stocks lower markets down

UK & Europe

The FTSE 100 crashed as much as 2.5% back beneath the widely-watched 6000 level after heavily-weighted oil giant BP reported its worst annual result in two decades. Appropriately the price of oil dived alongside BP’s share price on Tuesday, adding to bearish sentiment.

The only positive to be taken away from BP’s results was the maintenance of the dividend. Profits before and after adjustments both significantly undershot which reduces the capacity for BP to pay future dividends. It seems likely BP will have its credit rating downgraded in the not too distant future as the company slashes capex and increases leverage to sustain the same dividend it was paying when oil prices were more than double what they are now.

Shares of Sainsbury’s reacted positively to the supermarket’s raised bid for Argos-owner Home Retail on the realisation that some financial creativity embedded in the deal meant a smaller outlay of actual Sainsbury’s cash. 

The supermarket sector is not going to be a growth industry for the big four grocers anytime soon. It makes sense for Sainsbury’s to think outside the box of a race to the bottom of asset sales and price reductions alongside Tesco, Morrisons and Asda. Amazon are gradually moving into the grocery business so Sainsbury's CEO Mike Coupe must be of the opinion that the best form of defence is offence. Offering Argos collection in store is likely to broaden the appeal of Sainsbury's core grocery business, helping in the fight for Market share against discounters Aldi and Lidl.

 

US

US markets opened heavily in the red with the Dow Jones dropping 200 points as the price of oil sunk to a four-day low. The victory of controversial Texas senator Ted Cruz in the Iowa Republican caucuses added political uncertainty to the mix.

Alphabet officially surpassed Apple as the most valuable company in the world after better than expected results catapulted the Google holding company shares to a fresh record high.

 

FX

The US dollar was mixed as commodity currencies dropped alongside the price of oil while the euro and Japanese yen firmed on positive data and haven flows respectively.

The Australian and New Zealand dollar were notable laggards following the decision by the Reserve Bank of Australia to keep interest rates on hold.

The euro got a positive jolt after Germany reported its lowest unemployment rate since records began after reunification. The Japanese yen saw renewed safe-haven flows as equity markets declined alongside the price of oil.

 

Commodities

Oil appears to be entering another crash-phase. The crash has sent Brent slumping by over 5% and taken WTI crude back below $30 per barrel. This comes on the back of a 7% decline yesterday. The oil market is pre-pricing what is now considered an unlikely joint cut in production from Russia and OPEC.

The rally in gold stalled after reaching its 200 day moving average for the first time since October. The last time gold closed above its 200 DMA, it lasted only one day and marked the top before an 11% decline to multi-year lows.

 

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