News

Mood lifted by UK-EU talks and Moderna vaccine

CMC Markets

Stock markets are in positive territory as we approach the end of the trading session, as optimism in relation to UK-EU trade talks, vaccines, US stimulus talks and politics are all assisting the bullish mood. 

Micheál Martin, the Irish premier, said that he has greater hope for a UK-EU trade deal this week. The situation has yet to be resolved but it seems that things are heading in the right direction. The Food and Drug Administration (FDA) granted emergency approval for the Covid-19 vaccine being developed by Moderna, so things are improving on the health front. It is looking more likely that there will be a smooth transition of power from President Trump to President-elect Joe Biden in January, as the US electoral college confirmed the Biden victory. Mitch McConnell, the Senate majority leader, acknowledged the Biden win so that should help pave the way for the Democrat to move in to the White House in January. 

The UK property market has been strong ever since it reopened after the first lockdown, as pent-up demand was released. Rightmove described the activity as a mini boom and recently mortgage lending hit a 13-year high. This has translated into a solid set of first half figures from Purplebricks, the online property specialist. Operating profit was £6.9 million, and that compares with the £200,000 loss that was registered in the same period last year. In addition to that, the company anticipated that full-year profit will exceed the top end of estimates. The stock has hit a three-month high on the back of the update.   

JD Sports is hoping to expand its operation in the US as it is looking to acquire Shoe Palace for $325 million. The target company last year posted revenue and profit of $435 million and $52 million respectively. 

Zara’s owner, Inditex, announced that it plans to resume paying dividends next year. The news is seen as a positive step, but it seems a little strange that it intends to make payouts at a time when business is still downbeat. The fashion house saw nine-month sales fall by nearly 29% to €14.1 billion and EBITDA drop by over 40% to €3.3 billion. The high street business has been suffering because of the pandemic, but the online sales have surged by 75% and that helped offset the underperforming traditional side of the business. Inditex plans to invest €1 billion in the online operation over the next three years, which is a savvy move seeing how popular e-commerce is these days.

Chemring is one of the best performers on the FTSE All shares index on the back of the impressive full year numbers. Revenue rose by 20% to £402.5 million, and profit surged by 58% to £34.7 million. The board of directors said that the group surpassed expectations that the forecast for 2021 was left on hold. 

Rolls-Royce shares are under pressure after Panmure Gordon downgraded the stock to sell. JPMorgan lowered its price target for Rightmove from 542p to 517p.         

US markets

The S&P 500 and the NASDAQ 100 are showing modest gains as the vaccine news and the political situation are encouraging dealers to buy into the market.

The FDA has granted emergency authorisation for Moderna’s Covid-19 vaccine, which is 94.1% effective. There is talk the drug could be distributed in the next week.

Eli Lilly has announced plans to acquire Prevail Therapeutics for $880 million or $22.50 per share. Keep in mind the stock closed yesterday at roughly $11.66, so that equates to a premium of more than 90%. Prevail develops therapies to treat diseases such as dementia and Parkinson's.  

There has been chatter that Apple will increase iPhone production, which has helped to push the stock higher. The smartphone manufacturer, Alphabet and Amazon are also in focus because the EU has announced new rules that are aimed at making sure that tech giants operate in a fairer fashion. Large fines can be dished out for noncompliance of the rules.      

FX markets

The CMC GBP Index has witnessed a lot of volatility today. In the morning it come under pressure in the wake of the disappointing UK jobs data. In the three months until October, redundancies jumped by 370,000. Since March, nearly 820,000 jobs have been lost and there are concerns that further job losses are in the pipeline as the furlough scheme will end in late March. Sterling has rallied on the back of hopes in relation to the British-European talks.

EUR/USD is a little higher on the session thanks to the weakness in the US dollar. Yesterday, the currency pair hit its highest level since April 2018 and it is not too far from that mark. Traders will be paying close attention to tomorrow’s Federal Reserve meeting. The US central bank is likely to reiterate its desire to keep rates low and that should keep pressure on the dollar.          

Commodities

Gold is up today because of the weak US dollar and to a certain extent, bargain hunting. Lately there has been a strong inverse relationship between the metal and the dollar, so the slide in the greenback has assisted the commodity. It is also worth noting that yesterday, gold dropped to its lowest mark in nearly two weeks.

Brent crude oil and WTI have been lifted by the overall bullish mood that is circulating today. The sentiment surrounding the UK-EU trade talks has improved, the US political situation is looking more upbeat with respect to President-Elect Biden taking over in January and the Moderna news has helped too. All those stories bode well for the energy market.         


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