Stocks in Europe are driving higher as bargain hunters have swooped in to take advantage of the relatively low prices in the wake of yesterday’s heavy sell-off.
Europe
There hasn’t been any major positive news in the past 24 hours, but the turnaround in sentiment in the US tech sector has influenced the mood in Europe. Recently, any big sell-offs in Europe have been driven by the moves in the US tech sector, so now that some calm has been restored over there, things are on the up here.
The recovery in the oil market has helped Royal Dutch Shell and BP. The underlying energy incurred heavy losses in recent sessions due to concerns about demand, but it seems the fear factor has faded today.
Computacenter posted respectable first half numbers, as revenue increased by 1.5% to £2.46 billion, and adjusted pre-tax profit jumped by 39.4% to £74.6 million. The update from the computer services group was a carry on from last week’s update, when it said that the six month figures would top forecasts. The company is expanding as it will acquire Pivot Technology Solutions in Canada for CAD$ 105.8 million. Computacenter already had exposure to North America, and the move should enhance that.
Ryanairshares are a little lower today as the group cautioned that trading during winter is going to be ‘difficult’. The news from the Irish airline wasn’t a shock as only yesterday easyJet said that fourth quarter capacity will be shy of their already low forecasts. Ryanair cautioned that risk remains to the downside with respect to capacity, and it will consider closing bases and cutting back on capacity from countries that are not handling the coronavirus crisis in a sensible manner. The low-cost carrier is well financed to see it through the lean months ahead as it recently raised €1.25 billion from stock and bond issues. Ryanair will offer attractive airfares during winter in a bid to keep demand robust.
BT Group shares are higher on the back of the upgrade from Barclays as it issued an overweight rating, from equal-weight. The price target was upped to 160p from 130p.
Royal Mail Group suggested it might stop delivering letters on Saturdays as the surge in demand for parcel delivery has taken up a large amount of resources. Yesterday the company confirmed that revenue from parcel delivery jumped by 34% for the five months until late August, while letter revenue fell by over 21%. The stock price rallied over 20% yesterday, but it is only down slightly today.
AstraZeneca shares are only fractionally lower today even though it has had to pause its trial for the drug that has the potential to be a Covid-19 vaccine. There are high hopes for this drug so it’s a surprise it hasn’t fallen further on the news.
US
The mood in the US is bullish, after stocks lost ground in the last three sessions. The NASDAQ 100 is up 2.7% so it is comfortably outperforming the S&P 500 - which is up 1.8%. The tech sector has endured the largest losses recently, so it stands to reason that they are now leading the recovery. Apple, Amazon and Microsoft are all up at least 3%.
Slack shares are down 14% as the numbers were good, but the billing metric underwhelmed dealers, hence why the stock is lower. In the second quarter, EPS was zero, while equity analysts were expecting a loss per share of 3 cents. Revenue jumped by 48.9% to $215.9 million, topping the $209.1 million forecast. The calculated billing reading was $218.2 million, which undershot the $226.3 million forecast. Slack continues to grow at a fast rate but some traders thought they would post blowout numbers like Zoom, and that has impacted the stock.
Tiffany shares have lost their sparkle as there are doubts over the future of the LVMH takeover. The transaction needs to take place before 20 November 2020, but it doesn’t look like it will be achieved in that timeframe so Tiffany have requested an extension until 31 December 2020. Uncertainty in relation to the impact of the US tariffs on French goods is a factor. Tiffany claimed they will take legal action if LVMH try and back out of the deal.
FX
Earlier today the US dollar index hit its highest level since mid-August, but it has since retreated and it is now in the red. In the past week the greenback has pushed higher. The move lower in the dollar in the past few hours could be down to profit taking, but then again, the dollar has had several failed attempts at breaking out of the wider negative trend that has been in place since May.
GBP/USD was in the red earlier but it is now up on the day thanks to the reversal in the dollar. The euro is higher versus the pound, so GBP/USD’s move is dollar driven. Sterling is likely to see volatility in the weeks ahead as the UK-EU trade talks go back and forth.
The rebound in oil and metals – copper and silver – has boosted the Australian dollar and the Canadian dollar. The ‘commodity currencies’ have also been lifted by the slide in the US dollar. The Bank of Canada kept rates on hold at 0.25%, meeting forecasts.
Commodities
Gold has been helped by the move lower in the dollar as the inverse relationship between the two markets has helped the commodity today. Yesterday, when the dollar was firmer, the metal traded fractionally below its 50-day moving average, the first time that metric was tested since mid-June. Gold has been directionless lately, but while it holds above the $1,900 mark, the broader bullish move should continue.
WTI and Brent crude have recouped some of the ground that they lost yesterday – when the contracts fell to levels last seen in mid-June. The rebound in the energy market ties in with the wider change in attitude to risk. The latest PPI date from China came in at -2%, which was an improvement from the -2.4% registered in July. The improvement in PPI could be a product of higher demand, or just higher prices.
