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News

Markets quiet amid US holiday, oil stocks impair FTSE 100

Volatility in stocks has been low today because there have been no exciting headlines to spark interest in one direction or another.  

Europe

Last week, was mostly quiet as traders waited until President-elect Joe Biden revealed a $1.9 trillion stimulus package, which was at the top end of estimates. It is understood that Mr Biden plans to announce another stimulus that is aimed at investing in infrastructure and green energy, but that might not be for weeks, so some potential buyers might stay on the sidelines in the near-term. The FTSE 100 is showing a small loss, while continental markets are up modestly, trading ranges have been small as the US market remains closed for a public holiday. 

The current environment is not exactly upbeat as things are getting worse with respect to the lockdowns. The British government has closed the air corridors, so passengers arriving from outside the UK will need to show proof of a negative Covid-19 test as well as self-isolating once they arrive in the country. Last week, Portugal implemented harsher restrictions, France introduced a curfew from 6pm and it was reported the Berlin administration is also contemplating a curfew. China’s localised lockdowns are increasing too. Tighter restrictions should lead to even worse economic pain that is being inflicted by the lockdowns.

Dr Michael Ryan, the WHO emergencies chief, cautioned the coronavirus will claim 100,000 lives per week ‘very soon’. Governments won’t want to be presiding over such numbers so it is likely that things will get worse before they get better on the lockdown front. The timing of the update from Dr Ryan is bad, as the distribution of the vaccine will be slowed down due to supply constraints. 

Ryanair, easyJet and Wizz Air are offside on account of new tighter international travel restrictions in the UK. HSBC lowered its price target for Air France to €2.50 from €3.25. The bank also cut its price target for Lufthansa from €4 to €3.5. 

In terms of index points, BP and Royal Dutch Shell are some of the biggest fallers on the FTSE 100. A dip in the oil market has impacted the energy groups.

Babcock International shares are in the red again as Liberum and Morgan Stanley lowered their price targets for the stock. On Friday, Babcock’s share price suffered because of worries about future cash flows.  

Genus shares hit a new all-time high today as the company delivered a positive trading update. The group announced that it will perform ahead of its previous earnings growth forecast. Adjusted first half pre-tax profit is now expected to be £47-£49 million, and revenue for the six month period is now anticipated to be £285-£287 million.

US

Stock markets remain closed today as the country celebrates Martin Luther King Jr day today.

FX

The US dollar index is a touch higher and it eked out a four week high. Earlier this month the greenback fell to its lowest level in 33 months, but it has experienced a rebound since then. Lately, the dollar has experienced an increase in demand when dealers were not too keen on snapping up stocks. EUR/USD is lower due to the tick up in the dollar.  

CMC GBP index is in the red as it continues to retreat from the four month high that was set last week.  

Commodities

Brent crude oil and WTI are a little lower today. Worries that lockdowns will dent demand has chipped away at the energy market. Oil recently hit an 11 month high so a pullback is hardly a surprise, especially in light of the mixed data from China. The fourth quarter GDP reading on a yearly basis was 6.5%, which showed an increase on the quarter and topped forecasts. The retail sales reading for December showed annual growth of 4.6%, missing the 5.5% consensus estimate. In late 2019, the metric was approximately 8% so it is clear that internal consumer demand hasn’t rebounded to the pre-pandemic level. If Chinese shoppers are not overly eager to spend money, that should hold back demand.

Gold has experienced a relatively large trading range today as it fell to a seven week low, subsequently, it rebounded. The upward move comes as the US dollar is a little firmer, which makes the positive move all the more impressive – typically a stronger dollar hurts gold   


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