It has been a relatively quiet session today when you take into consideration the aggressive moves that were seen during the week.
Stocks are broadly set to finish higher. The health crisis is back at the forefront of traders’ minds given the number of Covid-19 cases in Germany, the UK and Italy. Several major economies in Europe have lockdowns in place and with the way, things are going, extensions could be issued. Some of the fear surrounding the health crisis was taken out of the market by Isabel Schnabel, of the ECB. The central banker, said the ECB would be ready to act if necessary, and that helped the mood in the equity markets. In recent years, stock markets have become addicted to monetary easing, and it seems the ECB is going to loosen their policy further next month. The Pfizer-BioNTech vaccine story is still lingering, but there is now the realisation that even if things go well with respect to regulatory approval, the pandemic will not be resolved quickly.
Galliford the construction and civil engineering specialist, announced that it expects to return to profitability in the first half of the year. The group also hopes to reinstate its dividend by the time the interim results are posted, such an announcement makes the stock more attractive to income seeking investors, and it sends out a positive message to the market. All construction projects have been in operation since 1 July, in addition to that, management confirmed that the business is performing in line with forecasts. In early November, the stock fell to its lowest level in 13 months, and today it hit its highest level since mid-August.
JP Morgan lifted its price target for Rolls-Royce to 50p from 30p. The move by the Wall Street titan comes one day after the engineering group raised £2 billion from a rights issue, whereby the uptake was more than 94%. The fact that existing shareholders were very eager to take part in the capital raising scheme indicates a high level of confidence in the company. Rolls-Royce was already having serious problems before the pandemic – the Trent 1000 engine issue – so the health crisis compounded the situation. The latest round of capital raising should help it see it through the turbulence that is going on in the aviation industry. The recent news that Pfizer and BioNTech are developing a drug that might go on to be a vaccine for the coronavirus has given a new lease of life to Rolls Royce and airlines.
Dealers are relatively optimistic in the US and the S&P 500 is up 0.7%, while the NASDAQ 100 is up almost 0.2%. Some normality has returned to stocks now that the dust has settled with respect to the possible coronavirus drug story. New York and Chicago look as if they are in for tougher restrictions and that could spread to other cities in the near term, and the bullishness from the vaccine story might fade.
Walt Disney shares are a touch higher this afternoon following the release of its fourth quarter numbers last night. The company confirmed that it added over 73 million to its streaming service in the year, and keep in mind, the original target was 20 million, so it hammered its owns initial forecast. The lockdowns helped with the subscription numbers no doubt, just like Netflix, but Disney suffered greatly too because its theme parks were impacted. The disruption to theme parks is expected to cost the group roughly $2.4 billion in the final quarter. The quarterly loss per share was 20 cents, and that was better than expected as the consensus estimate was a loss of 71 cents. With respect to revenue, equity analysts were expecting $14.2 billion, and it come in at $14.71 billion.
Palantir Technologies announced its third quarter numbers last night, and it was the first quarterly update since the company floated in September. The data analytics company confirmed revenue jumped by 52% to $289.4 million, topping the $279.4 million forecast. The loss per share was far greater than expected as it was 94 cents, while the forecast was 24 cents. In the three month period, Palantir, took a charge of $847 million relating to stock based compensation, and without that, the operating profit would have basically been zero, instead it was a loss of $847.8 million. The full year revenue guidance was nudged up to $1.07-$1.072 billion, from $1.06 billion.
A move lower in the US dollar has pushed up EUR/USD and GBP/USD. The greenback rallied during the week on the back of the news that Pfizer and BioNTech had major success with their drug which has the potential to be a vaccine for the coronavirus, as some dealers took the view that the Fed will reign in their very loose monetary policy should the pandemic be brought under control. The dollar is a little lower on profit taking.
The preliminary reading of eurozone GDP for the third quarter was 12.6%, while economists were expecting 12.7%. Keep in mind the region incurred an 11.8% fall in growth in the second quarter, so the area is rebounding. The latest lockdown will probably have a large impact on the fourth quarter metric.
The CMC GBP index is a little firmer today as the UK-EU trade talks situation is still in focus. There was no major reaction from the pound when there was the chatter that the mid-November deadline would be missed, probably because not many expected it to be honoured.
Gold is once again clawing back some of the ground that it lost on Monday – when it endured a massive sell off on the back of the volatility sparked by the coronavirus drug story. The markets have calmed down since the start of the week, and the dollar is weaker, and that has assisted the yellow metal.
WTI and Brent crude oil are offside as traders are worried about demand. Yesterday, the EIA report showed that US oil stockpiles jumped by over 4 million barrels, and that suggests weak demand. The worrying levels of Covid-19 cases and concerns about stricter restrictions in Europe and US cities are hurting oil too.
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