News

Volatility low as health situation and Fed are in focus

Equity benchmarks in Europe are broadly showing small gains. 

Europe

The FTSE as well as the DAX are barely in positive territory, while the CAC 40 and the FTSEMIB are both up roughly 0.3%. The trading session has been lacklustre as traders are only too aware of the deepening coronavirus situation, but sentiment hasn’t moved a whole lot in either direction. If yesterday’s positive move was down to a combination of short covering and bargain hunting, the muted session today might be a sign that buyers are running out of steam.   

Wizz Air shares are eyeing their all-time high following the solid third-quarter numbers. Profit for the three month period was €21.4 million – which was a record. Revenue jumped by over 24% to €637.3 million. Wizz Air hiked its full-year profit guidance to €350-€355 million, and keep in mind the old guidance was €335-€350 million. The stock outperformed its London-listed rivals in 2019 in terms of share price growth. In light of today’s update, it is likely to remain popular with traders.  

Fresnillo posted production figures today. Full-year silver and gold output fell by 11.6% and 5.1% respectively. Looking ahead to next year, the miner anticipates output to be roughly in line with levels achieved in this year. It is worth noting that if the firm’s production came in at the lower end of the forecast range that would likely equate to a fall in output on the year. Underlying silver as well as gold prices have been relatively strong lately, so that should assist the company.    

Crest Nicolson shares are higher today in the wake of Jefferies raising their price target to 449p from 429p.          

Stagecoach shares have been hit by a downgrade from HSBC. The bank lowered their outlook to ‘reduce’ from ‘hold’, and the price target has been lowered to 125p from 140p. 

McCarthy & Stone issued reasonably good figures yesterday, and the house builder confirmed that client interest has risen in the wake of the Conservative party wining the general election. Deutsche Bank as well as Canaccord Genuity lifted their price targets for the house builder today, but the stock is lower despite the announcements from the finance houses.   

US

The mood one Wall Street is slightly optimistic as the markets are building on yesterday’s rebound. The health crisis doesn’t appear to the having much of an impact sentiment. Traders are looking ahead to the Federal Reserve meeting at 7pm (UK time), while the press conference at 7.30pm (UK time) is much more likely to be interesting. The Fed are tipped to keep rates on hold. In the latter half of 2019 the US central bank cut rates three times ,and at a meeting at the back end of last year, the organisation gave off the impression it was going to sit on its hands for a while. It is likely we have yet to see the impact of the more recent cuts, and the central bank might use neutral language for a while.

Pending home sales dropped by 4.9% last month, which caught traders off guard as the consensus estimate was 0.5%.      

Apple shares hit a record-high following strong first-quarter figures that were reported last night. EPS were $4.99, and the forecast was $4.55. Revenue rose by 9% to $91.8 billion, while the consensus estimate was $88.5 billion. Lately the tech giant has been deriving more of its revenue from the services division, and that was the case in the three month period as the unit showed a 17% rise in revenue to $12.7 billion, but the consensus estimate was $13.07 billion. The group’s outlook is positive too as the margin plus the revenue guidance topped analysts’ forecasts.

McDonald’s shares hit a four month high on the back of solid quarterly figures. Revenue increased by 4% to $5.3 billion, meeting forecasts. EPS were $1.97 and traders were expecting $1.96. Global same-store-sales jumped by 5.9%, and that topped expectations too.  

FX

The US dollar index continues to push higher for the sixth day in a row. The economic indicators from the US have been hit and miss recently. It would appear that traders are buying the into the greenback as the Fed are likely to maintain their monetary policy for the next few months, while there is speculation the Bank of England might lower rates tomorrow. EUR/USD has also been hit by the rally in the greenback. German import prices increased by 0.2% last month, which was a drop off from the 0.5% reading posted in January.   

Commodities

Gold has recouped some of the ground it lost yesterday. The coronavirus situation is getting worse, and the headlines are circulating but there hasn’t been a huge reaction in the markets. The metal traditionally moves lower whenever the US dollar is higher, but that is not the case today, as both markets are up on the session. The Fed are likely to use neutral language later on, so the metal’s volatility might remain low.

WTI and Brent crude saw a jump in volatility on the back of the Energy Information Administration report. It showed that US oil and gasoline inventories increased by 3.54 million barrels and 1.2 million barrels respectively. The reading suggests low demand. Oil initially sold-off, but it is now back above the pre-announcement level.   

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