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Europe rebounds, Ocado and M&S rally over possible joint venture

Stock markets were firmly in the red in the morning, but European markets have pulled back most of their losses. 


Yesterday, traders welcomed the news that the US won’t be hiking up tariffs on Chinese imports in March, but the trade spat is still unresolved. The fact that European markets are off their lows of the session suggests sentiment is improving, but the trade dispute is far from over.  

Standard Chartered revealed a 28% jump in annual adjusted profit before tax to $3.86 billion, while equity analysts were expecting $3.98 billion. The annual net interest margin ticked up by three basis points to 1.58%. Full-year operating income rose by 2.5%. The finance house declared a dividend of 21 cents, which was double last year’s pay out. The bank’s CEO, Bill Winters, cautioned that ‘geopolitical uncertainties’ and a slowdown in global growth is hanging over the company, but the firm had a strong start to the year.

Persimmon shares are in demand today after the company announced strong full-year results. Profit before tax jumped by 13% to £1.09 billion, and revenue edged up by 4%. The operating margin rate improved from 28.2% to 30.8% - which is impressive considering higher costs have been a problem for the sector. 48.45% of the houses sold last year, were sold under the help-to-buy scheme, and it was reported over the weekend that Persimmon might be dropped from the scheme in light of complaints about property standards. The group greatly depends on the government scheme, and they must do all they can to remain a part of the initiative. The house builder warned of uncertainty in relation to Brexit, but confirmed that the order book is strong.

Ocado and Marks and Spencer are in talks about a possible joint venture. It was reported that M&S would pay Ocado between £800 million and £900 million for a 50% stake in the joint venture. Ocado are always on the lookout for another partner, and Marks and Spencer could avail of Ocado’s warehouse and delivery infrastructure. The share price of both stocks are higher today.

Croda’s full-year adjusted profit before tax rose by 3.5% to £331.85 million, while analysts were expecting £332.84 million. The group derives the vast majority of their revenue outside the UK and it is currently in the process of Brexit-proofing their operation. Free cash flow jumped by 57.8% to £155.4 million. The full-year dividend was raised by 7.4% to 87p, and a special dividend of 115p was declared too, which is a sign they are optimistic in their outlook.


Equities are little lower after the upbeat mood from yesterday’s tariff related rally has worn-off.  Jerome Powell, the Federal Reserve chief, said the US economy is ‘healthy’ and has a ‘favourable outlook’. The central banker made the remarks at the senate committee on banking, housing and urban affairs. Mr Powell also cautioned that financial conditions are less supportive now than they were last year, and that he is prepared to adapt policy if required.

Tesla shares are lower today after the Securities and Exchange Commission said that Elon Musk should be held in contempt for breaching their agreement. Mr Musk tweeted about car production projections, but later amended the tweet. Tesla’s lawyers claim the tweet was compliant with SEC settlement. Some investors are worried that Elon Musk attracts too much controversy due to his erratic behaviour. 

Home Depot shares fell after the company revealed disappointing results. Adjusted earnings per share for the fourth-quarter were $2.09, which undershot the $2.16 forecast. Revenue was $26.49 billion, which narrowly missed forecasts. Same-store-sales grew by 3.2%, while analysts were predicting 4.5% growth. The outlook failed to meet forecasts too. 


GBP/USD drove higher today after Theresa May stated if her deal is rejected next month, a vote will be held on whether lawmakers support a no-deal Brexit or not, and the outcome might trigger a vote on extending article 50 or not. Sterling reacted well to the news as the chances of the UK leaving without a deal seems to have diminished.

EUR/USD hasn’t moved much today. German GfK consumer sentiment held steady in March at 10.8, while French consumer confidence edged up to 95, from the revised 92 in January.


Gold has experienced low volatility today. The metal has lost a little ground in the past few sessions, but remains in the wider upward trend that has been in place since mid-November, if last week’s high is taken out, it might pave the way for the $1,366 region to be tested.

Oil is a little higher today as the energy has recouped some of the ground lost yesterday. The dust has settled in the wake of President Trump’s tweet about oil price s being too high. The US is a close ally of oil producing nations like Saudi Arabia, so his comments are likely to be taken into consideration. 


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