Eurozone stocks are set to finish higher on the back of the EU agreeing on the terms and conditions of the €750 billion rescue package.

Europe

The confirmation that a compromise was reached came through in the early hours of today, and that helped stocks get off to a flying start this morning. The €750 billion fund will be divided into €390 billion of grants and €360 billion of loans, and keep in mind the initial proposal was for €500 billion in grants and €250 billion in loans. Stocks are off the highs of the session, probably because traders felt that some sort of a compromise would be achieved in the end. Besides, the EU is not known to move quickly, so the funds might not be deployed for months.        

Ted Baker shares are up on the day as the company said its performance in the 11 weeks until 18 July was better than their base case scenario. Total sales in the time period dropped by 50%, but online sales jumped by 35%. E-commerce sales accounted for 69% of total sales in the time frame, while last year it only accounted for 25% of total sales. The group was fortunate to have a robust online operation to help it get through the lockdown. The fashion house is keen to tighten its belt as it now projects capital expenditure for this year to be below £10 million while the previous guidance was £15 million. The cash position is over £56 million, which is ahead of management’s expectations. It hopes to achieve rent savings of £16 million through further negotiations with landlords. Ted Baker is in a good position to turn itself around.   

The lockdown helped Bloomsbury Publishing as in the four months until the end of June, the company saw an 18% increase in sales to £49.5 million. On a year-on-year basis, digital revenue and print revenue increased by 63% and 9% respectively. The group made it clear that it has ‘sufficient liquidity to weather the impact of the pandemic’.

Last week, AO World announced that full year revenue cracked the £1 billion mark, and the loss narrowed to £3.8 million from £13 million. Today, the company announced an incentive scheme as a way of encouraging employee loyalty and motivating staff to provide better service. If the company’s value hits a certain level, a 30% increase from the close of trading on Monday, 10% of additional gains will be distributed to the workers via the scheme. The tactic should inspire employees to work harder and provide better service to customers.  

HMRC said they are expanding their investigation in GVC in relation to its former Turkish online business. The body will examine whether ‘corporate offending’ took place within the GVC entity. The update was light on detail, but it has knocked 12% off the GVC share price today.  

According to Kantar. UK grocery sales jumped by 16.9% in the 12 weeks until 12 July. Of the ‘big four’ supermarkets, Morrisons outperformed as sales jumped by 17.4%, while Asda’s sales only increased by 11% - the slowest rate of the big brands. Online grocerOcado, saw a rise of more than 45%.    

Rolls Royce shares are set to finish higher. It was reported the UK government will provide £5.5 billion in export credit support to the aerospace sector.

Persimmon shares are down today. Yesterday it was reported that Dave Jenkins, the CEO, sold 1.3 million shares.

US 

The broader mood is positive on the back of the hopes that progress is being made in relation to a possible vaccine for Covid-19. The health crisis is still an issue, but it seems some US states have a better handle on it now. The NASDAQ 100 is in the red following the record achieved last night.   

IBM shares are in demand on the back of the second quarter update last night. EPS was $2.18, which easily exceeded the $2.07 forecast. Revenue for the three month period was $18.12 billion, while equity analysts were expecting $17.72 billion. Cloud computing has become a very closely watched industry on account of its high demand. IBM’s cloud and cognitive division saw a 3% increase in revenue to $5.75 billion, and that was basically in line with expectations.    

After the close of trading tonight, Snap will post its second quarter numbers. The social media sector as a whole has had a tough time recently. Last week, a number of high-profile Twitter accounts were hacked. The situation was dealt with quickly, but the security breach impacted confidence in the company. A few weeks ago, there was a campaign doing the rounds, calling on companies to boycott Facebook in terms of advertising. It has fizzled out since. Snap has managed to avoid such negative publicity. Snap’s first quarter revenue increased by 44% to $462 million, while the loss narrowed to $306 million from $310 million one year ago. Traders will be seeing if the loss narrows further.

Coco-Cola revealed its second quarter numbers today. Revenue tumbled by 28% to $7.2 billion, meeting forecasts. EPS was 42 cents, which exceeded the 40 cents estimate. Global case volumes slumped by 25% in April, the first full month of lockdown, but in June were only -10%. The reading for July so far is a mid-single-digit percentage decline.      

FX

The US dollar is down again as dealers are in risk-on mode. In the past few months the greenback has been a popular safe-haven play, so today the opposite is the case. USD/CAD is showing a sizeable fall, partially due to general dollar weakness, but the rally in the oil market is a factor too. The Canadian dollar typically gets dragged around by the oil market, In May, Canadian retail sales jumped by 18.7%, and that was a big rebound from the 26.4% fall that was posted in April. It is encouraging to see there was a rebound in activity, but keep in mind that economists were expecting 20%.

GBP/USD hit its highest level in over one month. The slide in the greenback has assisted the pound. Last month, the UK public sector net borrowing was £34.8 billion. The initial May reading was £54.5 billion, but today it was revised to £44.7 billion. Last week the pound was trading in a small range and it seemed directionless, but in light of the move in the past two days, it seems as if it is continuing its wider bullish trend that has been in place since mid-May.   

Commodities

The weaker US dollar has helped gold set yet multi-year high. The asset has hit its highest level in nearly nine years. Gold has been on a bullish run recently and one of the reasons for that is it is typically a hedge against inflation, and even though CPI rates are depressed now some traders fear an inflation rise is on the horizon because of all the stimulus packages introduced by central banks. The broader positive sentiment has helped industrial metals such as copper, platinum, palladium, and silver.

WTI and Brent crude hit their highest level since early March as the overall feel-good factor in the markets has boosted the energy. The news of the EU rescue fund being agreed upon, and the hopes in regards to a Covid-19 vaccine being developed, have buoyed the oil market. Traders are taking the view that oil’s demand should increase, on the basic the EU’s recovery should be sped up, but the political process can be slow.

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