Europe

It’s been a subdued end to the week for markets in Europe, however for all this week’s choppiness we’ve still managed to hold onto most of last week’s advances, with the DAX managing to eke out a small weekly gain.

Travel and leisure stocks have come under renewed pressure again today on the back of reports that we could see new lockdowns, quarantines and curfews with IAG and EasyJet leading the fallers. Ryanair has also taken the decision to cut its October capacity by 20% due to the constant changes in travel restrictions by European governments. Hotel stocks have also fallen back with Holiday Inn owner Intercontinental Hotels also under pressure, along with Premier Inn owner Whitbread.

Rolls Royce shares have also remained under pressure in the wake of this week’s reports that it may issue new debt or equity, given the difficulties in raising funds quickly any other way. The continued reduction by airlines to their flight schedules puts more pressure on Rolls Royce cash flow as they get paid in line with how much time aircraft are actually in the air.

Yesterday’s renewed talk of negative rates is continuing to make itself felt in the share prices of UK banks today with Metro Bank and Virgin Money sliding well over 5%, NatWest Group sliding below 100p to a record low, and Lloyds Banking Group sliding below its lows this year at 25.5p, to levels last seen at the beginning of 2012

If the Bank of England had been intending to cut the legs out of the UK banking sector this week, with their talk of negative rates, they couldn’t have picked a better way to do it.  It is also being reported that HSBC is looking to cut most of the jobs in its Paris office in equity and structured products.

London Stock Exchange shares are also in focus on reports that it is now in exclusive talks with Euronext over the sale of its Borsa Italiana business, as it looks to clear the way for regulatory approval for its Refinitiv deal.

Sainsbury’s shares saw a big rise yesterday and have seen further gains today on reports that Daniel Kretinsky, a Czech billionaire, who already has a stake in Royal Mail, had taken a 3% stake in the business. It isn’t immediately clear what plans Mr Kretinsky has for Sainsbury with his decision to make this investment, however it probably won’t be too long before he makes his presence felt.  

South African wealth and fund manager Investec latest trading statement has seen its shares slide back after the company announced that its profits for the half year were expected to be over 50% lower from the same period last year, largely as a result of a weaker South African rand, and reduced client activity. The company also said it would be cutting 210 roles in its London office.

US

US markets opened modestly higher as the selloff in tech stocks once again appears to have taken a pause just above some key support levels, on the S&P500 and Nasdaq benchmarks.

US banks have joined the selloff in financials after the US Federal Reserve announced a new series of stress tests for the sector, the results of which will be known by the end of this year. The central bank is also considering extending the ban on issuing dividends, and conducting share buybacks, though the weakness being seen in US banks isn’t anywhere near the scale we are seeing in European financials today.  

Oracle shares have also slipped back a touch after the US Commerce Department said it will block US users from downloading TikTok or WeChat from 20th September

Beyond Meat shares are also on the back foot after being on the receiving end of a downgrade from JPMorgan

FX

It’s been a difficult week for the US dollar, after two weeks of modest gains, as concern about the US recovery continues to grow. The inaction of the Federal Reserve, along with a rise in the Chinese yuan and the Japanese yen this week has kept a lid on any further gains in the greenback.

Currency markets have painted a confusing picture for risk this week, with the Japanese yen the best performer over the last few days, suggesting that investors are becoming increasing nervous about the outlook, yet the pound has also performed well against the US dollar despite a week that has seen UK and EU trade talks continue to remain fractious.

Commodities

Oil prices are on course for their best week since June, with Brent prices edging back towards their 200-day MA, after the Saudi energy minister warned rather darkly of betting against a further recovery in prices, while rebuking those who tried to get away with pumping too much. The fallout from Hurricane Sally is also helping to support prices.

Gold prices have remained fairly well supported, edging higher this week, as concerns over an increase in coronavirus cases, weighs on the prospects for the continued rebound in economic activity.