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StockBeat: Signs of Life in Mining, Fashion, Offset Grim Bank Results

Stock MarketsJul 29, 2020 05:43AM ET
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By Geoffrey Smith -- Is that a light at the end of the tunnel? For some, it’s still too early to say, but Wednesday’s slew of European earnings suggests that others are confidently looking forward to better times.

The STOXX 600 was up a mere 0.1% by mid-morning in Europe, but that covered a wide spectrum of reactions to reports that served up a decent mix of good and bad. 

Santander (MC:SAN)'s massive writedowns and loss grabbed the morning headlines, while Deutsche Bank (DE:DBKGn) and Barclays (LON:BARC) were both able to cushion the blow of souring loans with windfall returns from trading, just as their brethren on Wall Street had done.

Elsewhere, there were signs of life too obvious to ignore in the mining sector, which is enjoying a healthy rebound in demand out of China for base metals after a pandemic-driven collapse in the first quarter. Rio Tinto  (LON:RIO)  may have reported a 28% drop in free cash flow for the first half, but was relaxed enough about the outlook to raise its interim dividend by 3%.

Rio Tinto (NYSE:RIO) stock is now some 14% above its pre-pandemic levels, despite an embarrassing and costly episode in which it blew up some sites sacred to Australia’s aboriginal population while developing a new mine. It also had the good luck to discover a gold-bearing ore formation at one of its newer copper mines in Australia this month.

There was also evidence that companies are getting to grips with the ongoing uncertainties of working in the post-Covid world. U.K. fashion retailer Next  (LON:NXT), one of many to suspend guidance after the first quarter, reinstated it with a pleasingly high full-year target of 195 million pounds in pretax profit.  It also said the second quarter hadn’t been as bad as first seemed likely: full-price sales fell 28%, less than the company’s most optimistic hopes.

“There is still much that remains uncertain and our central scenario cannot be accorded the same degree of confidence that our guidance would normally receive at this time of year,” the company said. “The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment, and, most importantly, whether there will be a second wave lockdown, all remain unknowable.”

“Nonetheless, our experience over the last 13 weeks has given us much greater clarity on our Online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic.”

Next stock hit a new post-pandemic high before retracing to be up 5.8% by mid-morning.

On the continent, too, sports gear maker Puma  (DE:PUMG) struck a similar note, saying that the second quarter hadn’t been as bad as feared, and saying it expected a return to growth next year even though the outlook for the rest of 2020 was still highly uncertain.

And there was further proof of the ability of businesses to adapt as Gucci owner Kering (PA:PRTP) recorded a sharp rise in online sales, something that LVMH’s earnings earlier this week had suggested was too much to expect from a boutique-based business. Kering shares rose 4.4%.

StockBeat: Signs of Life in Mining, Fashion, Offset Grim Bank Results

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Camaro Camero
Camaro Jul 29, 2020 5:52AM ET
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Finally! Hopium is BACK.
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