News

China health concerns hangs over markets, sterling lifted by jobs report

CMC Markets

Stock markets are mostly showing modest losses as we approach the close of trading. 

Europe

The declines that were posted in Asia overnight impacted sentiment in Europe. Traders are fearful about the possibility of a new coronavirus in China. Comparisons are being drawn with the SARS crisis, which is why dealers are cutting their exposure to equity markets. There has been an absence of positive macroeconomic news in the past 48 hours in Europe, so the bears are currently winning out.  

EasyJetshares have bucked the industry trend thanks to the quarterly update.  In the three month period, the company said the revenue per passenger metric rose by 9.7%, revenue from ancillary services jumped by 10.8%. The air fare sector is competitive, and it has been a common theme of airlines to derive more revenue from ancillary services. EasyJet said the first-half loss would not be as steep as the £275 million loss posted in the same period last year, and that has lifted the share price. Long-haul air carriers like Lufthansa, International Consolidated Airlines, and Air France are all lower today on the back of the coronavirus fears as travel to and from China are likely to be impacted by the story. The Lunar New Year holidays are drawing nearer, and millions of people are expected to be on the move in China, and well as traveling to and from China. 

Dixons Carphone shares are higher this afternoon after the company maintained its full-year guidance, despite a so-so trading update covering the 10 week period until early January. There was some confusion with today’s announcement as it was initially reported that sales increased by 2%, but then it was revealed there was an administration error and in fact sales slipped by 2%. There was some volatility on the back of the correction, but the stock is now above the pre-correction announcement level. Traders were clearly cautious going into the announcement as the firm issued a painful profit warnings during the summer.

UBS revealed largely disappointing numbers this morning, hence why the stock is in the red. The adjusted cost-income ratio was 78.9%, while the target was 77%. The common equity tier 1 ratio is a closely watched metric in terms of the bank’s strength, and the reading was 12.4%, and that undershot the target of 15%. The wealth management division saw outflows of funds of $4.7 billion – which could be related to the fact the bank is now charging clients to deposit large sums of cash. The sub-par update highlights the stark differences European banks and their US counterparts like JPMorgan Chase

Sainsbury’s will cut hundreds of jobs in management as the group makes further headway with the integration of Argos. The move is a part of a wider cost cutting scheme that was previously announced.

US

The mood on Wall Street is slightly downbeat given the health concerns surrounding China. Today has been quiet in terms of economic news form the US, and the sentiment is being dictated from Europe and Asia. 

Haliburton posted solid fourth-quarter figures as EPS came in at 32 cents, while equity analysts were expecting 29 cents. In the three month period, the revenue was $5.19 billion, which was slightly above forecasts. The slump in the US shale industry hurt the group as it took a hit of $2.2 billion in relation to sector. The company took a hit on account of asset impairments as well as staff reduction costs. This echoes the news from Schlumberger that it trimmed its headcount in the latest quarter.  

Netflix will reveal its fourth-quarter numbers tonight. The rate at which the company adds news users in the US and overseas has been a closely watched metric for the group, but now it will be even more important seeing as Apple TV+ as well as Disney+ have entered the ring. Netflix has ruled roost in terms of the streaming industry, but now they position could be challenged. Disney has a stellar back catalogue, while Apple is extremely cash rich, so Netflix might find it tough to stay ahead of its peers.

FX

GBP/USD has pushed higher on the back of the respectable data from the UK. The unemployment rate remained at 3.8%, meeting forecasts, but the average earnings figure excluding bonuses showed 3.4% growth, which was a drop from the 3.5% posted in the previous update. A dip in the wages reading isn’t ideal, but overall it was a decent set of figures. The report made some traders call into question the chatter about a rate cut from the Bank of England later this month, hence why sterling is higher on the session.

Even though the US dollar is broadly lower this afternoon, USDC/AD, is showing a small gains on the back of the poor Canadian manufacturing sales report. The reading showed a 0.6% fall in November, undershooting forecasts.

EUR/USD is higher on the day as the German ZEW economic sentiment reading jumped to a 23 month high of 26.7, while traders were only expecting a reading of 15. 

Commodities

Gold is lower today even though the US dollar is down as are stocks. It is concerning that gold can’t muster a rally on a day when traders are clearly in risk-off mode – equities are lower, and the yen is higher. The metal typically gets a lift from a softer US dollar, but that has not been the case today. It is possible the sharp sell-off in palladium as well as platinum is influencing the gold market.

WTI and Brent crude are a little lower today in the wake of the push higher yesterday – which was driven by supply concerns. Traders are less worried about the unrest in Iraq as well as Libya today, and it seems the wider feeling of malaise has impacted the energy market.

 

 


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