Sentiment in Europe is positive as we approach the end of the trading session. 

It has been another rocky day in the markets as the FTSE 100, DAX and the CAC 40 were all in the red for a good portion of the day, but sentiment turned around shortly after trading got underway in New York.

In a surprise move, the Bank of England (BoE) cut interest rates to 0.1%, and its holding of UK government and corporate bonds was increased by £200 billion. Equity markets were already pushing higher in advance of the news, so the BoE update was a nice surprise. Keep in mind, the ECB revealed a €750 billion bond-buying scheme last night, and central bankers are clearly stepping up their responses to the coronavirus crisis.  

Ocado’s shares price has seen a lot of volatility today as the company posted its first-quarter update. The first three months of the year went well as retail revenue increased by 10.3%. The group performed well in terms of the number of new baskets as well as the average basket size. In a previous update, the company has confirmed there has been an increase in business on account of the health emergency. Today, the company maintained its full-year retail revenue outlook of 10-15% growth. In the current climate, it is almost unheard of firms to hold their guidance, so the update is impressive.

Auto Trader, Crest Nicholson, and National Express all revealed warnings in relation to the health emergency. In an effort to keep business motoring along, Auto Trader will allow retailer clients to advertise for free in April, but the group couldn’t issue guidance on account of the ‘unprecedented levels of uncertainty’. Crest Nicholson have cancelled their final dividend as well as suspending their guidance. National Express are cutting costs in a bid to free up cash, and the transport firm warned of ‘significant’ fall in passenger numbers recently.

The travel sector is mixed as TUI, Air France and Lufthansa are higher, while easjJet and Ryanair are in the red.

Next shares had a rocky start to the trading day but when traders got their head around the fact the company is in a good financial position, the stock pushed higher. The fashion house is bracing itself for a fall in sales in the months ahead. Next said it can withstand a £1 billion drop in full-price sales without breaching the terms of its credit facilities. The rude health of the company has boosted sentiment today.

The hospitality industry is under extreme pressure on account of social distancing, so the likes of Restaurant Group, Marston’s, Mitchells and Butlers and JD Wetherspoon are all lower again today.

Before the Covid-19 crisis, the house building sector was in a strong position. Many of the firms operating in the sector had seen their share prices boosted by the Conservative Party win at the December election. January saw a turnaround in building activity, but the landscape has changed now. Barratt Developments, Berkeley Group, Taylor Wimpey and Redrow are all offside as dealers feel the industry is in for a slowdown or possibly a contraction.

Foxtons are enduring a large fall on fears of a slump in property deals in the short-to-medium term.   

The health emergency has seen a spike in demand for cleaning as well as hygiene, which is why Unilever as well as Reckitt Benckiser are up today.

The supermarket sector has seen some bullish moves recently on account of people stocking up on items. Today the picture is more mixed as Marks and Spencer are higher while Morrisons are down on the day.  

US

After intense selling pressure at the start of trading the US indices are now powering higher. Yesterday the Dow Jones closed below 20,000, but now the sentiment has swung around. Traders are still hopeful about a stimulus package from the Trump administration. There are reports of individuals receiving cash directly from the government of $1,000 per adult and $500 per child. There is talk of struggling businesses receiving assistance too. A rally will need to be sustained before confidence will start to return to the stock market.   

The impact of the coronavirus crisis is starting to show up in the economic reports. The jobless claims level jumped to 281,000 from 211,000 – it was the highest reading since September 2017. The Philly Fed manufacturing index swung from 36.7 in February to -12.7 in March – which was the worse reading since 2012. These dreadful reports are likely to be the tip of the iceberg.

Haliburton and Exxon Mobil are higher due to the massive rebound in the energy market.

Costco and Walmart are largely unchanged on the day, which is a bit strange given the reports of people stocking up on household items.      

FX

GBP/USD was given a nice boost by the BoE rate cut and the additional bond-buying scheme. Rates were cut by 0.1% to 0.15% - a fresh record low. In more normal circumstances, the surprise rate cut would weaken the domestic currency, but this move should provide much assistance to the UK economy. The pound was already pushing higher against the US dollar before the BoE took action.

EUR/USD is deep in the red as the dollar has seen a broad rally today. The German Ifo business confidence reading for March was 87.7, which was a drop from 96.1 in the previous reading. The greenback hit a speed bump when poor jobless claims and Philly Fed updates were posted, but the euro’s declines continued.     

Commodities

WTI and Brent crude have undergone huge rebounds after plunging yesterday – when the energy contracts fell to levels last seen in the early 2000s. A mixture of short covering and bargain hunting helped drive up the prices. To a lesser extent, the less violent moves in the global equity markets have helped oil too. Oil is higher today, but the Philly Fed update is a taste of what lies in store for economic indicators from the US in the months ahead.

Gold hasn’t moved that much today, which is unusual when you take into account the surge in the US dollar index – the two markets typically have an inverse relationship. The metal is lower on the day, but it hasn’t fallen that much when you take into account the strength of the US dollar. There appears to be less volatility in the wider markets today, and that applies to gold too. While the commodity holds below the $1,500 mark, the recent bearish trend is likely to continue.     

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