News

Mood lifted by Pelosi comments

CMC Markets

The FTSE 100 is set to close higher on the session on the back of the optimistic comments from Nancy Pelosi in relation to the stimulus package.

Europe

Pelosi, is the House Speaker, and a short while ago she said that they are nearly there in relation to making an agreement on the Covid-19 relief package. For much of the session, the sentiment in European stocks was weak but the comments prompted some pre-close buying.

Rentokil initial​ shares are in demand today on the bank of a robust third quarter trading update. The pandemic has promoted companies to ramp up their spending on health and safety, and that benefited Rentokil greatly. In the three month period, group revenue rose to £754.6 million, which was an increase of almost 10%. The pest control unit saw a 1.3% rise in revenue. The hygiene division was the standout performer as revenue jumped by 53.3%, and that was a big increase on the 16.3% rise that was posted in the second quarter.

International Consolidated Airlines Group (IAG) shares saw a lot of volatility today. The downbeat third quarter update initially prompted a sell-off in the stock price, but it has since recovered. IAG registered a €1.3 billion loss in the third quarter. Revenue in the three month period dropped by 83% to €1.2 billion. Business is obviously tough for the entire sector at the moment, but IAG was keen to point out that it has strong liquidity and it is in a good position to ride out the turbulence. As a way of conserving cash, and possibly because of weak demand, IAG will operate at 30% capacity in the fourth quarter, and keep in mind, they previously planned to operate at 40% of capacity.

Unilever PLC was one of the minority of companies to benefit from the pandemic as they sell consumer goods, not surprisingly, the health care products saw high demand. Underlying revenue increased by 4.4%, topping the 1.83% growth that equity analysts were anticipating. Turnover was €12.9 billion, ahead of the €12.69 billion consensus estimate. All the departments performed well, and home care, beauty & health care and food & refreshments, posted revenue growth of 6.7%, 3.8% and 3.7% respectively.

Moneysupermarket shares fell to a seven month low after the company revealed a 16% fall in third quarter revenue. The price comparison site has underperformed recently on account of the current climate. Bank’s lending criteria is tougher, and few products are available, and there are fewer opportunities to save money on energy too. The financial site reiterated the point that it is in rude health and it should be in a position to take advantage of opportunities when the environment picks up.                                                

US

The major indices were given a lift on the back of the news with respect to the comments from Nancy Pelosi. The mood was muted before the optimistic announcement was made The labour market is improving but that hasn’t improved sentiment in stocks. The jobless claims reading fell to 787,000 – it’s lowest since March. The continued claims report, is one week behind the jobless update, and it dropped from 9.39 million to 8.37 million. It is encouraging to see that things are slowly improving in the jobs market.    

Tesla shares are driving high today on the back of solid third quarter results that were released last night. Revenue was $8.77 billion, and that topped the $8.36 billion that equity analysts were predicting. EPS came in at 76 cents, and that easily exceeded the 57 cents consensus estimate. The auto-maker saw a 33% jump in costs, but that was largely down to the fact that it built factories in Texas, and in Germany. Tesla is aiming for production growth of 30-40%, so expansion at the factory level is required. In the third quarter, gross margins at from the auto division came in at 23.7%, up from 18.7%. The stock has been pushing higher since early September and while it holds above the 50-day moving average at $414, it could retest the $502 area.               

FX

The US dollar index has rebounded from the seven week low that was posted yesterday. The session high was achieved on the back of the well-received US jobs data, although it has cooled a little since then. Lately the greenback has been under pressure as there is persistent talk of the US plan to have a stimulus package. The Federal Reserve seems to be content to keep their policy on hold, but central bankers often call for a fiscal response too.

EUR/USD and GBP/USD are in the red on the back of the push higher of the dollar. Sterling is lower across the board, but it retreated from the six week high that was hit yesterday. The mood is cautiously optimistic in relation the UK and the EU striking a trade deal, so we might have seen a floor under the pound for the time being. 

EUR/USD is in the red after it hit a five year high week yesterday so there is a bit of profit taking doing the rounds. The German GfK consumer sentiment report for October was -3.1, and that was a drop from the -1.7 registered in the previous report.          

Commodities

Gold has been dragged back below the $1,900 mark on account of the US dollar. The inverse relationship between the two assets has been strong recently and today is it working against the yellow metal.

WTI and Brent Crude oil have rebounded after they fell to nearly one week lows yesterday. For much of October, the oil market has been drifting lower as concerns about demand – in light of rising coronavirus cases and tighter restrictions – has weighed on sentiment. The fact that US politicians have yet to reach a stimulus deal hasn’t helped either.   


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