Some negative sentiment has returned to the equity markets after it was announced that Robinhood, the trading app, removed limits on trading Gamestop – the stock at the centre of the recent Reddit-retail investor frenzy.
The US non-farm payrolls report was broadly negative as the headline reading showed that 49,000 jobs were added last month, just below the Reuters consensus estimate of 50,000, while Bloomberg’s survey was 100,000. December’s level was revised from -140,000 to -227,000. Seeing as the latest ADP and initial jobless claims updates were a lot better than expected, there were high hopes for today’s announcement. Unemployment fell from 6.7% to 6.3%, but that might be down to the fact the participation rate slipped by 0.1% to 61.4%. On a yearly basis, average earnings came in at 5.4%, unchanged on the month as the last report was revised up from 5.1% to 5.4%. A high earnings metric could be a sign that a relatively large number of lower income workers have left the labour market.
Beazley shares jumped on the news that it will return to paying dividends in 2021. The insurance group swung to a loss because of claims connected to cancelled events, the pre-tax loss was $50.4 million, which was a big difference from the $267.7 million profit in the previous year. Gross premiums written grew by 19% to $3.56 billion, while net investment income dropped by 28% to $188 million. As bad as the headline results were, investors are looking ahead to the rest of the year and they are taking the view that 2020 was unique. Vaccinations are being rolled out and a company like Beazley stands to benefit a lot from a return to some form of pre-pandemic life. Beazley’s optimistic outlook has overshadowed the poor results from 2020.
BNP Paribas posted a 14% fall in fourth quarter net income to €1.6 billion, beating estimates of €1.2 billion. Revenue slipped by 4.5% to €10.83 billion, largely meeting forecasts. The cost of risk metric measures the potential costs of bad debts, in the final quarter the reading rose by 65.5% to €1.6 billion, higher than expected. In the latest US reporting season, banks have been largely reducing their provisions for debt debts, same with Deutsche Bank, who posted their latest numbers yesterday. The French bank expects the cost at risk measure to fall in 2021, it also predicts ‘significant improvements’ in the year ahead but it did not offer a formal guidance.
The no-so-hot jobs report has not stopped the Dow Jones as well as the S&P 500 from gaining ground, although the indices are off the highs of the session. Earlier today it was announced the Senate has adopted a measure to fast-track President Biden’s $1.9 trillion stimulus plan so optimism is still in reasonably healthy supply. The jobs update made for interesting reading but the stimulus story is still the big issue of the week.
Gamestop shares have been jolted higher as Robinhood has lifted restrictions on trading the stock, it is up 30%.
Ford shares are a little higher today following the well-received update last night. The established auto-maker revealed plans to invest $29 billion in electric vehicles (EV) until 2025. The EV market has gained a lot of traction in recent years so the company is making a big play for the sector. Ford’s fourth quarter results were positive, EPS was 34 cents and that hammered the 7 cents loss that analysts were expecting. Revenue was $33.2 billion, essentially in line with forecasts. Looking ahead to the first quarter, it expects earnings of $8-$9 billion, which would be a huge improvement on the $632 million loss in the same period last year.
Peloton posted healthy quarter results after the close of trading but the group cautioned about supply constraints so that took the shine off the stellar numbers. Quarterly revenue surged by 128% to $1.06 billion. EPS was 18 cents, easily beating the 9 cents forecast. The exercise equipment and media company is experiencing such high demand it is investing in its supply chain, which speaks to its popularity.
Snap’s fourth quarter numbers were solid but the relatively weak first quarter outlook weighed on sentiment. The social media group continues to draw in advertisers as revenue was $911 million, up 6.2%. Average revenue per user, is a closely watched metric, it was $3.44, slightly ahead of forecasts. Snap cautioned that planned changes to Apple’s iOS 14 – operating system – would hurt the business. In the first quarter, the social media firm is expected to lose $50-$70 million as a result, while analysts had pencilled in a profit of $19.3 million.
The US dollar index is in the red following the jobs report. Yesterday, it hit its highest level in two months so it had a good run in advance of today’s update. Selling pressure descended upon the dollar as it became apparent there are some pockets of weakness in the labour market - the negative revision to the December jobs reading. Overall, the report wasn’t dreadful so today’s negative move in the dollar could easily turn out to be a bump on the road of the wider positive move. EUR/USD and GBP/USD have been helped by the negative move in the greenback.
USD/CAD saw a spike in volatility as the US and Canadian jobs reports were posted at the same time. Canada’s unemployment rate jumped from 8.8% to 9.4%, which was far higher than the 8.9% estimate. The employment change showed that 212,800 jobs were lost last month and the December level was revised from -62,600 to -68,200. The currency pair is in the red but a lot of the losses were incurred ahead of the employment updates.
Gold is back above the $1,800 mark thanks to the slide in the dollar, the inverse relationship between them continues to be strong. Yesterday, the metal dropped to a two month low, so the slide in the greenback today provided an excuse for bargain hunters to step into the fold.
WTI and Brent crude oil hit their highest levels since February last year on continued worries about supply coupled with a belief the world economy is going to improve this year, and therefore demand for oil will rise. During the week it was revealed that OPEC+ will maintain their output plans, in addition to that, US oil inventories fell to an 11 month low – according to the EIA.