The picture is positive in Europe today as the FTSE 100 and CAC 40 are showing solid gains while the DAX is just about in positive territory. 

Government intervention is the name of the game today as Germany will pursue a €750 billion rescue package. The Berlin administration will suspend their debt brake to combat the Covid-19 crisis – the move shows us the German government means business.US lawmakers will vote on a rescue package that is worth approximately $2 trillion, and traders are hopeful the deal will be passed.

The wider positive sentiment has boosted many industries that have been hammered recently, such as airlines, transport, banking, hospitality and mining. Restaurant Group shares are up in excess of 40%. National Express shares have surged too while easyJet continues to recoup recent losses.        

Bellway posted their first-half figures today, and they were respectable, but the company cautioned about the coronavirus impacting their business. Operating margins fell to 19.3% from 21.5% - meeting the firm’s guidance, and that caused pre-tax profit to slide by 7% to £291.8 million. In light of the Covid-19 situation, Bellway want to preserve as much liquidity as reasonably possible, so it turn it will postpone the interim dividend. The fact the firm is only postponing its dividend suggests the group is in a strong position in terms of cash – if the group was less confident about its cash position, it would probably scrap the pay-out.

Scrapping the interim dividend is exactly what Persimmon have done, in addition to that, the firm postponed its final dividend. In light of the health emergency, the group will begin an orderly shut-down of its sites. Persimmon reassured dealers that it has access to a £300 million credit facility, and it said its balance sheet is strong.    

Yet again there was a string of companies issuing Covid-19 updates today. United Utilities are in a relatively strong position as its revenue for the next five years is fixed. Rentokil foresee a ‘significant’ impact on operations because of the health crisis, and in light of that they have suspended their dividend. Countryside Estates were in a weak position before the crisis, so a slowdown in the property market could seriously damage the group. It has access to a £300 million credit facility, but it will seek to open more credit facilities. Biffa predict the coronavirus crisis will bring about a ‘significant disruption’ to its business, so the firm took the decision to scrap its final dividend.    

US

The Dow Jones is up over 3% - it is building on last night’s mammoth gains. Even though there has been some back and forth in relation to the stimulus package, dealers are optimistic lawmakers will work out their differences and back the package.  

Like so many companies these days, Target have withdrawn their guidance. The retailer has seen an increase in food and house hold goods sales on account of customers stocking up amid the health crisis. Target cautioned that expenses will rise an account of cleaning costs and hiring overheads.

The beleaguered airline sector is flying high today as there is speculation the US rescue package will include assistance for the industry. It is possible the US government will take equity stakes in firms in exchange for financial help. American Airlines, Delta Air and United Continental are all up this afternoon.

Nike shares hit a two week high after the company posted third-quarter results last night. EPS fell to 53 cents, missing forecasts, but revenue increased by 5% to $10.1 billion, narrowly topping forecasts. In the three month period, the group posted a 36% rise in digital sales, while greater China alone saw digital sales jump by 30%. The online unit is likely to play a vital role in the months ahead as stores in the west will be closed.

FX

The US dollar index is in the red, the currency has been under pressure since the Fed announced the open-ended bond buying scheme. It is worth noting the dollar is off the low of the session.

EUR/USD has been lifted by the weakness in the US dollar, but the single currency is off the highs of the session. The final reading of the German Ifo business climate report for March was 86.1, while the consensus estimate was 87.7. The ECB said it was broadly in favour of OMT, should it be required. The announcement nudged the euro higher.  

GBP/USD also had a good run because of the dip in the dollar. The pound pushed higher towards $1.2000, but it ran out of steam and since then it has retreated. The UK CPI rate dropped to 1.7% from 1.8%, while economists were expecting 1.5%.   

Commodities

WTI and Brent crude have been relatively weak today as earlier gains were handed back after a few hours into the European session. The Energy Information Administration report helped the energy tick higher. US oil inventories grew by 1.62 million barrels while the consensus estimate was for a build of 2.75 million barrels. The gasoline stockpiles dropped by 1.53 million barrels – a greater fall than expected. The tumble in gas inventories implies robust demand.

Gold is in the red as traders lock in profit from its recent rally. The metal enjoyed a bullish run recently as the closure of three refineries in Switzerland sparked supply concerns. The renewed weakness in the US dollar on the back of the ECB OMT news might help support gold prices.

Palladium has soared as the lockdown in South Africa has prompted supply fears.      

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