Sentiment has gone from bad to worse today as traders are worried about the health crisis.
Europe
The number of new coronavirus cases has stoked fears about stricter restrictions, and that has impacted market confidence as economic activity could take a hit. Earlier today, the IMF revised upward its growth outlook for the world economy for this year but that hasn’t stopped the decline in European equities. The body now thinks the global economy will shrink by 4.4% in 2020, and keep in mind, the update in June predicted an economic contraction of 4.9%. With respect to 2021, the IMF now anticipates growth of 5.2%, down from 5.4% in a prior update. The lack of progress with respect to a US coronavirus relief package hasn’t helped sentiment in the markets either.
SSE announced that it will sell off two assets for a total of £995 million. The group will offload holdings in two facilities that convert industrial, residential and commercial waste into renewable energy. The decision comes as SSE is keen to get rid of none-core assets, and the cash raised from the transactions will be used to fund greener projects. The firm is aiming to invest £7.5 billion in low-carbon infrastructure over the next five years. The stock hit a three month high on the back of the update.
Rolls-Royce shares are in the red as the stock is being weighed down by the bearish sentiment in the travel sector. The engineering titan supplies aircraft engines, and seeing as there are renewed worries for air travel, the declines in easyJet, Wizz Air and Ryanair are impacting Rolls-Royce.
Peel Hunt slashed their price target for Saga from 374p to 240p.
Experian shares are bucking the wider negative trend after Credit Suisse lifted its price target to 3,600p from 3,450p.
US
The S&P 500 is a touch lower in the wake of the decent gains that were posted yesterday, as dealers have grown weary of the back and forth in relation to the proposed Covid-19 stimulus package negotiations. The optimism in the broad market has faded for now, but the NASDAQ 100 is slightly higher, which is impressive given its strong rally last night.
JPMorgan Chase posted respectable third quarter results. EPS was $2.92, which easily topped the $2.23 forecast. Revenue in the three month period was $29.94 billion, while equity analysts were expecting $28.3 billion. The fixed income and equity trading divisions posted revenue that exceeded forecasts. In the previous two quarters, the bank put aside in excess of $15 billion for bad debt provisions, but in a surprising change of pace, it greatly lowered the size it bad debt provision to $569 million. The fact the credit loss provision has dropped greatly suggests the bank thinks it is over the worst of the pandemic-related losses.
Citigroup Inc also posted its third quarter numbers. Revenue came in at $17 3 billion, which was slightly ahead of forecasts. The EPS was $1.40, and that smashed the $93 cents that analysts were predicting. In the three month period, the credit loss provision was $1.9 billion, and that compared with the $2.2 billion set aside for bad debts in the second quarter.
Delta Air Lines Inc registered a $5.4 billion loss in the latest quarter. Revenue slumped by 76% to $3.06 billion, and that was shy of the $3.1 billion consensus estimate. The airline cautioned that revenue may not normalise for ‘two years or more’. The loss per share was $3.30, while traders were anticipating a loss of $3.
Johnson & Johnson shares are in the red after the company paused it Covid-19 vaccine development programme after a patient taking part in the trial was found to have an ‘unexplained illness’. It is not clear whether the individual in question was prescribed the drug or a placebo.
Apple is tipped to release the iPhone 12 today, which would be the company’s first 5G phone. The stock has handed back some of the gains that were made yesterday.
FX
The risk-off attitude of traders has seen funds flow into the US dollar. The greenback has been a popular destination for safe haven flows lately. Yesterday, the dollar was muted, while on Friday it fell to its lowest level in over two weeks, so it was starting from a relatively low base.
EUR/USD and GBP/USD have been hit by the move higher in the greenback.
The final reading of German CPI for September was -0.4%, and that was in line with forecasts. The German ZEW economic sentiment reading for October tumbled to 56.1 – a five month low. In the UK, the economic indicators were too not too hot either as the unemployment rate increased from 4.1% in July to 4.5% in August. The sizeable rise suggests the impact of the pandemic is finally being reflected in the jobs data in a meaningful way. In terms of jobless claims, the reading was 28,000 for last month, while economists were predicting 80,000.
Commodities
Gold is down on the day on the back of the upward move in the greenback. Historically, the yellow metal has performed well when equities have sold off, but recently the US dollar has attracted safe haven funds, so the inverse relationship between the US dollar and the commodity has hurt gold.
WTI and Brent crude are higher after falling in the two previous sessions. China is the largest importer of oil in the world and its imports last month increased by 5.5% on a month-on-month basis. The fact that total imports rebounded sharply too last month – they jumped by 13.2% on a yearly basis - ties in with the oil data so it suggests the country is making a decent recovery. The International Energy Agency warned that global demand for oil won’t be back to the pre-pandemic level until 2023, but dealers have shrugged off the warning.
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.
