Nasdaq Composite was up 1% at point as investors sought some sanctuary in large cap tech, but finished flat. Futures are indicated higher.
