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Europe mixed, GameStop drops a level, oil pops

The same old worries about another wave of coronavirus cases as well as concerns that Europe’s lockdown will drag on are doing the rounds. 


The major equity markets are mixed as the close of the trading day draws near, it seems that dealers are somewhat immune to the Covid-19 news as they realise the extended restrictions will not last forever. London’s FTSE 100 is outperforming the DAX 30 as the upward move in natural resource stocks is giving the British market an edge. The bullish moves in oil and copper have lifted BP, Royal Dutch Shell, Rio Tinto, Glencore and Anglo American.    

Bellway delivered a respectable set of first half figures. Revenue rose by almost 12% to £1.7 billion but pre-tax profit slipped by 4% to £280.2 million. Restrictions imposed by the government due to the coronavirus impacted construction work but the order book is up 8.4% to £1.64 billion. Earlier this month the government extended the scheme that scrapped stamp duty on properties worth up to £500,000, the incentive will now run until the end of June so that should assist demand. Bellway resumed dividends and the pay-out will be 35p, this is largely in-step with other home builders. The firm announced that it is in excellent position to continue its long-term growth strategy.

Softcat had a strong performance in the first half and it issued a bullish outlook for the full year numbers. In the six month period, revenue increased by 10% to £577 million and gross profit jumped by over 20% to £134.5 million. The IT solutions group announced a 6.4p dividend too. The stock hit an all-time high on account of the upbeat update.   

Halma shares are higher on the day as the firm lifted its outlook, it now anticipates full year pre-tax profit to be similar to last year’s metric. Its performance in the second half is ahead of the same period last year.                 


The Dow Jones and the S&P 500 are showing respectable gains as the US’s economic recovery continues. The flash reading of services and manufacturing came in at 60.0 and 59 respectively, both readings were improvements on the month.        

GameStop shares are in the red as the company said it is contemplating selling off some of its stock as a way to finance its restructuring. Despite the fact the stock has dropped greatly since its recent all-time high, it is still up over 800% on a year-to-date basis. The company needs to pivot away from its bricks and mortar business and put more focus on its online sales, in the fourth quarter, e-commerce sales rose by 175%, which accounted for more than one third of total sales. GameStop has been left behind by the switch to online sales and those problems were compounded by the lockdowns. Should the company dispose of some of its shares and use the funds to reinvest in the business that should benefit the firm in the long run.


Sterling is weaker because of the worse-than-expected UK inflation report. In February, the CPI reading was 0.4%, which was a big fall from the 0.7% posted in January. It caught traders by surprise as economists were expecting 0.8%. In recent weeks, there has been increasing chatter about higher inflation, especially in the US, but in light of today’s British data, those fears should fade a little. The UK’s PMI reports were impressive but they failed to propel the pound higher. The flash services PMI reading was 56.8, the fastest rate of expansion in seven months. Reasonably tough restrictions are in place in the UK so what will the metrics look like in the summer when restrictions should be removed. The CMC GBP Index is down over 0.1%.            

The US dollar index hit a four month high as the greenback continues the uptrend that has been in place since early January. The Federal Reserve is keen not to raise rates until 2024 but seeing as UK inflation suffered a fall and the eurozone could be stifled by extended lockdowns, the Fed are out in front to lift rates, hence the upward move in the dollar.       


Gold is higher despite the multi-month high in the greenback – recently the inverse relationship has been strong between the two markets. The US 10-year yield is now off the lows of the session but earlier it dipped below 1.6%. It seems the metal benefited from the dip in bond yields because recently rising yields detracted from the commodity.

WTI and Brent crude oil were already rebounding this morning, the oil contracts extended their gains after the EIA data was reported. Yesterday, oil fell to its lowest mark in over one month, largely driven by demand concerns from Europe in light of the tighter restrictions. Bargain hunters swooped in to snap up the relatively cheap contracts. US oil inventories grew by 1.91 million barrels, while the consensus estimate was for a draw of over 272,000 barrels. The pervious report was a build of 2.39 million barrels. It seems that refineries are working their way through the backlog caused by the big freeze. Gasoline inventories rose by 203,000 barrels, traders were anticipating an increase of 1.18 million barrels.                  

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