Marketmind: Chaos, the Weatherman and Inflation

A look at the day ahead from Julien Ponthus.

Yet their research won’t provide answers to one key question dominating financial markets: how cold or how warm this winter will be, how that will play on surging gas and oil prices, and therefore on inflation.

Brent crude futures stand at $84 a barrel this morning and Russian President Vladimir Putin reckons prices could well reach $100.

While the world has indeed moved on from the 1970s’ petrol dependence, the International Energy Agency warned nonetheless the energy crunch may stoke inflation and slow economic recovery.

Supply chain issues, production bottlenecks and labour shortages are fuelling fears meanwhile that growth could falter enough to lead to some sort of stagflationary scenario.

On that note, the number of Americans filing new claims for unemployment benefits fell to a 19-month low, suggesting that a shortage of workers, rather than weakening labour demand was behind slower job growth.

What the policy response should be, is being debated between hawks and doves.

St. Louis Fed President James Bullard urged the U.S. central bank to taper fast, while BoE policymaker Silvana Tenreyro said a rate rises to tackle short-lived effects on inflation such as energy prices would be “self-defeating”.

Markets are taking a rest, however, from fretting about stagflation– world stocks are nearing three-week highs while European and U.S. equity futures are ticking up after a positive Asian session.

Wall Street set the tone on Thursday when the S&P 500 notched its biggest daily percentage advance since early-March, and banking giants JPMorgan, Citi, Well Fargo and Bank of America, crushed estimates with combined Q3 profits of $28.7 billion.

Bond yields are off recent highs, with 10-year Treasury yields touching 10-day lows and Germany’s Bund back at -0.18% after tip-toeing over -0.10%. Watch for U.S. retail sales and inflation expectations data later in the day.

Key developments that should provide more direction to markets on Friday:

-Bitcoin nears $60,000 as investors eye first U.S. ETFs

-China looks to lock in U.S. LNG as energy crunch raises concerns- sources

-Rio Tinto cuts 2021 iron ore shipments forecast on labour squeeze

-Hugo Boss raises 2021 outlook after strong third quarter

– German and UK new car registrations

– New York Fed President John Williams speaks

– U.S. retail sales/University of Michigan index/inflation expectations

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Julien Ponthus; editing by Sujata Rao)

World’s Largest Miners Pledge Net Zero Carbon Emissions by 2050

“ICMM members’ collective commitment to net zero scope one (direct) and two (indirect) greenhouse gas emissions by 2050 is a pivotal moment in our history,” CEO Rohitesh Dhawan said in an open letter signed by the 28 chiefs of the world’s largest miners.ang

The announcement comes before next month’s U.N. climate gathering that aims to achieve more ambitious climate action from the nearly 200 countries that signed the 2015 Paris Agreement to limit global warming.

Many miners including Anglo American, Rio Tinto and BHP, under pressure from environmental activists and shareholders, have already committed to net zero by 2050 in direct and indirect emissions.

The collective commitment, however, “represents a joint ambition from companies that make up one third of the global mining and metals industry,” the ICMM said.

Its 28 members span 650 sites over 50 countries.

Direct and indirect emissions will be lowered by accelerating the use of renewable energy and reducing or eliminating the use of diesel trucks, Dhawan told Reuters.

Companies will report on their progress annually, the ICMM said.

Targets for scope three emissions, which includes those from customers processing iron ore to steel, should be set “if not by the end of 2023, as soon as possible.”

The technology to produce carbon-free steel has not yet been proven.

Glencore, the world’s largest supplier of seaborne thermal coal, has committed to a scope three goal mainly by starving its coal mines of fresh capital.

ICMM members, which include Barrick Gold and Alcoa, have collectively cut emissions by 6% between 2016-2018, Dhawan said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Zandi Shabalala and Clara Denina; Editing by Cynthia Osterman)

UK Shares Rise on Travel, Banking Boost; Retail Sales Data Ease Taper Fears

The blue-chip FTSE 100 index rose 0.3%, with banking shares gaining after a series of brokerage upgrades and price target hikes.

Asia-focused banks HSBC Holdings and Standard Chartered jumped 1.8% and 0.5%, respectively, after Barclays raised price targets on the stocks. RBC also upgraded HSBC to “outperform” from “sector perform”.

However, gains on the FTSE 100 were capped by miners Rio Tinto and Anglo American, which slipped 2.7% and 3.6% after Morgan Stanley cut its price targets on the stocks.

The domestically focused mid-cap FTSE 250 index advanced 0.5%.

British retail sales dropped 0.9% on the month in August versus a Reuters poll for a rise of 0.5%, after data earlier this week pointed towards a sharp recovery in the jobs market and a spike in inflation.

Investor focus will now be on the outcome of Bank of England’s (BoE) policy meeting next week.

“Next week’s policy decision should reaffirm that some tightening will be needed over the next few years to keep inflation (and the economy) in check. But we don’t expect the BoE to conclude that there is a sufficient case yet for near-term rate hikes,” Deutsche Bank economist Sanjay Raja said.

Airlines Wizz Air, Ryanair Holdings and British Airways owner IAG, and holiday company TUI AG rose between 1.2% and 4.7%, as Britain was set to consider easing its COVID-19 rules for international travel.

“The hope will be that a shift in the rules is the precursor to people jetting off for autumn and winter getaways,” said Russ Mould, investment director at AJ Bell.

Wickes Group jumped 5.6% to the top of FTSE 250 index after Deutsche upgraded the DIY retailer to “buy” from “hold”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Devik Jain in Bengaluru; Editing by Uttaresh.V and Shounak Dasgupta)

Guinea Bauxite Prices Rise After Coup, Mines Report no Immediate Impact

Guinea is the world’s second-biggest producer of the raw material that is refined into alumina, a substance used to make aluminium metal, and is the top supplier to China.

Guinean bauxite for delivery to China was last assessed by Asian Metal at $50.50 a tonne, up 1% from Friday and the highest since March 16 last year. Prices are up about 16% this year.

The ousting of Guinea President Alpha Conde by an army unit on Sunday also extended a rally in aluminium prices to multi-year highs and boosted shares in aluminium producers Norsk Hydro and Rusal.

The unrest did not have any immediate impact on bauxite operations, which are key to Guinea’s economy as its main foreign currency earner. The country produced 88 million tonnes of bauxite last year, according to mines ministry statistics.

“It is highly unlikely that the coup will have any major short-term impact on exports, which are always at the lowest part of the cycle in September with stockpiles depleted as the rainy season comes to an end,” said Guinea bauxite industry specialist Bob Adam.

“Any incoming government will want to make sure that it doesn’t jeopardise future earnings and investment.”

Coup leader Mamady Doumbouya on Monday said that a curfew imposed in mining areas had been lifted.

Guinea’s top bauxite producer Société Minière de Boké (SMB) did not immediately reply to a request for comment.

A spokesperson for Aluminium Corp of China (Chalco), the world’s biggest producer of alumina, said its bauxite business in Guinea was operating normally.

Singapore’s TOP International Holding, which owns two bauxite mines in Guinea, said operations were continuing “with minimal disruption” and the situation at sites in Boke and Boffa was stable.

A Compagnie des Bauxites de Guinée (CBG) spokesperson said its mines had not been affected by the turmoil.

U.S. aluminium giant Alcoa, joint owner of CBG, said it is monitoring the situation closely and is not aware of disruption to bauxite exports.

Rusal, which owns the Compagnie des Bauxites de Kindia (CBK) in Guinea, did not immediately respond to questions on whether its operations had been disrupted.

For a graphic on Guinea’s bauxite production, click: https://tmsnrt.rs/3l1NSxW

AngloGold Ashanti said its Siguiri gold mine in Guinea was operating normally.

“We’re monitoring the situation and are in close contact with the leadership of our mine in Guinea, which is operating normally,” the gold miner said in a statement. Siguiri produced 117,000 ounces of gold in the first six months of this year.

The coup casts further doubt on the future for Guinea’s many iron ore mine projects.

Rio Tinto, which is developing part of Guinea’s huge Simandou iron ore project alongside Chinalco, declined to comment on how the overthrow might affect its plans in the country.

Andrew Gadd, senior steel analyst at CRU Group, said: “Sourcing the finances for Simandou has proved very difficult and the uncertainty generated by the current developments will challenge the commitment of interested parties.”

Guy de Selliers, chairman of the Société des Mines de Fer de Guinée (SMFG), which is developing the Nimba iron ore project, said: “Irrespective of who is in charge, they will want this project to happen because it is good for the country.”

De Selliers said that SMFG has political risk insurance through the World Bank’s Multilateral Investment Guarantee Agency.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Helen Reid; Additional Reporting by Melanie Burton in Melbourne, Polina Devitt in Moscow, Mai Nguyen in Singapore and Tom Daly; Editing by Emelia Sithole-Matarise, Jane Merriman and David Goodman)

FTSE 100 Inches Higher As Industrial Miners Jump

After falling as much as 0.46%, the FTSE 100 index ended 0.2% higher, helped by heavyweight mining stocks up 2.4%.

Limiting the advances, however, were pharmaceutical stocks that weakened 1.1% to be the top losing sub-index.

“Basically we have been trading waters while we look across Europe and that seems to have been the trend throughout the day,” said Craig Erlam, senior market analyst at Oanda.

“I think at this point all eyes are on the Jackson Hole meeting, so it wouldn’t be a surprise to see this kind of market behaviour.”

The FTSE 100 has added 10.3% so far this year, but is still 8% away from its record highs hit in 2018 as an economy slowing due to weaker consumer demand, and risks around central banks pulling back monetary support sooner than expected, have weighed on the FTSE 100 recently.

In a bright spot, official data showed that British retailers saw the biggest surge in spending in almost seven years this month and orders hit a new high. However, stocks fell to the lowest levels on record, putting pressure on prices.

The domestically focused mid-cap index added 0.6%, hitting record highs. Travel stocks were among the top boosts.

Meanwhile, real estate stocks fell 0.3% after official data showed the number of homes sold in the UK fell by more than half last month after the scaling-back of a tax break designed to encourage home purchases during the coronavirus crisis.

Rio Tinto gained 3% after the miner said it had restarted operations at its Richards Bay Minerals project in South Africa after a furnace in July was shut down, affecting the supply of raw materials.

Wood Plc dropped 0.2% after the engineering and consultancy firm forecast lower annual revenue and reported a 14.1% fall in first-half profit.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shashank Nayar and Amal S in Bengaluru; Editing by Subhranshu Sahu, Uttaresh.V and Mark Heinrich)

Fifty Shades of Green: EU Sustainable Fund Rules Muddy the Waters

A Reuters analysis of funds marketed to retail investors increasingly hungry for anything green shows asset managers are adopting a wide range of strategies to justify the sustainable label since the EU brought in disclosure rules in March.

The EU’s Sustainable Finance Disclosure Regulation (SFDR) is an attempt to deliver transparency for investors focussed on environmental, social and governance (ESG) issues but fund managers say the definition of sustainability is too vague and has created confusion about what makes the cut.

Take the Allianz Global Water fund.

It actively invests in companies that improve the supply, management and quality of water and is marketed as falling under Article 8 of the SFDR, which means it is a fund that promotes “among other characteristics, environmental or social characteristics, or a combination of those characteristics”.

Now take one of Legal & General Investment Management’s (LGIM) Article 8 exchange-traded funds (ETF).

The L&G UK Equity UCITS ETF tracks the Solactive Core United Kingdom Large & Mid Cap Index, which excludes coal miners and firms that make weapons such as cluster bombs or have breached U.N. principles on corporate values.

Its top 10 holdings are the same as for L&G funds tracking the FTSE 100 index that don’t carry the Article 8 label and include oil giants BP and Royal Dutch Shell, miner Rio Tinto and British American Tobacco.

L&G said the fund was considered Article 8 because it promotes sustainability characteristics by applying LGIM’s Future World Protection List and this was a “binding element” of the investment process.

“The lens we should use is what is right. It’s not just about what is legally required because it seems not very much is legally required,” said Eric Christian Pedersen, head of responsible investments at Nordea Asset Management.

GREEN RUSH

The new EU rules have sparked a rush by investment firms to badge products as sustainable as they seek to grab a share of the booming market in sustainable mutual funds that hit a record $2.3 trillion in the second quarter.

From March 10, the rules automatically placed all investment funds into a coverall Article 6 category. Managers could then upgrade them to Article 8, or Article 9 which is for products with an explicit sustainable investment objective.

The investment industry has dubbed Article 8 funds “light green” and Article 9 “dark green”, though the EU regulations do not use those terms.

A European Commission spokesperson said its rules were designed to ensure funds were transparent about the sustainability of products so investors could make choices, and was not a labelling scheme.

Reuters asked 20 of the biggest fund houses for a list of products they market as Article 8 or 9.

An analysis of the funds of the 14 firms that replied shows some Article 8 products have limited claims to sustainability, such as those tracking conventional stock and bond indexes, investing in fossil fuels or buying debt from countries with weak ESG standards such as Saudi Arabia and Nigeria.

Some claims hinge on funds excluding securities they would not have bought anyway, based on the index being tracked.

For some in the industry this represents so-called greenwashing, where the benefits of a business or asset are exaggerated to attract environmentally aware investors.

Hortense Bioy, director of sustainability research at Morningstar, said Article 8 funds ranged from climate-themed green to “very, very light green”, excluding just a few firms.

“Managers need to ask if they are even relevant,” she said. “That is the key message: investors shouldn’t expect anything from Article 8.”

INDEX TRACKERS

Industry experts say none of the asset managers is breaking any rules. Managers determine themselves which article to apply and Brussels does not check whether claims are justified.

The Reuters analysis shows some managers are more likely to brand funds as sustainable than others.

Two of Europe’s biggest firms, Alliance Bernstein and AXA Investment Management, classify nine in every 10 euros of assets they manage under the scope of SFDR as Article 8 or 9, according to data they supplied to Reuters.

Others such as Pictet Asset Management and Allianz Global Investors place a little over half of their relevant assets in those categories, their data showed.

Morningstar data published in July shows a third of the assets falling under SFDR are now billed as Article 8 or 9, with Article 6 products disappearing from recommendation lists sent by investment advisers to retail investors.

Many Article 8 funds have clear sustainability criteria, such as strategies that invest in businesses with the lowest carbon impact in their sectors, or Allianz’s water-focused fund.

For others, that’s not always the case. Candriam’s Cleome Index Europe Equities is another Article 8 product. It tracks the MSCI Europe index but excludes companies that don’t comply with the U.N. principles.

Critics say such exclusions are very limited.

When asked for an example, Candriam did not point to any company expelled from the U.N. list that is also part of MSCI Europe. The Candriam fund’s top 10 holdings replicate the index.

A Candriam spokesperson said it also applies exclusions on companies materially involved in controversial weapons, tobacco and thermal coal, and the Cleome equity fund uses proprietary ESG analysis relative to the benchmark, justifying Article 8.

Morningstar analysis shows one in four Article 8 funds has exposure to companies involved in controversial weapons and one in five to tobacco. A third of Article 8 and 9 funds have more than a 5% exposure to fossil fuel firms.

‘NASTY’ ESG?

Demand for funds with a sustainable label is soaring.

“There is a clear commercial opportunity,” said Eric Borremans, head of ESG at Switzerland’s Pictet Asset Management, which classes 57% of its assets as Article 8 or 9.

Borremans said Pictet had no index-tracking Article 8 funds but planned to apply the label to some after incorporating more exclusions.

U.S. investment giant BlackRock told Reuters it expected to exceed a target of putting 70% of its new, or rebranded, products this year under Articles 8 or 9.

Some funds use ESG thresholds to justify sustainable labels.

JPMorgan Asset Management says 51% of the securities in its Article 8 range must carry an ESG score in the top 80%. These are scores fund firms or third-party providers give companies based on ESG metrics such as carbon usage, governance or human rights in supply chains.

Critics say such thresholds are too weak.

“You have funds saying most of our holdings are not nasty and therefore I’m ESG,” said Pedersen at Nordea, which requires 100% of its Article 8 holdings be above a minimum ESG score.

The JPMorgan threshold, for example, also means 49% of companies in its funds could rank in the bottom 20% for ESG goals, although the funds exclude sectors such as tobacco, controversial weapons and coal miners.

JPMorgan Asset Management did not respond to questions about ESG scores. A spokesperson said the firm remained “focused on a thoughtful and thorough approach to the implementation of SFDR”.

Pictet’s Borremans said funds interpreting the rules loosely now can get away with it, but strategies sailing close to the wind will eventually be exposed.

By next year, the EU will flesh out its taxonomy — a list of environmentally sustainable economic activities — and from July 2022 funds must detail how they meet sustainability criteria based on the EU’s Regulatory Technical Standards (RTS) that will clarify disclosure requirements.

“It could hurt the reputation of an asset manager to offer financial products as falling under Article 8 and 9 or as taxonomy aligned if this cannot subsequently be backed when the RTS enters into application,” the European Commission spokesperson said in emailed comments.

Amundi’s head of cross-border product, Florian Schneider, said SFDR rules made clear products with minimal exclusions were Article 8.

“The danger is everyone blindly assuming all Article 8 funds offer the same level of ESG integration when there are very different shades of green.”

For a look at all of today’s economic events, check out our economic calendar.

($1 = 0.7274 pounds)

(Additional reporting by Simon Jessop; Editing by Sujata Rao, Alexander Smith and David Clarke)

European Stocks Extend Record Rally on Lift From Insurers, M&A Activity

The pan-European STOXX 600 index inched up 0.1%, extending gains to a ninth consecutive session.

British insurer Aviva rose 3.5% after saying it would return at least 4 billion pounds ($5.5 billion) to shareholders, while Zurich Insurance Group added 3.8% on reporting a 60% jump in first-half business operating profit.

Dutch insurer Aegon NV jumped 7.3% after posting much better than expected second-quarter earnings.

Deutsche Telekom rose 2.8% after raising its profit outlook for the second time this year.

The benchmark STOXX 600 clocked its longest winning streak since June, as earnings reports and optimism related to the pace of vaccination across Europe reinforced investor confidence in an economic recovery.

Data showed Britain’s economy grew by a faster than expected 1% in June, after many hospitality firms restarted indoor service in mid-May and as more people visited doctors following the pandemic, lifting healthcare.

Factory output fell in June in the euro zone, as Germany, the bloc’s industrial powerhouse, faltered amid supply bottlenecks, European Union estimates showed.

“The second successive monthly fall in euro-zone industrial production in June was largely due to ongoing supply-chain difficulties in Germany,” said Andrew Kenningham, chief Europe economist at Capital Economics.

“As these will ease only slowly, we don’t expect industry to contribute much to economic growth in the coming months, even though demand is still red hot,” Kenningham added.

Cineworld Group rose 3.9% after it said it was considering a listing of itself or a partial listing of its movie chain Regal on Wall Street.

Meanwhile, Adidas rose 1.6% after selling its Reebok brand to Authentic Brands Groups for up to 2.1 billion euros ($2.5 billion), as the German sporting goods company sought to draw a line under an ill-fated investment.

Stock Spirits Group soared 43.7% funds as funds affiliated with private-equity firm CVC agreed to take over the London-listed vodka maker in a deal valuing it at 767 million pounds ($1.1 billion).

Dragging down miners, UK-listed shares of global miner Rio Tinto slipped 5.5% on trading ex-dividend.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in BengaluruEditing by Shounak Dasgupta and David Holmes)

Canadian Union Unifor Starts Strike at Rio Tinto Operations

Unifor issued a 72-hour strike notice on Wednesday after nearly seven weeks of unproductive talks over proposed changes to workers’ retirement benefits and unresolved grievances.

Rio Tinto was given every opportunity to reach a fair deal but showed complete disregard for our issues,” the union said in a statement.

The union represents about 900 workers at the miner’s aluminium smelting plant in Kitimat and power generating facility in Kemano.

Unifor said it was committed to resolving the labour dispute amicably and urged the mining company’s management to reach a fair settlement. Rio had earlier sought an order from the province’s labour relations board declaring power plant workers essential, according to a union bulletin.

(Reporting by Rithika Krishna in Bengaluru and Jeff Lewis in Toronto Additional reporting by Radhika Anilkumar; Editing by Mark Potter)

Why Rio Tinto Stock Is Testing Multi-Year Highs?

Rio Tinto Video 16.02.21.

Strong Commodity Prices Push Rio Tinto Shares To New Highs

Shares of Rio Tinto are testing multi-year highs as commodity markets continue to rally on stimulus optimism. Copper has not traded at current levels since 2012 while iron ore prices are at high levels due to weaker-than expected production results from Brazil’s Vale which were reported earlier this month.

In addition, strong results from Rio Tinto’s peer BHP  boosted market sentiment towards major miners. BHP reported solid profits for the first half of the 2021 financial year and announced a record dividend as its results were boosted by favorable commodity prices.

Rio Tinto will report its 2020 full-year results tomorrow, and traders are speculating that they will be similar to results of BHP.

What’s Next For Rio Tinto?

The current rally in the copper market looks very strong, and analysts are rushing to update their price targets for copper-related companies. Copper is boosted by demand from electric vehicles and renewable energy projects which is expected to grow in the upcoming years.

Meanwhile, few major copper projects are developed around the world. In addition, it’s often challenging to finish such projects as Rio Tinto learned with its Oyu Tolgoi project in Mongolia which suffered cost overruns, delays and legal uncertainty.

The current situation in the iron ore market is not as bullish compared to copper market but iron ore continues to enjoy strong demand. In addition, many analysts are talking about the potential start of the new commodity super cycle which should be boosted by rampant money-printing from the world central banks. In short, the current market mood in the commodity space is bullish, and even oil managed to get to the $60 level despite weak demand from Europe.

In this environment, shares of Rio Tinto have a good chance to gain additional upside momentum.

For a look at all of today’s economic events, check out our economic calendar.

Rolls Royce drags on the FTSE100, as SAP Boosts the DAX

Investors appear to be making the conscious decision to find safety in the US trillion-dollar big caps rather than move their capital into the traditional safe haven of government bonds.

Asia markets have taken their cues from yesterday’s positive US session, despite the continued rise in coronavirus cases across the US, and which US Federal Reserve President Loretta Mester expressing concern that the rising virus count is introducing increased downside risks to the US economic recovery. On Wednesday we saw Texas set a new record for daily cases, hospitalisations hit a new high in California, while Arizona posted a new record number of deaths.

After two successive negative European sessions, markets here in Europe have taken their cues from yesterday’s recovery in US markets and this morning’s positive Asia session, opening modestly higher, though still well off their peaks from Monday, and struggling to make much in the way of headway early on.

If anything, the rising coronavirus case count in the US, is helping to weigh down any confidence in a more global recovery in equity markets, however on the plus side there doesn’t appear to be any evidence of a second wave here in Europe so far as various lockdown measures continue to get eased.

While this is positive for markets in Europe the lack of any imminent agreement between EU leaders on any pandemic recovery fund appears to be deterring a wholesale move of capital back into European markets for the time being.

The problems in the aerospace sector continued to be laid bare this morning as Airbus the European plane maker reported that it had failed to obtain any new aircraft orders for the third month in succession. This is equally bad news for Rolls Royce who have been having difficulties of their own, as they reported their latest first half numbers this morning.

Last Friday there were reports that Rolls Royce was looking at reinforcing its balance sheet further by raising additional capital, or disposing of some of its assets with ITP Aero, its Spanish operation one likely option. There was no mention of raising additional capital in todays’ Q2 update which has seen management say that they expect a better performance in the second half of the year.

Good progress has been made in reducing one-off costs with £300m achieved in H1, with another £700m expected by the end of 2020. The company also said it would be taking a charge of £1.45bn over the next 6 years, in respect of reducing the size of its hedge book, with £100m of that charge being taken this year and £300m in 2021 and 2022, and then £750m spread over 2023 to 2026.

The company also said that they had pro-forma liquidity of £8.1bn, including an undrawn credit facility of £1.9bn, and commitments for a new 5-year term loan facility of £2bn underwritten by a syndicate of banks and a partial guarantee from UK Export Finance. The company also took a £1.45bn write down in respect of hedges spread over 6 years.

Not all sectors are in the doldrums, with the increasing focus on cloud technology, helping to benefit the tech sector, as more and more business moves on line. This morning German software giant SAP reported an improvement on its Q1 numbers, with cloud revenues rising 21% in Q2, driven by improvements in its Asia markets.  This outperformance in SAP has helped underpin the DAX in early trade this morning.

Rio Tinto this morning announced it was closing its New Zealand operations as an aluminium supply glut takes its toll on its profits.

In the wake of yesterday’s budget measures on stamp duty, house builder Persimmon announced its latest first half update.

Unsurprisingly given the lockdowns in April total revenues fell to £1.19bn, down from £1.75bn in 2019, with completions sharply lower at 4,900, down from 7,584. On the plus side average selling prices were modestly higher at £225k, however higher costs are likely to eat away at overall margins in the months ahead, which could act as a drag on profitability.

Much will depend on whether the removal of stamp duty for properties up to £500k will offset any loss of confidence prospective buyers have about the economic outlook. Recent mortgage approvals data suggests that consumers are becoming much more cautious.

In terms of future expectations there does appear to have been a fairly strong rebound since sales offices reopened with forward sales up 15% from the same period last year, helping to push the shares higher in early trade.

Vistry Group also posted a positive first half update, delivering a total of 1,235 completions in H1, down from 3,371 a year ago, with an average selling price of £290k. Revenue was sharply lower at £344m, down from £854m in 2019. Forward sales saw an improvement to £1.66bn, up from £1.5bn at the end of May.

Real estate investment trusts have had a rough time of it recently, with Intu going into administration only recently. Workspace Group has been one of those companies that have done things a little differently over the last ten years, in terms of how it sold its office space, and that has helped cushion it to some extent, due to its focus on small or micro businesses, selling flexible office space, and short-term leases with superfast connectivity.

This does appear to be reflected in this morning’s Q1 update, which has seen the company report cash collection of rents at 75%, net of rent reductions and deferrals. The company has received 65% of rents due in Q2, compared to 80% a year ago. Activity in its business centres has remained low at 15% of normal. Demand is now picking up as lockdowns get eased further.

Building materials and DIY retailer Grafton Group has seen its shares rise in early trading after it reported H1 numbers, which saw revenues fall 19.4% to just over £1bn. June trading has proved to be more resilient, with revenues 11.4% higher than the same period last year.

Boohoo shares are also sharply higher this morning as buyers start to return after the precipitous falls of earlier this week, with some saying that the declines have been too severe, when set against the underlying long-term fundamentals.

US markets look set to open modestly lower against this morning’s rather indifferent European session, with the main focus once again set to be on the latest weekly jobless claims numbers, and in light of the recent re-imposition of lockdowns, the main focus will once again be on continuing claims and whether that number starts to edge up again in the weeks ahead. This could take some time to be reflected in the numbers with continuing claims expected to fall below 19m to 18.95m.

Weekly jobless claims are expected to fall to 1.37m.

Bed Bath and Beyond shares are also expected to be in focus after the company announced the closure of 200 stores over 2 years due to a 50% fall in sales.

Delta Airlines is also expected to give its latest Q2 update and it’s not expected to paint a pretty picture. Delta had a standout 2019 largely due to its reliance on sales of Premium class tickets. Business travel, which a lot of national carriers rely on, is likely to see a big drop off in the months ahead as companies realise that lots of meetings can take place just as easily on Zoom and other remote conferencing facilities.

Year on year revenue for Q2 is expected to decline by 90%, with the carrier losing 85% of its flight capacity at the height of the pandemic, while losses are expected to come in at $4.43c a share. Delta expects to add 1,000 new flights to be scheduled this month, and another 1,000 in August.

Dow Jones is expected to open 60 points lower at 26,007

S&P500 is expected to open 4 points lower at 3,166

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)