FTSE 100 Underperforms, US Big Tech Booms

FTSE 100 Underperforms, US Big Tech Booms

CMC Markets  | Aug 02, 2020 07:03

The FTSE 100 is underperforming its continental counterparts on account of the firmer pound.


In terms of index points, some of the largest fallers on the London market are companies that derive a high percentage of their revenue outside of the UK, so a firmer pound often works against them. British American Tobacco (LON:BATS), AstraZeneca (LON:AZN) and Diageo (LON:DGE) have been impacted by the positive move in sterling. The FTSE 100 has a relatively large exposure to the commodity sector. The decline in copper has hurt Rio Tinto (LON:RIO), BHP Group (LON:BHPB) and Glencore (LON:GLEN). BP (LON:BP) and Royal Dutch Shell (LON:RDSa) are weighing on the British market too. Prime Minister Johnson has postponed the easing of restrictions for fear it could spark a jump in coronavirus cases. Eurozone stocks are in the red also as there are worries about a second wave of Covid-19, and the lack of political progress with regards the proposed $1 trillion stimulus package in the US is a factor too.

Pets At Home (LON:PETSP) shares have been the standout performer today as demand for pets jumped during the lockdown. The group was deemed to be an essential service so it was permitted to remain open during the health crisis, but it operated on a reduced hours basis. In addition to that, the non-essential side of the business – the salon – remained closed. In the first three months of the year, total group revenue fell by 1%, and that was better than expected. Trading in the first quarter was volatile as revenue dropped by 13.5% in the first eight weeks, and then it jumped by 12% in the last eight weeks.

NatWest Group (LON:NWG), like Lloyds (LON:LLOY) and Barclays (LON:BARC), posted a larger-than-expected provision for bad debts. The bank set aside £2.1 billion for losses on loans as it predicts that defaults will surge on account of the pandemic. The consensus estimate for the provision was just over £930 million. NatWest announced a first half operating loss of £770 million. Alison Rose, the banks CEO, has been making a concerted effort to scale back the amount of risk the bank takes on and the risk weighted assets (RWAs) fell by almost 7% to £32.8 billion. The CET1 ratio is an important measure of liquidity and it is closely watched. The metric increased from 17.3% to 18.9%, so it is clear the firm’s financial health is improving despite the environment.

International Consolidated Airlines Group (LON:ICAG) shares have declined today on the news it will raise up to €2.75 billion from an equity release. The update wasn’t a shock as earlier this month there was speculation the group was planning on raising fresh funds. The airline sector has endured major turbulence on account of the pandemic, and the recent rule from the UK government that people returning from Spain must self-isolate for two weeks had made matters worse. Fears of a second wave are hanging over the already troubled sector.

BT Group (LON:BT) predicts that full year revenue will fall by between 5% and 6%. In the first three months, revenue and pre-tax profit fell by 7% and 13% respectively. Now that sporting events are taking place, that should help the company.


The S&P 500 is a little lower as traders are concerned the Democrats and Republicans are still playing politics and have yet to reach a compromise to put in place a $1 trillion stimulus package. The fact there was even a mention of the US presidential election being delayed has weakened sentiment. The NASDAQ 100 is higher thanks to a few of the big hitters posting strong numbers.

Apple (NASDAQ:AAPL) remains the apple of the market’s eye on the back of the impressive third quarter numbers that were posted last night. Revenue was $59.69 billion and that topped the $52.25 billion that analysts were expecting. EPS was $2.58, exceeding the $2.04 consensus estimate. The group has been making an effort to derive a larger percentage of its group revenue from services, and it increased by nearly 15% to $13.16 billion. Revenue from iPads, Macs and other products all topped forecasts. The company announced a 4-for-1 stock split. The share price set a new record high today.

Facebook (NASDAQ:FB) shares hit a fresh record high thanks to the impressive quarterly figures that were released after last nights close. EPS was $1.80, and that easily exceeded the $1.39 forecast. Revenue for the three month period was $18.7 billion, topping the $17.4 billion that traders were expecting. For social media companies, the average revenue per user reading is closely watched, and the metric was $7.05, higher than expected. Not long ago there was a campaign for advertisers to boycott Facebook, and it clearly didn’t have much impact on the group.

Amazon (NASDAQ:AMZN) shares are in demand too as its second quarter revenue and EPS were $88.9 billion and $10.3 respectively. Equity analysts were expecting $81.56 billion and $1.46 respectively. The online retailer saw a colossal surge in demand amid the pandemic as the lockdowns drove consumers down the e-commerce route. The company’s cloud business registered a 29% jump in revenue.


The US dollar has seen a lot of volatility recently. Earlier today it fell to its lowest level since May 2018, but it has recovered a little since then. The upward move is tiny when compared with how much ground it lost in recent weeks, and it has form when it comes to rolling over on itself.

EUR/USD hit its highest level in over two years thanks to the move in the greenback, but it is now slightly lower on the session. The mixed eurozone data didn’t have much of an impact on the single currency. The flash reading of the second quarter GDP on a quarterly basis was -12.1%, while economists were expecting a drop of 12%. The flash CPI and core CPI reports were 0.4% and 1.2% respectively – the readings showed growth on the month.

GBP/USD hit a new four and a half month high today as the bullish run in sterling continues. In July, UK house prices rose by 1.7% on a monthly basis, and that was a nice rebound from the 1.6% fall that was posted last month. It seems there was a high level of pent up demand in the property market.


Gold is higher on the session. The metal recorded a record high during the week and it is on track for its largest monthly percentage gain since early 2012. The weakness that we have seen in the US dollar recently has boosted gold as it is listed in dollars – the inverse relationship has worked in the commodity’s favour. The pressure on government bond yields has prompted certain traders to buy gold as some yields are negative.

WTI and Brent crude has recovered a little from yesterday’s sell-off. The energy market was caught up in the broader bearish sentiment that was circulating yesterday. Oil is usually sensitive to the perceptions about global demand and it is holding up relatively well considering the concerns about a second wave of the coronavirus.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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