European stock markets enjoyed a bullish run in the first few hours of trading. 

The World Health Organisation said the situation in Europe might be nearing its peak, and that helped market sentiment. The number of Covid-19 related deaths in Spain jumped by more than 11% in the past 24 hours, and that underlines the severity of the situation. Continental stocks are showing small gains this afternoon, while the FTSE 100 is firmly in positive territory. The UK market’s relatively large exposure to the natural resources sector has helped it stand-out against its eurozone counterparts.

The latest economic data from China paints a picture of a massive rebound in business activity in March. The manufacturing PMI and the non-manufacturing PMI readings were 52 and 52.3 respectively. Those figures are in stark contrast to the dreadful readings of 35.7 and 29.6 registered in February. It would appear that Beijing’s tough response to the covid-19 crisis has paid off. As a result, we have seen a sizeable rally in mining and oil stocks today. Antofagasta and Anglo American are some of the best performers in the mining industry. The China data acted as a nice excuse to go bargain hunting for BP and Royal Dutch Shell shares.

The airlines are mixed today, but easyJet and Air France have gained the most ground. Vistry is showing modest gains but the wider house building sector is mixed. Hammerson has clawed back some of the ground it lost yesterday. The food and drink sector business is strong today, and Restaurant Group is up roughly 15%.

In light of the upheaval in the oil market, Royal Dutch Shell now expect to incur a post-tax impairment in relation to oil prices of $400-$800 million in the first-quarter. The slump in the oil market recently is likely to hurt the entire industry, but seeing as Shell are one of the biggest players in the space, they should be able to withstand the downturn better than most firms. The group confirmed it has access to a $12 billion credit facility, and that is in addition to the $10 billion facility that was secured in Iate 2019.

The supermarket sector held up relatively well in the past month amid the panic selling as some shoppers rushed out to stock up on supplies. Images of long queues outside stores added to the hysteria. The result was positive for the industry as Kantar said it was a record month for grocery sales. In the 12 weeks until 22 March, Lidl and Aldi performed the best as sales jumped by 17.6% and 11% respectively. Sainsbury’s saw sales increase by 7.4% - making it the strongest performer of the old guard. Tesco, Asda and Morrisons saw sales rise by 5.5%, 4.9% and 4.6% respectively. Aldi and Lidl started from a lower base but the groups continue to nip away at the market share held by the ‘big four’.  

Imperial Brands’ shares have surged today after the company confirmed it has agreed a €3.5 billion credit facility, which covers multiple currencies. The agreement replaces an old facility, and the new one will be in place until March 2023. Imperial said the health crisis has had ‘no material impact’ on their business so far.  

Smiths Group had a good first-half as revenue increased by 3%. In accordance with the FCA guidelines, the firm won’t be publishing its six month numbers until at least 6 April. On account of the health crisis it has withdrawn its full-year guidance. Smiths made it very clear they are in a strong position in terms of liquidity.  It has total liquidity headroom that exceeds £850 million, and it can tap into £600 million worth of credit from the BoE Covid-19 corporate finance facility. The planned demerger of Smith Medical has been postponed. The group will be making a vital contribution to the health crisis as it will ramp up its supply of ventilators.

WPP have had a typical reaction to the pandemic as the group has suspended its share buyback scheme and its final dividend. In addition to that the guidance was withdrawn. The advertising giant will go down the cost cutting route too.  

US

It has been a quiet start on Wall Street as the health crisis is hanging over sentiment. The Dow Jones and the S&P 500 are showing modest gains. A US health official, Dr Anthony Fauci, said they are starting to see small signs that social distancing is working. While it looks as if things are heading in the right direction, then equity traders are likely to buy into the market. As it is the last day of the quarter, we might see some repositioning of portfolios.   

Carnival has been one of the worst impacted firms by the health crisis as the cruise operator has had to suspend operations.  Today the firm said it will halt its dividend in addition to its share buyback scheme. The group can’t estimate the financial impact of the health emergency on the business, but it anticipates to make a loss in 2020.

Conagra Brands posted mixed third-quarter earnings, but the upbeat outlook offset the so-so numbers. EPS for the three month period was 47 cents, but traders were expecting 49 cents. Revenue came in at $2.6 billion, which fractionally topped estimates. On account of the health emergency, the food group has seen a jump in demand. Conagra now predicts they will top their old revenue and profit guidance.

FX

The US dollar index is up for a second day in a row as bargain hunters have snapped up the relatively cheap greenback. The CMC USD index is underperforming when compared with the US dollar index on account of the 20% yuan component – the Chinse currency has rallied today.

GBP/USD is in the red on account of the push higher in the US dollar. The final reading of the UK fourth-quarter GDP was 0.0% on a quarterly basis – it met forecasts. The economy grew by 0.5% in the third-quarter so it was a sizeable fall in economic output in the last three months of 2019, but at least it avoided negative growth. The UK GfK consumer sentiment reading dropped to -9 from -7 in February, while economists were expecting -15. All things considered, it was an alight reading.

EUR/USD has been hit hard by the push higher in the greenback too. German unemployment held steady at 5%, narrowly undershooting the 5.1% forecast. The headline CPI rate in the eurozone dropped to 0.7%, while the core CPI level dropped to 1%. Both updates undershot forecasts. In light of the lockdowns, it is no surprise that demand in the euro-area is falling.   

Commodities

The oil market has rebounded after falling to an 18 year low yesterday. It was reported the Trump administration and Russia will enter into talks about trying to stabilise the energy market. The huge turnaround in Chinese manufacturing data helped the oil market too. Trump and Putin are not exactly best friends, but they both stand to benefit from a firmer oil market so progress might be made on that front.

Gold has been dented by the firmer US dollar again. The metal enjoyed a positive move last week thanks in part to the slide in the greenback, but now we are seeing a reversal of those moves. It is worth noting the closure of refineries in Switzerland last week also helped the gold market. If supply concerns are still circulating, that might explain why gold hasn’t fallen that much in the past two sessions.  

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