Trading has been volatile today in the wake of the US presidential election, and the race to the White House is extremely tight.
Tensions surrounding the situation have faded, especially now that President Trump has been less aggressive in relation to how the postal voting situation could play out. Earlier this morning, the US President basically indicated he would contest the result of the overall election if he loses because of a surge in postal votes for Mr Biden. Things have calmed down on that front, but we will not know the results from Michigan or Wisconsin anytime soon, and the Pennsylvania tally might not be known until next week. Dealers have gotten over the initially political uncertainty and the bullish sentiment from earlier in the week is in play.
Marks & Spencer posted its first ever first half loss. The adjusted pre-tax loss was £17.4 million, which was a big difference from the £176 million profit that was registered last year, but keep in mind that equity analysts were predicting a loss of £78 million. Group revenue fell by 15% to £4.1 billion, but the company’s partnership with Ocado performed well as retail revenue jumped by almost 48%. M&S confirmed that the Ocado business accounted for £38.3 million profit, so it was clearly a worthwhile agreement. As is typically the case with the firm, the food division was the head and shoulders performer of the wider group, as adjusted operating profit increased by 19%. The clothing and household (C&H) unit has traditionally lagged, but the division has seen a rebound in activity thanks to the lifting of the lockdown. In the first quarter C&H revenue tumbled by 61.5%, while it the second quarter it fell by 21.3%, but tighter restrictions in the UK and the impending one month lockdown for England is likely to hurt the division. M&S was already restructuring the C&H business in advance of the pandemic, and today it confirmed the process is going well.
Smurfit Kappa Group PLC GB shares hit their highest mark in over two years on the back of the company’s bullish update. The company said that its third quarter update was better-than-expected. In the first nine months of the year, revenue was €6.3 billion and EBITDA was €1.16 billion. The company expects full year EBITDA to be between €1.46 billion and €1.48 billion. The packaging group revealed a second interim dividend of 27.9 cents – the generous pay-out has made the stock popular with income seeking investors.
Royal Mail Group shares have been driving higher after an upgrade from JPMorgan. The bank lifted its rating from neutral to overweight, and it raised the price target to 374p from 253p.
US
Equity traders are in a very bullish mood even though the Presidential election is too close to call. It could be next week before we have every vote counted, and even then, the result might be disputed, but nonetheless, stocks are soaring.
Uber and Lyft shares are driving higher this afternoon on the back of a ruling in California, that the car service companies can treat their drivers like independent contractors rather than employees. The decision suits the business model of the firms as contractors typically have few rights than employees and the flexible arrangement suits the groups. There is an argument to be made that some of the drivers would prefer to the arrangement too, while others would prefer to be deemed to be employees.
Hilton Worldwide Group Inc confirmed that EPS was 6 cents, which easily topped the 2 cents loss per shares that traders were expecting. Revenue in the three month period came in at $933 million, and that was way below the $2.39 billion posted last year. Comparable revenue per room tumbled by almost 60%. The hotel group confirmed that 97% of sites are open.
FX
The dollar index has been a popular safe haven trade in recent months, and the currency saw a large trading range today because of the volatility surrounding the US Presidential elections. In the early hours of trading, the dollar rallied but since then it has handed back those gains. After a wild ride on the currency markets, the dollar is essentially flat on the day. It seems that now that the dust has settled with respect to the vote, the swings in the greenback has tapered off too.
The CMC GBP index is in the red as traders are looking ahead to tomorrow’s Bank of England meeting. The central bank are expected to increase the quantitative easing programme by £100 billion, so traders are cutting their exposure to the pound.
Commodities
Gold sold off aggressively overnight on the back of the rally in the US dollar – the inverse relationship between the two markets has been strong recently. Since the US dollar retreated from its high, we saw a recovery in the gold market, but it is still down on the day. The commodity has whipped around today because of the political uncertainty, but as those tensions have cooled, so has the metal.
The oil market was up on the session in advance of the Energy Information Administration (EIA) report on account of the overall bullish run in stocks, but the EIA update helped WTI and Brent crude. The announcement showed that US oil stockpiles dropped by 7.99 million barrels, while traders were expecting a build of 890,000 barrels – the update suggests that demand is very strong.
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