Equity markets appear set to finish the day firmly in positive territory on the back of hopes that countries will continue to reopen segments of their economies.
Lately there has been a lot of optimism that governments are keen to loosen their lockdown restrictions, so that has fuelled the bullish move in equities. Dealers have the impression that we are over the worst of it in terms of the lockdowns, so that should the pave the way less stringent restrictions. The Caixin services report from China was 44.4 – up from 43 in March. The reading is still awful but at least it is a step in the right direction, so therefore it acted as a signal to the bulls.
IAG, the parent of BA, Aer Lingus, and Iberia, said they hoped to return to meaningful services in July. The airline had a terrible first quarter as it swung to a loss of €535 million from a profit of €135 million. Revenue was €4.58 billion, a drop of 13.4%. To make matters worse, the company has predicted the second quarter will be far more painful than the first three months of the year. In November, IAG agreed to buy Air Europa for €1 billion and the deal looks as if it is still going ahead, but the firm might want to reconsider the move seeing as now isn’t exactly an ideal time to be expanding operations. Willie Walsh, the CEO, was due to step down in March but due to the chaos caused by the pandemic, he decided to defer his departure date so now he plans to retire in September.
BT shares have taken a knock following the announcement the firm won’t be paying a dividend until 2022. The telecoms company is keen to invest money into it services and networks as competition is tough, and it is likely to become even tougher. The full year update from the London-listed group showed that profit before tax was £2.35 billion, and revenue slipped to £22.9 billion from £23.4 billion. BT didn’t offer a guidance because of the uncertainty circulating. It was announced that Virgin Media and O2 will merge, and so the group will be on a collision course with BT.
Trainline delivered solid annual figures today. Total group revenue and total group earnings jumped by 24% and 62% respectively. Gross margin improved from 78% to 81%. Due to the health emergency, the firm has paused marketing activity. The group saw a 39% rise in cash flow, and net debt tumbled by 64% to £71 million. Trainline is in a good position to ride out the current storm.
Intercontinental Hotel Group (IHG) confirmed that revenue per available room RePAR fell by nearly 25% in the first quarter, for March that metric tumbled to -55%. By the end of April, 15% of all their hotels were closed. Approximately 50% of IHG hotels are in the US where roughly 10% of the businesses are shut. The group is making progress in relation to cutting cost, and it has $2 billion of liquidity, so the company will just have to sit tight until the lockdown restrictions are eased.
The higher oil and metal prices have helped the likes of Royal Dutch Shell, Glencore and Rio Tinto.
The major indices are up on the session on continued optimism that some US states are slowly but surely reopening their economies. In addition to that, there is a belief the US authorities are better in control of the health crisis now. The latest jobless claims report was 3.16 million, bringing the total number to roughly 33.5 million since the pandemic took hold. Today’s reading was a dip form the 3.84 million posted last week and it was the fifth consecutive week the metric declined. The rate should taper off even further when as states looks to ease up on restrictions.
Lyft shares are driving higher this afternoon following the release of its first quarter numbers last night. The number of active riders in the three month period was 21.2 million, a 3% rise on the year, and that sparked the buying momentum. It is worth noting that active riders in April crashed by 75%. The company registered a loss per share of $1.31, while the consensus estimate was for a loss of $0.62c per share. Revenue was $955.7 million, topping estimates.
On the back of the Lyft update, traders will be paying attention to Uber, who will post their numbers after the close of trading tonight. In February, the company revealed an annual loss of $8.5 billion, and it said it was aiming to be profitable by the end of 2020, but that seems highly unlikely given the Covid-19 crisis.
Moderna shares are in demand after the FDA approved its Covid-19 vaccine for phase two of testing. The pharma company anticipates to spend huge sums of money on trying to develop a vaccine for the virus, but that comes with the territory. The stock is up 5%.
The Bank of England kept interest rates on hold at the historic low of 0.1%, meeting traders’ forecasts. The asset purchasing scheme was left unchanged too, but two central bankers, Jonathan Haskel and Michael Saunders voted to ramp up QE by £100 billion. The UK central bank has left the door open to additional stimulus should it be required. The BoE predicted the UK economy will contract by 14% in 2020, but then experience a big rebound in 2021. The CMC GBP index is offside as it is believed the UK government will only announce ‘limited’ measures in relation to unwinding the lockdown in the near term.
EUR/USD is in the red as the US dollar gains ground gain. The eurozone has been badly hit by the coronavirus, but the EU are still divided over what sort of rescue package is required. More recently, the ECB’s asset purchase scheme hit a bump in the road when the German constitutional court found that areas of the programme were not backed by EU treaties. Until the European institutions iron out these issues, the euro is likely to remain weak.
WTI and Brent crude are enjoying a very bullish run today as optimism about economies reopening has encouraged traders to snap up oil, which is still relatively cheap when compared with prices seen in January. Saudi Arabia has lifted its selling prices for oil, and US producers have cut back on output. In addition to that, gasoline stockpiles in the US have been falling too, so that has all helped the oil market.
Gold has recouped some of yesterday’s losses despite the fact the US dollar is firmer and that equity markets in Europe and the US are higher. The metal has moved up today, but it has yet to retake the $1,700 mark. According to the World Gold Forum, the demand for gold-backed exchange traded funds jumped sevenfold in the first quarter, so it appears there is still a lot of fearful investors out there, but the prospect of looser lockdown restrictions might cap golds rally.
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.