News

Stocks slump again as health woes linger, Home Depot holds up

Health fears continue to hurt market sentiment as the major equity markets in Europe are all in the red. 

Europe

The colossal losses that were racked up yesterday encouraged some bargain hunting at the start of today’s session, but then old concerns crept in, hence why we are offside again. The coronavirus fears have gripped European stocks as dealers are worried that this part of the world could go down the Wuhan route in terms of being on lockdown. Yesterday, Europe-focused airlines like easyJet and Ryanair posted painful losses, and they are in the red again today, and that tells you everything you need to know about tourism sentiment.       

SIG shares have slumped following the announcement the CEO as well as the CFO has stepped down. Their successors have been named. Steve Francis will replace Meinie Oldersma as CEO, while Kath Kearney-Croft will take over from Nick Maddock as CFO. The stock price has been has been hammered in recent months on account of a profit warnings in October plus January. The update today knocked investment sentiment even further as the two new senior executives will have the pressure on them to come up with a turnaround plan quickly.

Meggitt announced solid full-year figures, and the guidance was largely positive, and some aspects of the outlook were downbeat, and that weighed on the stock price. The yearly revenue figure came in at £2.3 billion, an 8% increase on the year, and statutory profit jumped by 33% to £286.7 million. The firm anticipates that annual organic group revenue will increase by between 2% and 4%. Meggitt made a cautious reference to the coronavirus crisis as well as the suspension of the Boeing 737 Max production, and that hit the share price.

Prudential shares are in demand this afternoon after Third Point, an activist investor, who owns nearly 5% of the company, have called for the group to be split-up. The investment firm have argued the US unit and the Asian business should be spun-off as separate businesses, and they feel it would enhance the value of both groups. Third Point are recommending that Prudential should be less generous when it comes to the dividend, and they are suggesting funds should be reinvested in the business.            

US

The major US indices initially traded higher on the open but the bullish move didn’t last that long, and it is a clear indication that traders are fearful of the health crisis. The Dow Jones lost over 1000 points last night, and it is in the red again today ,so that sums up the negative sentiment.  

The housing data was well received as the Case Schiller report showed annual growth in December of 2.9%, topping the 2.8% forecast, but it is worth noting the November reading was revised to 2.5% from 2.6%. The Conference Board consumer confidence for February came in at 130.7, which undershot the 132 consensus estimate, and it was a slight drop from the 131.6 posted in January.  

Home Depot shares are up more than 1% on the back of strong fourth-quarter figures. EPS came in at $2.28, which easily topped the $2.10 forecast. Revenue for the three month period was $25.78 billion, marginally topping forecasts. Same-store-sales is a closely watched metric, and it jumped by 5.2%, while equity analyst were anticipating an increase of 4.8%. Sales on a square foot basis ticked up, as did the average ticket. The numbers were impressive but the wider negative sentiment caused the stock to only increase by a small amount.  

FX

GBP/USD has traded back above the 1.3000 mark, and that in part is because of the weaker US dollar. The CBI realised sales report came in at 1, which was a slight improvement from the 0 registered in the previous update. The reading doesn’t sound impressive, but it is the highest in 10 months. Yesterday, Andy Haldane of the Bank of England, suggested the UK might see an increase in business investment, and that slightly upbeat comment has played on dealers’ minds.

It was confirmed the German economy grew by 0.0% in the final-quarter of 2019 – meeting forecasts. The powerhouse of Europe didn’t grow in the last three months of last year, so the disruptions caused by the health crisis in Italy is likely to feed into the first-quarter GDP numbers. EUR/USD is higher today due to the dip in the dollar.     

Commodities

Gold is lower as traders booked their profits from yesterday – when the asset it a seven year high. The metal usually benefits from the flight to quality effect but that relationship hasn’t really played out today. Gold is off the lows of the session, and that is coinciding with the turn lower in stocks, so the risk-off strategy might be kicking-in again.       

WTI and Brent crude are lower again as demand fears are weighing on sentiment .The energy has been dragged around by the coronavirus story in recent weeks as China – the largest importer of the energy in the world, is at the centre of the emergency. Traders are worried the situation could spiral into a global problem, hence why the oil market is lower.     

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.