Equity markets are firmly in the red as we approach the close of the trading today.
Coronavirus fears are still circulating, hence why stocks are lower, but it is worth noting that indices are off the lows of the session. The aggressive rate cut and stimulus package form the Fed last night acted as a warning signal to the markets. A large rate cut gives off the impression the Fed are nervous, and traders have picked up on that. The latest data from China showed that industrial production and retail sales tumbled by 13.5% and 20.5% respectively – dealers are terrified the economies of Europe will see similar outcomes in the months ahead.
Sainsbury’s shares are in positive territory as groceries are in high demand these days amid the health crisis. Tesco and Ocado are outperforming too. M&G’s stock price has been clobbered by the volatility in the markets as traders feel the company’s clients will withdraw their funds from the asset manager. Cineworld shares are down more than 12% but they have recouped a major amount of the ground they lost from earlier in the session. As more and more people are avoiding densely populated spaces, dealers feel the group is going to suffer severely in terms of footfall.
The airline sector is still undergoing huge losses as several major players have had to greatly cut their flight plans. Lufthansa, International Consolidated Airlines Group, Ryanair, Norwegian Air Shuttle plus easyJet have all cautioned about cancelling a significant amount of their operations. Norwegian will cancel up to 85% of their flights. The turbulence in the aviation sector has added to the woes in the energy market. The major drop-off in flights should equate to a big fall in demand for oil plus oil-related products. The slump in the underlying energy market has hurt the share price of BP and Royal Dutch Shell.
The health crisis has promoted the cancellation of major sporting events, and in turn that has driven down the share price of gaming companies. Flutter Entertainment, Paddy Power’s owner, issued a profit warning. The ripple out from the warning has hit GVC and William Hill. PSA Group, Fait Chrysler and Ford are to suspend operations at their European plants on account of the growing health crisis. Traders are fearful this could become common practice across the entire manufacturing sector. Retailers have been hit by the coronavirus crisis too as Associated British Foods will close some of their Primark stores – the closures will account for 20% of floor space at the fashion house. Kingfisher will close their stores in France as well as Spain.
The losses on Wall Street are massive as dealers are turning their backs on stocks. Trading was halted in New York as the circuit breaker kicked – it’s a mechanism that is designed to stop the markets moving aggressively. When the circuit breakers kick-in because of a declines it really highlights the uncertainty in the markets. The usual suspects are suffering greatly – airlines as well as oil stocks. American Airlines plus United Continental Airlines mapped out plans to greatly capacity – a common move in the industry these days.
The New York empire manufacturing index fell to -21.5 in March, which massively undershot the consensus estimate of 3, and keep in mind the February reading was 12.9. The awful reading could be a taste of what is come in terms of ISM manufacturing and non-manufacturing.
USD/CAD remain in its uptrend despite the wider sell-off in the greenback. The sizeable fall in the oil market is hurting the Canadian dollar as the economy is closely tied in with the energy sector. The fact that ‘the loonie’ is lower versus the greenback speaks volumes about the weakness in the Canadian dollar.
The pound is under pressure too. Sterling has fallen against the US dollar as well as the euro. Given the health crisis, the UK-EU negotiations are likely to take a back seat for a while. EUR/USD is in the red as the eurozone is at the forefront of the crisis in the west, but that being said, EUR/GBP is pushing higher.
Oil has been hammered again as the market continues to be dogged by demand woes. The dreadful Chinese industrial production report - it dropped by 13.5%, has hit the oil market hard as dealers are fearful that demand in the west will drop off in the weeks ahead. The dire outlook for the aviation sector has is hurting oil too. The price war between Russia and Saudi Arabia is adding to the problem in terms of oversupply fears.
Gold is in the red as there is so much fear in the markets, even the safe havens are losing ground. It says a lot when gold is offside despite the fact that stocks have seen huge falls. It implies that some dealers are so concerned about the health of the global economy, they are dumping any assets.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.