It was been another volatile day on the markets as European equity benchmarks started off strong on the hopes of a tax cut from President Trump, but now most of the major European indices are in the red.

Europe

Last night, President Trump said he will push for a payrolls tax cut as well as assistance for hourly employees who have been impacted by the health crisis. The proposal hasn’t come to fruition yet, and that is why stocks turned sharply lower.

Yesterday the Italian government revealed plans to put the entire country on quarantine in a bid to get a handle on the crisis. The move is extreme but a similar strategy worked for China so traders are taking the view it could be worth it in the medium-term. The Rome administration has taken some of the pressure off mortgage payers in an effort to make the lockdown more practical. It was reported that EU leaders will hold a conference call today to discuss the health crisis, and there is some optimism surrounding that too. The major indices in Europe are still up on the day, but they have handed back a lot of their gains, which is a little concerning for the bulls.        

Royal Bank of Scotland (RBS) will offer relief to clients who have been impacted by the coronavirus crisis. The move echoes that of Italian banks who have offered mortgage relief to their clients. RBS will allow customers the option to defer mortgage and loan repayments by up to three months. The move should take some pressure off the individuals impacted by the health emergency. Barclays as well as Lloyds have announced schemes to assist customers too. Most UK banks have been boosted by the rise in gilt yields as that should improve their lending profitability.  

BP as well as Royal Dutch Shell rebounded from yesterday’s slump, the move mirrors the bounce back in the underlying energy market. 

M&G shares are lower today despite the company posting a 9.6% rise in full-year assets under management and administration (AUMA). IFRS profit after tax jumped to £1.06 billion from £811 million last year. The company saw an increase in AUMA across all the major subdivisions, retail savings, retail asset management, as well as institutional asset management.    

John Wood shares saw major volatility today as the stock surged on the open, but now it is in the red. Full-year revenue slipped by 1.2% to $9.89 billion. Adjusted earnings on a like-for-like basis ticked up by 5.4% to $704 million, while operating profit surged by over 83% to $303 million. The total dividend was 35.3 cents, which was a fractional increase on the year. The net debt excluding leases fell by 5.9% to $1.42 billion and the ‘strong cash generation’ was a factor in the decline in debt. The group sold off its nuclear and industrial services businesses for $430 million. The firm will continue to ‘focus on margin improvement’. The company is in robust shape but the oil industry has taken a beating recently so John Wood might experience a decline in business in the months ahead. 

Standard Life Aberdeen posted not-so-hot full-year figures. Fee based revenue dropped by 13% to £1.6 billion, and net outflows in 2018 and 2019 were cited for the fall. Adjusted profit before tax dropped by 10%. The group is getting a handle on costs as operating expenses slipped by 4% - synergies from the merger are paying off. Net outflows, excluding the Lloyds tranche, were £17.4 billion, which was a huge improvement on the £40.9 billion net outflow in 2018. The asset manager cautioned the outlook is ‘turbulent’.

Norwegian Air Shuttle have had a brutal few weeks on account of the health crisis. Since the close of business on 21 February – just before the coronavirus struck in Italy, the stock has dropped in excess of 65%. Today it said it will temporarily layoff staff as well as cancel roughly 3,000 flights.      

DFS Furniture shares are in the red as the company revealed a 5.7% fall in group revenue for the first-half. The company described market conditions as ‘challenging’, as consumer confidence was impacted by political uncertainty. In the near-term, the footfall is likely to remain subdued in light of the health situation. 

US

The mood on Wall Street was bullish as traders were buying into stocks on the back of the comments from Mr Trump about a payrolls tax cut, but traders became impatient, and the bullish move ran out of steam. The Dow Jones racked up a monster rally, then it tumbled into the red, and now it is just about in positive territory. 

Dick’s Sporting Goods revealed impressive quarterly results. EPS were $1.32, which smashed the $1.22 forecast. Revenue for the three month period was $2.61 billion, which was above forecasts. Same-store sales is a closely watched metric and it showed 5.3% growth, topping forecasts. E-commerce sales rose by 15%. It is encouraging to see the group is posting higher sales online and in stores too.

Delta Airlines cautioned the health crisis is having a material impact on their business and the group scrapped its guidance. This sort of update is common among airlines at the moment. American Airlines will cut domestic capacity by 7.5% because of the health crisis.

Oil stocks such as Occidentalas well as ConocoPhillipsare higher this afternoon thanks to the rebound in the oil market.  

FX

EUR/USD and GBP/USD has been driven lower by the rebound in the US dollar. The greenback was hammered yesterday as US government bond yields were driven lower, but now we are seeing a reversal of that move. In terms of economic data, it has been a quiet day. French as well as Italian industrial production reports showed 1.2% and 3.7% growth respectively. There were no major economic announcements from the UK or the US today.

USD/JPY has surged as there was a U-turn in investment sentiment. Traders adopted a more risk-on strategy, so they dropped the yen. The Bank of Japan are monitoring the health situation and they are ready at act should it be required.

Commodities

The oil market clawed back some of the ground that was lost yesterday, WTI as well as Brent crude are up more than 5%, but they are well-off the highs of the day. Short covering as well as bargain hunting helped ramp up the energy market. Even though Russia and Saudi Arabia are at loggerheads in relation to the oil price, Russia refused to rule out talks with OPEC. Traders took that as a sign that Moscow might be open to the idea of playing ball with the Saudis. But then again, the Saudi’s plan to ramp up their output to 12.3 million barrels per day in April.

A mixture of a stronger US dollar and the risk-on strategy of traders has hurt the gold market today. The metal’s inverse relationship with the greenback is playing out. Now that sentiment surrounding stock markets has changed, some traders are dumping gold as a way of freeing up cash to go long stocks.     

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