Growing Euro notes arrows over the flag of European Union.

EU Rescue Deal Reached, Equities Jump, Ted Baker Rises

A number of ‘frugal’ countries, most notably The Netherlands, were against the original plan of a €500 billion to €250 billion, grant to loan ratio, especially if the grants didn’t have any conditions. It was agreed upon that €390 billion will be issued as grants, and the remaining €360 billion will be dished out as loans. A system will be put in place to help ensure that grants will be used appropriately, but at the moment traders are just focused on the fact that an agreement was reached.

The FTSE 100 is above 6,300 and the DAX 30 hit its highest level in over four and a half months. The bullish mood this morning is also on account of the optimism that is circulating in relation to the progress being made on developing potential Covid-19 vaccines.

Ted Baker, like other companies that have a high street presence, have been hit hard by the lockdown, but the group revealed than online trading has been significantly higher than expected. For the 11 weeks until mid-July, total sales slumped by 50% but e-commerce sales rose by 35%. The online sales equated to 69% of total sales, which is a huge improvement on the 25% it made up last year. The fashion house stated that trading has been ahead of the base case scenario that was mapped out last month, and that it has made a good start on achieving its full year 2023 goals.

TalkTalk shares saw volatility this morning as the company confirmed it achieved a significant improvement in average revenue per user (ARPU) in June and July, which promoted the company to say its expects to see an improvement in APRU for the rest of the year.

The pandemic impacted the business and it expects the cost to be £15 million, as bad debts are likely to be an issue. Stripping out voice usage and the pandemic impact, there would have been no difference between fourth quarter and first quarter ARPU. The group saw a decline in net debt and it expects earnings to remain stable or possibly even grow a little. The stock initially traded higher but it is now in the red.

AO World revealed an employee incentive plan. The scheme is designed to encourage employers to deliver a better service to customers as well as loyalty to the group. Essentially, if the market capitalisation is driven beyond a certain level – 30% higher from Monday’s valuation at the close – 10% of the additional value will be distributed to the employees as a part of the scheme. The measure is likely to boost morale and in turn help the business.

GVC shares are in the red this morning as HMRC announced it is expanding its investigation into its former Turkish online business. The update from the gaming company was short, but it said the UK tax authority is examining any ‘potential corporate offending’ by an entity within the GVC group.

Bloomsbury’s Publishing revealed an 18% rise in 4 month revenue to the end of June. The lockdown helped digital sales surge by over 60%.

The continued weakness in the US dollar has helped GBP/USD. In June, UK public sector net borrowing was £34.8 billion, while economists were expecting £34.3 billion. The May reading was revised to £44.7 billion, from £54.5 billion.

IBM shares pushed higher in post-market trading last night following the release of well-received second quarter results. EPS was $2.18, topping the $2.07 forecast. On a yearly basis, revenue slipped by 5% to $18.12 billion, but that exceeded the $17.72 billion consensus estimate. Gross margin was 48%, up from 45.1% in the first quarter. The cloud and cognitive division registered a 3% rise in revenue to $5.75 billion, and that was fractionally ahead of analysts’ estimates.

Snap is in focus as it will post its second quarter numbers tonight. The first quarter loss was $306 million, which was a slight improvement on the $310 million loss that was posted one year previous. Traders will be keen to see if the loss narrows further. In the first three months, ARPU increased by 20%, while total revenue rose by 44%.

We are expecting the Dow Jones to open 220 points up at 26,900, and the S&P 500 is called up 24 points at 3,275.

By David Madden (Market Analyst at CMC Markets UK)