Sterling’s strength has hit the FTSE 100. 

Europe

The push higher in the pound has dented the London benchmark as the international nature of the index means a more expensive pound impacts revenues from overseas. Traders are now factoring in a roughly 50% possibility of an interest rate cut from the Bank of England this month, but keep in mind the probability was roughly 70% recently. A better-than-expected update from the CBI helped the pound, and in turn hurt the FTSE 100. Continental European stocks are showing small loss too as some nerves exist in relation to the coronavirus situation.   

Mike Coupe, the CEO of Sainsbury’s, announced his plans to step down from the top job in May, and retire from the group in July. Mr Coupe has been at the helm for nearly six years and under his leadership the firm pivoted within the retail sector by acquiring Argos, but he tried to merge the group with Asda – which was blocked by the regulator. Mr Coupe has certainly helped the supermarket giant adapt to the changes in the sector, but keep in mind the stock is greatly down under his leadership, so shareholders might not be too sad to hear he will be leaving. 

Berkeley Group have big plans as the high-end house builder hopes to ramp up production plus deliveries by 50% over the next six years. The company also confirmed plans to return £1 billion to shareholders over the next two years, and that is £455 million above the previous guidance, hence why the stock is higher this afternoon. The company has a proven track record of generous shareholder returns, and that trend is set to continue. 

Burberry shares have slipped today as the company issued a mild downgrade to their forecast. Annual revenue is now expected to grow by a single digit percentage, while the previous guidance was for growth to be broadly stable. It is worth noting that in the third-quarter, comparable sales ticked up by 3%, topping the consensus estimate, but traders latched onto the guidance. Mainland China continues to be lucrative market for the fashion house, but the sales growth in Hong Kong dropped drastically on account of the unrest. Asia as a whole is a big market for the firm so the coronavirus situation could be costly for the company.

The inventory estimate is causing trouble for Ted Baker again. Last month it was estimated the inventory overstatement charge would cost the organisation somewhere between £20 million and £25 million, but today it was revealed the charge will be £58 million. The news was a double whammy for the stock, as first of all, the cost has jumped, but it also suggests they are not fully in control of their outfit.        

US

The bullish move on Wall Street continues as traders have shrugged off the coronavirus concerns, and the S&P 500 has hit a new record high. Corporate stories as well as decent housing data has boosted sentiment. The existing house sales report rebounded to show 3.6% growth last month, which was a big improvement on the 1.7% fall registered in November. 

Netflix shares are in the red following the group’s update last night. The fourth-quarter figures were very strong, but the guidance missed the mark, and that did the damage to the share price. In the final-quarter, the EPS was $1.30, which hammered the 53 cent forecast. Revenue for the three month period was $5.47 billion – exceeding forecasts. The streaming giant expects to increase its paid subscriber base by 7 million in the next-quarter, but dealers were looking for a 7.86 million forecast. Disney+ and AppleTV+ launched recently so the underperformance in terms guidance was most likely down to the new entrants in the market.

Tesla continues to be on a bullish streak as the group’s market capitalisation has topped $100 billion.

IBM’s cloud and cognitive software business helped the group post strong quarterly figures. In the last quarter EPS were $4.71 and the revenue was $21.77 billion, and both topped forecasts. The cloud and cognitive software division registered a 9% rise in revenue, when compared with the year previous.    

FX

USD/CAD jumped on the back of the Bank of Canada’s interest rate decision whereby rates were kept on hold at 1.75%, meeting forecasts, but some of the language in the commentary was dovish. The central bank dropped the commentary about the rate being appropriate. In addition, the institution cautioned about the ‘high degree of uncertainty’ in the global economy.

GBP/USD has pushed higher as the markets are now factoring in a roughly 50% chance of an interest rate cut from the Bank of England at the meeting next week, and keep in mind, until recently the probability was approximately 70%. The CBI industrial orders expectations reading improved to -22 from -28, and that update influenced the perception surrounding the BoE’s next move.   

Commodities

WTI and Brent crude are sharply lower on the back of fears that supply will be excessive. Fatih Birol, the head of the International Energy Agency, sees ‘an abundance of energy supply in terms of oil and gas’. He predicts there will be a surplus of 1 million barrels per day in the first-half of the year. We know the group called OPEC+ are curtailing output, so it stands to reason a supply glut would be a result of weak demand.  

Gold continues to be range bound as recently it has spent much of its time between $1,546 and $1,560. The fact the US equity markets are strong this afternoon has put pressure on gold as the asset tends to underperform when traders adopt a risk-on strategy. Volatility has cooled in the asset, but while it holds above last week’s low, the broader bullish trend should continue. 

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