It has been another bullish day for European stocks even though the political picture still isn’t very clear in the US.
A Biden win seems like the most probable outcome, but despite the absence of clarity, equity traders are happy to snap up stocks. Political uncertainty and a rally in equities do not normally go together but some people are taking the view that Mr Biden might not be able to do a whole lot should he trump the Donald in the race to the White House, as the Senate will probably remain under Republican control. Judging by the voting results, President Trump performed better than the pollsters expected, and at the same time, a stock market rally amid a backdrop of political uncertainty was not a common prediction either.
Sainsbury’s shares have slipped on the back of the first half update. Total retail sales excluding fuel increased by 7.1%, and the like-for-like metric showed growth of 6.9%. The pandemic was a huge shock to the economy, and in turn the retail sector. The closure of Argos shops amid the lockdown cost the group £438 million, and that contributed to the pre-tax loss of £137 million. Underling pre-tax profit, excludes exceptional items, and that came in at £301million. In the six month period, digital sales soared by 117%, and it equated to almost 40% of total sales. It is encouraging to see that the group can cope with such high levels of e-commerce and this should stand to them in the near-term as England has entered a one month lockdown. The firm will be undergoing restructuring, and it intends to close approximately 420 standalone Argos stores between now and March 2024. Argos stores and collection points will be incorporated into Sainsbury’s outlets. The firm announced a special and an interim dividend of 7.3p and 3.2p respectively.
Tate & Lyle shares rallied on the back of the first-half pre-tax profit of £157 million, which topped expectations. The food group confirmed that its primary markets performed well, and that was well received seeing as the current environment is difficult. Revenue in the six period that revenue was £1.38 billion, and that was a drop from the £1.47 billion registered one year ago. No guidance was issued because of the climate, but the interim dividend was left on hold at 8.8p.
Trainline PLC has been hit hard by the pandemic as the lockdowns and the rise in working from home has greatly dented the number of people travelling on public transport. In the first half, group net ticket sales were £358 million, which was only 19% of last year’s figures. The operating loss surged from £8 million last year to £43 million. Despite the dreadful numbers, the stock is higher today, but it is worth noting they fell to their lowest level since March on Monday. The next month is going to be painful for Trainline seeing as England will be in a lockdown for one month.
Tech stocks are rallying again as it looks like a victory for Joe Biden. The Democrat has plans to curb the power of technology titans, but even if he does win, he will probably struggle to pursue that policy as The Senate will probably be controlled by the other side. At some point there will probably be a coronavirus relief package, but given how things are shaping up in terms of the voting, it will probably be much smaller than what the Democrats were calling for before the election.
Qualcomm shares hit a record high due to the solid fourth quarter results. EPS was $1.45, which easily exceeded the $1.17 consensus estimate. Quarterly revenue was $6.5 billion, topping the $5.93 billion forecast. The group’s QCT division, which specialises in chips, performed well as revenue surged by almost 40% to $4.97 billion. Qualcomm confirmed it is well positioned to take advantage of the 5G mobile boom that is tipped to take place. It is predicted that 200 million 5G phones will be delivered in 2020, and that will surge to 500 million in 2021.
General Motors shares are up on the back of the solid third quarter numbers. EPS was $2.83, which easily topped the $1.38 consensus estimate. Revenue was $6.5 billion, ahead of forecasts. The auto manufacturer confirmed that sales in the US and China have recovered at a faster rate than expected.
The US dollar is in the red as traders are content to take on more risk and plough their cash into equities and metals – assets that are considered to be riskier. No change from the Fed is expected this evening and seeing as there is political uncertainty in the US, we won’t be getting any fiscal boost from the government anytime soon, and therefore the central bank will probably reiterate its willingness to support the economy.
The US dollar index dropped to a two week low and that in turn has assisted the GBP/USD and EUR/USD. The Bank of England increased its quantitative easing scheme by £150 billion to £895 billion, and keep in mind that the consensus estimate was for a £100 billion increase. The UK central bank kept rates on hold but they left the door open to the possibility of negative rates – even though it is likely to put pressure on lending margins at banks. Rishi Sunak, the UK Chancellor of the Exchequer, confirmed the extension of the furlough scheme until March, with 80% pay.
Gold has been driven higher by the sizeable slide in the US dollar. The metal hit its highest level since late September and while it holds above the 50-day moving average at $1,914, the recent bullish move should continue.
WTI and Brent crude are a little in the red today are traders are content to book some of their profits from the last few session – where the energy market rallied. The possibility of a Biden administration has worried some in the oil market as he could soften the US’s stance with respect to Iran, and that could to bring about increased supply - if this issue was a major concern, the oil market would have fallen much further.
Disclaimer: 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.