News

Markets quiet on account of US holiday, Tullow falls again

Equity markets are moderately higher this afternoon as the largely positive move in Asia overnight lifted sentiment in Europe. 

Europe

Stock markets in China surged on the back of the chatter the Chinese authorities will step in and give assistance to the economy. The People’s Bank of China (PBoC) cut the interest rate on one year loans in a bid to support credit markets, which should help commerce in the country. Over the weekend, the Chinese Ministry of Finance said it would inject 8 billion worth of liquidity into the market, in addition to that, Beijing has planned tax cuts in the pipeline. The Shanghai Shenzhen CSI 300 index has now recouped all the ground that it lost when the market reopened after the Lunar New Year holiday.

Sadly the health crisis is deepening in China but traders are reacting to the intervention by the Beijing administration. The DAX eked out a fresh all-time high in early trading this morning but it is now off the highs of the session. The CAC 40 is in positive territory too and it is not too far away from the February highs. The FTSE 100 is still in the broad uptrend that it has been in place since October, but it is still a fair distance away from its 2020 highs. Commodity stocks have held back the British equity benchmark. The US holiday means that trading has been subdued in Europe.    

Jupiter Fund Management shares got off to a strong start this morning after it was announced the company has agreed to acquire Merian Global Investors for £370 million. The combined group would have assets under management of roughly £67 billion. Merian shareholders would wind up owning 17% of Jupiter should the tie-up go ahead. The proposed deal should benefit their clients ‘ever evolving needs’. 

Tullow Oil, the Irish oil exploration group, has been running low on luck lately as the share price has taken a battering recently on account poor updates – it has dropped by 79% since mid-November. Today the company confirmed it would abandon one of its wells in Peru as drilling showed no significant hydrocarbons.     

Bayer shares are in the red after a court in Missouri found in favour of a farmer who sued the chemical giant for $265 million. The legal battle was in relation to herbicide, and it was believed to have caused major crop damage, Bayer are appealing the verdict, but it the court’s ruling is upheld, it could open the floodgates for far more legal cases against Bayer.

US

The NYSE remains closed today as the US celebrates President’s Day.

FX

The US dollar index has extended its gains as the currency continues to be popular with traders as it seems to have relative strength. The political uncertainty in relation to what the UK’s post transition period relationship with the EU will look like has held the pound back. Even though the UK economy is robust in some respects, the fear of a no-deal scenario after the transition period has prompted some dealers to dodge the pound. Traders are still that mindful of the fact the German economy could be on the path to a recession in light of the zero growth achieved in the fourth-quarter of 2019. Volatility has been low today in EUR/USD plus GBP/USD.    

Commodities

Gold is a little lower today on account of the largely optimistic sentiment in stocks. The metal often benefits when there is uncertainty in equity markets as traders typically seek out assets that are deemed to be lower risk, so today the opposite is the case. Gold might be fractionally in the red but the wider uptrend still remains intact.

WTI and Brent crude are slightly in the red this afternoon as traders lock-in profits from the gains that were made last week. Volatility as well as trading volumes have been low as traders in the US are on holiday so todays move probably aren’t a true reflection of market sentiment. If both oil markets can hold above their recent lows, we might see Brent crude retest the $60.00 area while WTI might seek to target the $54.00 zone. 

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