News

US stimulus hopes lift mood, oil pops

CMC Markets

Equity markets are showing decent gains on renewed hopes of a stimulus package in the US.

Europe

President Trump claimed that Congress has restarted talks in relation to a coronavirus relief package, but no further details were given. The back and forth in relation to the stimulus programme has been the main story of the last few sessions. Earlier in the week, the Donald declared that the discussions were brought to an end, and that there would be no stimulus scheme until after the election, but now there has been a U-turn, and it would not be the first time that the US leader changed his mind in a short period of time. Traders’ reacted well to the news, especially seeing as European markets underperformed against their US equivalents yesterday.   

GVC shares hit their highest level in over two years on the back of the bullish third quarter update. Group net gaming revenue increased by 12%, and the online gaming unit outperformed as the revenue jumped by 26%. The online gaming revenue is now at levels above that before the pandemic struck – some of GVC’s competitors also experienced a jump in online gaming activity. GVC announced that full year EBITDA will be in the region of £770-£790 million, which would be above forecasts. In the current environment only a minority of groups are issuing optimistic outlooks, and that caught traders’ attention.

EasyJet announced that full year passengers fell by 50% to 48 million. The low-cost carrier predicts that the annual loss will be between £815 million and £845 million. Renewed health fears and tougher travel restrictions have hurt the airline and the outlook remains weak, as it plans to operate at 25% of capacity in the first quarter. Even though the environment is challenging easyJet is in a strong position to endure the tough times ahead as it’s cash balance is £2.3 billion.            

Hargreaves Lansdown shares are in the red even though the company had a respectable first quarter. Revenue was £128.1 million, up 12%. Net new business was £800 million. A surge in volatility in the financial markets on account of the pandemic helped the business. In the three month period, assets under management increased by 3% to £106.9 billion.

Imperial Brands said that full year net revenue is expected to be flat on the year, which is a better-than-expected guidance. The group had a relatively strong performance in regard to tobacco products in Europe and the US, so that helped offset the weaker sales at popular holiday destinations. The next generating products unit is expected to post a 30% fall in revenue. 

Toscafund Asset Management has approached TalkTalk with a takeover offer, and the telecoms group confirmed they are exploring the proposal. The news sent TalkTalk shares to their highest in four months.

Rolls-Royce shares are on a roll as the stock is up 23%. Last Friday, the stock tumbled to a 17-year low, and since then it has rebounded over 85%. The engineering titan plans to raise funds from a rights issue and through debt in an effort to bolster its balance sheet. It seems that traders feel the capital raising plans should stop the rot in terms of the company’s financial image.    

US

The S&P 500 is building on yesterday’s gains as the comments from President Trump in relation to the possibility of a stimulus package. Mr Trump said that he plans to target China with tariffs, and it seems that will be his strategy going into the election. Only a few days ago it appeared he was going to use the lure of relief package to try and win over voters, but he has turned his attention back to China, which he will probably use as the bogeyman.

The initial jobless claims reading was 840,000, which was slightly higher than the 820,000 that economists were expecting. The previous reading was revised from 837,000 to 849,000. The continued claims reading fell from 11.76 million to 10.97 million, but keep in mind the report is one week behind the jobless reading. The labour market is clearly in a dire state, but things are slowly improving. 

Domino’s Pizza inc delivered third quarter EPS of $2.49 but equity analysts were expecting $2.79. US same stores sales jumped by 17.5%m and that topped the 13.9% forecast.   

FX

There has been little movement in GBP/USD and EUR/USD as there has been an absence of any major news to influence the currencies. The dollar is a touch higher in the wake of the negative move that was witnessed yesterday. Lately the greenback has been sensitive to any big changes in the attitude to risk and seeing as US equities haven’t moved a whole lot today, and that appears to be affecting the dollar.              

Commodities

Gold is basically flat on the session. In the past few months, the asset has been dragged around by the greenback. There has been a strong inverse relationship between the two markets and seeing as the dollar has traded in a small range today, it is a similar story with gold.

WTI and Brent crude are up as a category 3 hurricane is due to descend upon the Gulf of Mexico and oil companies have been removing workers from their operations in the area. The hurricane story has been in the news for a few days. The overall feel-good factor in relation to the optimism about a stimulus package in the US is helping too.                   


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