European equity benchmarks are in positive territory as we approach the close of the trading session. 

Europe

Optimism about a stimulus package in the US has lifted sentiment on this side of the Atlantic. There has been a lot of back and forth in relation to what US politicians are pushing for, but ultimately there is hope that some sort of a relief package will be agreed upon. The FTSE 100 hit a three week high, and mining, pharma and energy stocks have been the biggest gainers in terms of index points. Commodities like copper and oil have enjoyed a bullish run this week, hence the upward move in commodity companies.

This day last week, Rolls-Royce shares fell to a 17 year low, but since then it has rebounded by 120%. There has been no significant news about the company in the past week, but some traders have speculated about a possible takeover bid, but there is nothing official along those lines. It is not surprising to see a rebound after the shares fell to its lowest mark since 2003, but a rally of this magnitude - without any very bullish news – is unusual.

British Land caught traders off-guard this morning by announcing plans to resume paying a dividend. The property specialist confirmed that it will pay-out 80% of underlying EPS, and it intends to declare an interim dividend next month. Real estate investment trusts have had a rough ride recently as the lockdowns prompted people to avoid busy shopping and working districts, so it is encouraging to see that British Land feels confident in paying a dividend. Collecting rent for commercial property has been tricky in recent months and many retailers have been under strain. British Land said that 86% of its retail sites have reopened. The group collected 74% of June’s rent, 98% of office rent was received, while it was only 57% of retail rents that were collected. The stock hit a three month high on the back of the update.

Pandora shares have jumped today thanks to the positive update that was issued yesterday afternoon. The company lifted its guidance in relation to earnings margin. The EBIT margin is now expected to be between 17.5% and 19.5%, and that was a slight improvement on the old forecast, which was 16-19%. The group’s e-commerce business outperformed as organic online revenue for the third quarter surged by almost 90%. Not everything in the update was positive as it now anticipates that 10% of its stores will remain closed in the fourth quarter, while in the previous guidance, it predicted that all stores would be open. Pandora has shown that it is able to cope with a large volume of online business, so that should stand to the company should Covid-related restrictions impact stores.

The Competition and Markets Authority approved the merger between Marston’s and Carlsberg. The regulator ruled that there won’t be an impact on competition as Marston’s specialises in brewing ale, while Carlsberg focuses on larger. The tie-up between the two brewing businesses should provide cost saving synergies.    

Stagecoach maintained its full year outlook. The transport company is under pressure on account of the fear in relation to the rise in the number of Covid-19 cases, as there are worries about localised lockdowns.

Barclays cut its price target for Trainline to 365p from 410p.                        

US

Sentiment on Wall Street is a little bullish as the chatter of a coronavirus relief package is doing the rounds. There have been a few twists and turns in relation to the proposed stimulus scheme, but dealers are cautiously buying to the market in the belief that some progress will be made. The Democrats and the Republicans are still divided so one could argue that traders are getting ahead of themselves. 

Xilinx shares have jumped on the back of the news that Advanced Micro Devices (AMD) are in advance talks to buy the company. The deal could be worth $30 billion. Chips demand has jumped partially because of the rise in working from home. AMD has taken some the market share from Intel and they are clearly keen to expand. Traders are clearly not thrilled with AMDs decision as the stock is in the red. 

FX

The US dollar index is down again as dealers are in a slightly risk-on mode. Lately the greenback has jumped when traders have been keen to hold assets that are considered to be lower-risk, and now that there is hope for a US stimulus package, the dollar is in the red – it has fallen to its lowest level since 21 September.

GBP/USD has been assisted by the fall in the dollar. There are some concerns for the health of the UK’s recovery as the August GDP reading was only 2.1%, and that was nowhere near the 4.6% that economists were expecting. The July report was 6.6% so there was a large drop off in activity. Next week will be important in the UK-EU trade talks as the British side has threatened to walk away from the discussions if a meaningful deal hasn’t been outlined by 15 October. 

USD/CAD is in the red, partially because of the broad move lower in the dollar, and the robust jobs report form Canada helped too. The Canadian unemployment rate fell to 9% from 10.2%, and the employment change report showed that 378,200 jobs were added, and that easily topped the 156,600 forecast.   

Commodities

Gold’s has been given a lift by the slide in the US dollar. In recent months the moves in the greenback has had a big impact on gold’s price action. As mentioned above, the US dollar index has fallen to its lowest level since 21 September, and the yellow metal has it its highest mark since 21 September. While the asset holds above $1,900, the broad uptrend should remain intact.

WTI and Brent crude oil are slightly in the red after several days of sizeable gains. The energy market was driven higher this week because of worries about supply. A hurricane will descend upon the Gulf of Mexico and due to the adverse weather, production in the area has essentially been halted – the regions account for roughly 17% of total US output. Striking oil workers in Norway have also helped the oil market push higher this week.          


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