UK & European markets trade lower ahead of the US return

Little real impetus from overnight trading, with US markets closed for the MLK holiday. Without fresh catalysts, UK and European markets continue to drift lower with the FTSE 100 slightly down.

French, German and Italian equity indices are also heading lower once more, the MiB 40 is down by –0.87%, the CAC 40 has lost -0.54% and the DAX is weaker by -0.66%.

Its midcap counterpart, the MDAX, has lost -1.20% this morning and almost -5.0% over the last month.

Uncertain outlook for banks

German equities are being led lower today by a –5.0 % fall in Commerzbank shares.

Media reports yesterday suggested that the troubled lender is once again considering a merger with rival Deutsche Bank.

The future path for European bank earnings is unclear after ECB council member Robert Holzman warned that the market should not expect rate cuts in 2024.

However, US bank JP Morgan wrote on the sector today, cautioning that Net Interest Income, or NII, may be peaking for European banks, with rate cuts ahead, and that EPS downgrades are likely to follow.

JPM has already reduced its forecasts for the sector.

Ocado delivering the goods

Back in London online supermarket and technology firm Ocado’s share price is up by +7.0% following a trading statement, covering the 13 weeks till November 26th.

Retail volumes grew by almost +11.0% to £609.40 million, with average orders per week and active customer numbers also rising.

However average basket sizes, as measured by the number of items ordered, were slightly lower when compared to 2022.

Ocado also confirmed that it has enjoyed record Christmas trading with an overall +7.0% increase in sales.

Rolls Royce’s halo slips

Elsewhere the Rolls Royce share price was downgraded by German broker Berenberg, who moved their recommendation to sell.

Saying that it can see the current drivers of Rolls Royce’s share price fading from 2027 onwards.

The bank’s analysts added that intrinsic factors such as the cost of new jet engines, and their reliability, will become an increasingly important issue, given that most Rolls Royce customers are low-margin airlines.

Rolls Royce shares are down by -1.10%.

The Hut Group trading updates strike the right note

Away from the top-flight, shareholders in the troubled e-commerce company, THG received a tonic in the shape of the firm’s Q4 2023 trading statement.

This showed that the business was performing in line with its expectations, and guidance for the full year. And that the group had £600 million of cash and facilities at its disposal.

The Hut Group share price is up by +9.50% today.

That’s likely something of a relief rally, given that the stock price has been dogged with bad news, and is down by more than -25.00% in the last 6 months.

Those gains may be short-lived, however, because on closer inspection underlying trading, in areas such as nutrition, does not look impressive.

Spirent Communications Plc in good spirits

Spirent Communications also published a trading update today and the market liked what it heard.

Spirent’s share price is up +6.82% on the day as the company is streamlining its operations, and reducing both headcount and office space.

Though that will entail an initial charge of $15.00 million, the firm believes it will recoup that money, through cost savings, in two years.

Following a share buyback program in 2023, on which it spent $72.0 million, the group retains $103.0 million of cash and is “well placed to take advantage of investment opportunities as they arise”