Stocks across Europe are showing large losses as health fears are weighing on markets. 

Europe

Two people in the UK have tested positive for coronavirus, which adds weight to the World Health Organisation’s view that it is a global emergency. Dealers are dumping stocks for fear the health crisis will curtain economic activity in China, and to a lesser extent the rest of the world – should the situation keep spreading. The FTSE 100 fell to a seven week low, and it is not too far from the low of the week. It would be appear that traders are rushing for the exit before markets in mainland China re-open on Monday – the authorities might decide to extend their holiday period though. 

Aston Martin shares surged today on the back of the news the company will receive a cash injection of £182 million from a consortium headed-up by Lawrence Stroll. The cash boost will give the consortium a 16.7% stake in the group. The luxury car manufacturer will raise an additional £318 million via a rights issue. The new funding stream will be used to strengthen the balance sheet as well as help with production. High-end vehicles are still in demand so if Aston Martin get improve their operations then they should be on the right track.

Banco de Sabadell disappointed investors by posting a greater-than-expected loss of €15 million in the final-quarter. The figure was a big drop-off from the €80 million posted in the same time from last year. The bank confirmed it was still paying out 2 cents as a dividend – which seems odd as the company clearly had a poor fourth-quarter. The stock is down is down roughly 12% but then again, if the dividend was cut or halted, the tumble could have been greater.    

US

Bearish sentiment in the US is on the rise too as the Dow Jones plus the S&P 500 are both down in excess of 1%. The health fears appear to be creeping higher on Wall Street. The Fed’s preferred measure of inflation, the core PCE reading, held steady at 1.6%, meeting forecasts. Personal income cooled to 0.2% from 0.4%, while personal consumption slipped to 0.3% from 0.4%. The latter two reports are a little concerning as it could be a sign of economic cooling.

Amazon’s market capitalisation has jumped back above the $1 trillion dollar mark. The company revealed robust fourth-quarter numbers last night, hence the rally in the stock today. Revenue in the three month period increased by 21% to 87.44 billion, topping forecasts. The EPS came in at $6.47 and the consensus was $4.03. Cloud computing is a rapidly expanding industry so Amazon are cashing in on the growth. The cloud business is component of the Amazon Web Services operation – which registered a 34% in revenue to $9.95 billion, exceeding the $9.81 billion forecast.

Caterpillar shares are in the red following the latest quarterly update. In the final three months, the group saw revenue fall by 8% to $13.14 billion, while traders were expecting $13.41. EPS topped the $2.37 forecast, as it came in at $2.63. The company cautioned about ‘economic uncertainty’ as well as issuing a guidance that undershot forecasts. Caterpillar expects full-year EPS to be $8.50-$10, while equity analysts were expecting $10.63.

FX

The US dollar index is in the red, but it has had a positive week nonetheless. The not-so-hot US personal income and consumption figures put pressure on the greenback. GBP/USD has extended its gains from yesterday, thanks mostly to the slide in the US dollar. Last month, UK mortgage lending came in at £4.55 billion, which was an improvement on the £4.24 billion registered in November. It was an impressive increase when you consider the political uncertainty on account of the general election. EUR/USD is higher on the back of the eurozone CPI numbers, which showed the rate increased to 1.4% from 1.3%. The rise suggests that demand is increasing, but the slip in the core reading from 1.3% to 1.1% indicates the opposite.       

Commodities

Gold has been driven higher by the drop in the greenback as well as the risk-off strategy of traders. The inverse relationship between gold and the greenback is playing out today. The funds that are being extracted from equities are partially being funnelled into gold.

WTI and well as Brent crude have endured yet another round of heavy selling as traders are cutting their energy positions. The energy market has been hammered this week as dealers are worried a prolonged health crisis in China – the largest importer of oil in the global, could dampen demand.

 

 


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