14-5-2020 02:56:1314-5-2020 02:50:31The FTSE 100 is underperforming versus its Continental counterparts as the rally in the pound is holding the index back. 

The international nature of the British equity benchmark, means that some stocks are hurt by a firmer pound because of the exposure to overseas markets. The FTSE 100 is still set to finish higher, but the gains in the eurozone are far greater. Central banks and government have been throwing money at the health crisis and it seems that some of it is starting to stick, which is why stocks are firmly higher. The G20 meeting next week is at the forefront of traders’ minds too.     

After a brutal few weeks, the share price of Wetherspoon has rebounded on the back of the company’s first-half update. The figures were good, but most importantly, the pub group has sufficient liquidity. Since the government prompted social distancing, the firm has seen a ‘significant’ fall in sales. Keep in mind that sales fell by 4.5% in the week until 15 March, so things are likely to get uglier from here. In the six-month period, revenue and pre-tax profit increased by 4.9% and 15.2% respectively. The group pulled its dividend and said it was impossible to issue a guidance – hardly surprising in the current environment. Marston’s and Mitchells and Butlers have enjoyed large gains too.

Marks & Spencer shares are firmly in the red today after the company warned that earnings are likely to be at the lower end of expectations, or perhaps even below expectations. It is worth noting the stock did well earlier this week as there was an increase in food shopping across the board. M&S confirmed there has been a substantial fall in clothing sales since the health crisis kicked off, but staff from that division are being redeployed to the food unit to assist with the jump in demand. Tesco and Morrisons are in the red too.  

Unilever and Reckitt Benckiser were in demand during the week as the companies produce hygiene and cleaning goods, but we are seeing a reversal of their previous fortune. The pound’s strength is a factor too as the firms earn a large proportion of their revenue in foreign currencies.    

Redrow, Barrett Developments and Bellway are all showing decent gains as the sector has rebounded from a brutal sell-off. There is a perception in the markets that UK house prices could be in for a slide in light of the huge economic uncertainty.

Carnival, the tour operator, are the best performer of the travel sector – which has undergone a big bounceback today. The firm have suspended operations, but they confirmed that bookings for the first half of 2021 are respectable. The Covid-19 crisis has wreaked havoc on the tourist trade. It would seem that short covering has kicked in as easyJet, Ryanair and Wizz Air are showing big gains.

Intercontinental Hotels Group said that bookings were at their lowest levels ever, but the company reminded traders that it is not overly leveraged, so from a liquidity point of view it should avoid problems.  

The Bank of England has cancelled the stress tests for banks as they will have enough on their plate with the Covid-19 related chaos. RBS plus Lloyds are in the red this afternoon – the low interest rate environment will probably squeeze the lending margin.

Airbus has jumped on the news as it will receive aid from the French government, and so will Air France.     

US

The mood in the US is less optimistic than in Europe as the Dow Jones is showing a small gain, while the S&P 500 is in the red. Non-essential businesses will close their doors in New York as a way of tacking the health crisis. Traders are terrified this will be announced in other parts of the country too. The Fed will continue to improve liquidity, but the health situation has taken centre stage.

The weekly jobless claims report for Ohio was in excess of 139,400, which was a colossal jump from the 4,815 registered in the previous reading. The update is the tip of the iceberg and much more pain is in the pipeline.    

Walmart announced it will hire 150,000 hourly workers to cope with the surge in demand on account of the health crisis. The news is similar to Amazon who are going to take on 100,000 new workers in a bid to process the jump in consumer activity. Certain sections of the retail sector are benefiting from the health emergency.

Tesla will suspend operations at its plant in Fremont, California, in addition to which, the group’s solar roof factory in New York will also suspend operations.

Apple will limit the number of iPhone sales online to two per person as supply chain disruptions are an issue for the group.

Hibbett Sports’ shares are in demand as the company issued a relatively strong outlook, but the fourth-quarter numbers were broadly disappointing. EPS for the three-month period were 51 cents, which undershot the 62 cents forecast. Same-store sales increased by 4%, but traders were expecting 4.7%. The group cautioned about a slowdown in demand because of the coronavirus, but it confirmed there has been disruption to its supply chain - these days that’s seen as a boon.

FX

Sterling’s mammoth comeback continues as it surges versus the US dollar and the euro. There is an argument that the pound’s declines during the week were excessive, so now we are seeing the correction. If the GBP/USD rally continues it might target 1.1900.

EUR/USD is also higher on the session thanks to the wider pullback in the US dollar. The euro is also making up for lost ground this week. The German PPI rate in February swung to -0.1% from 0.2%, and that could be a sign that headline inflation will slide in the near-term.

USD/CAD is in the red and the Canadian dollar makes a comeback. Retail sales in Canada increased by 0.4% in January, topping the 0.3% forecast.     

Commodities

WTI and Brent crude are in the red today as dealers bank their profits from the huge rally yesterday. The volatility is still high by normal standards but it has cooled a lot when compared with the middle of the week. Oversupply fears in addition to demand woes are likely to hang over the energy market.

Gold is higher on the session as the softer greenback has assisted the metal. Gold has seen a fair bit of volatility today, but it is still above the lows of the week, and while that remains the case, it stands a chance of recovering some of its recent losses.

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