30th July 2021

Weekly Round Up

UK markets have been on a roller coaster of a ride this week with the FTSE 100 Index ending at 7,017 points, gaining a mere 0.32% at the time of writing.

Concerns over Beijing’s widening crackdown on some parts of the economy brought fear to the markets early in the week. Strong earnings momentum lifted sentiment towards the end of the week and travel shares were buoyed by England’s decision to scrap quarantine for fully vaccinated EU and US visitors.

The British Pound held above $1.39, ending the week at a four-week high as the dollar weakened after the US Federal Reserve said it was in no rush to withdraw stimulus.

Chinese technology stocks listed in the US are set for their worst month since the global financial crisis after investors dumped shares following a regulatory crackdown by Beijing. The sharp declines come as Beijing has launched a regulatory assault on companies that handle large amounts of data and education businesses, as well as an overhaul of how Chinese groups list on stock markets outside the country.

Policymakers in Beijing have tried to reassure global and domestic investors that the avalanche of regulations and punitive measures are not meant to bury China’s biggest companies, prompting a brief rally in in their shares before falling back on Friday.

US futures were lower on Friday, with contracts on the Nasdaq sinking more than 1% after Amazon earnings topped forecasts. Although revenues missed forecasts for the first time in three years, the company said sales growth would slow in the next few quarters as customers venture outside the home more. 

Earlier this week, Apple warned that chip supply constraints could impact iPhones and iPad sales this quarter and Facebook also warned of a slowdown.

In its July 2021 meeting, the Federal Reserve kept rates and QE steady and hinted that progress had been made towards conditions for tapering bond buys. Fresh economic data released during the week showed that growth peak in the US may have passed already. GDP grew at a lower-than-expected rate of 6.5% and jobless claims remain at the 400,000 level, double pre-pandemic levels.

Riser

Shares in Royal Dutch Shell rose approximately 7% during the week as the company announced it has raised its dividend by almost 40% and launched a $2bn share buyback scheme. 

The increase came on Thursday as the company reported a jump in second-quarter earnings, helped by oil’s recovery above $70 a barrel. The focus on returning cash to shareholders is an effort to demonstrate that Shell remains a huge generator of free cash flow when energy prices are strong with the ability to bolster pay-outs to yield-hungry investors.

Faller

Reckitt Benckiser shares fell by 12.18% during the week after the company warned that a boom in demand for disinfectants and surface cleaners has moderated while commodity cost pressures have intensified. 

While sales of its Durex products are dependent on social mixing picking up as coronavirus restrictions relax, Reckitt said that it expected a slower third quarter. However, some investors may retain a positive view of the company as it has a worldwide economic moat through its strong brands, which should enable it to navigate inflationary pressures and various economic cycles.