News

Markets calm, US election and jobs report in play

CMC Markets

It's looking more and more likely that Joe Biden will win the US presidential election. With Donald Trump making allegations of postal voting fraud, it looks as if he will contest the outcomes in various states, and that could pave the way for a drawn-out legal battle.

Seeing as election fever has gripped the US and the rest of the world, the US jobs report took a back seat today. The unemployment rate metric was the highlight of the announcement as it fell from 7.9% to 6.9% - the sizeable fall suggests the economy is rebounding. The US non-farm payrolls update showed that 638,000 jobs were added last month, and that easily topped the 600,000 forecast. The September reading was revised up to 672,000 from 661,000. Average wages slipped from 4.6% to 4.5% - which could be seen as a positive as it might suggest that more low income workers have returned to work.

Europe

The FTSE 100 is set to finish higher today, but the major continental markets are on track to end the day in the red. European equities enjoyed strong gains this week so it is not surprising that volatility has tapered off and that some indices are offside today.     

RSA Insurance was in focus today in the wake of the news that was announced yesterday – the company was approached with a takeover bid from Canada’s Intact and the Danish group Tryg. The two firms are keen on breaking up RSA, as Intact are interesting in the UK, Irish and Canadian assets, while Tryg would acquire the units in Sweden and Norway. The proposed deal is worth £7.2 billion, and Tryg would be putting up £4.2 billion, and Intact would be footing the remaining £3 billion. RSA shares fell to a 15 year low in March, so the group was relatively cheap. It seems that the two potential bidders waited for the insurance market and the financial markets to settle down before making their move. The companies bid 685p per share, and keep in mind the stock closed at roughly 461p on Wednesday, and that represents a 48% premium, so RSA shareholders shouldn’t feel that they are being picked off at a low price.

Beazley shares are up on the day after the company confirmed that gross premiums for the nine month period increased by 16% to $2.53 billion, which is ahead of expectations. There was a 14% increase in premiums for renewable business, in the nine month period. The company set aside $80 million for Covid-19 provisions for the third quarter, and it maintained its guidance of an annual $340 million in provisions for losses. Beazley confirmed that it has ‘great confidence’ in its ability to post mid-teens growth next year.

Premier Foods has sold off Hovis Bread for £37 million and the funds raised from the deal will be used to beef up its balance sheet. Speaking of strengthening one's balance sheet, easyJet confirmed that it carried out a sale and leaseback transaction whereby it sold off 11 aircraft for over £130 million. Less than two weeks ago, the low-cost airline said it carried out a similar deal where it raised over £305 million in exchange for 9 aircraft. In early October, the airline announced that it has cash and equivalents of £2.3 billion, so it is in rude health, but the asset sales should give it an extra cash buffer.                  

US

The positive sentiment that engulfed Wall Street during the week has run out of steam as the Dow Jones and the S&P 500 are flat on the session. The NASDAQ 100 is showing a modest loss, but that seems to be down to profit taking seeing as the index has greatly outperformed in the last few sessions. The politician situation will remain in focus as it looks like President Trump will dig in for a long legal battle with respect to certain state results but dealers don’t seem to be spooked by that.       

Peloton interactive inc posted its first quarter results last night, and they were impressive. The company revealed earnings of $69.3 million, and that was a big improvement on the $49.8 million loss in the previous quarter. EPS was 20 cents, and that easily topped the 11 cents consensus estimate. Revenue surged by 232% to $757.9 million, which exceeded the $748.1 million forecast. The group saw a 137% surge in subscribers to 1.33 million. Peloton’s full-year revenue guidance is now $3.9 billion, while the previous forecast was $3.5-$3.65 billion.

Uber technologies shares are in red on the back of its third-quarter figures. The loss per share was 62 cents, and equity analysts were anticipating a loss per share of 65 cents. On a yearly basis, revenue surged by 52% to $3.12 billion, and that narrowly undershot the $3.2 billion consensus estimate. The pandemic clobbered the demand for car rides, but Uber Eats registered a 190% in revenue to $1.14 billion. Despite the uncertainty caused by the pandemic, Uber maintained its forecast that it will post a positive EBITDA by the end of 2021.

Aurora Cannabis and Tilray are in high demand today as the possibility of a Biden victory helps the prospect of more states legalising cannabis, but in reality the process could be tricky.                    

FX

The sell off in the US dollar continues as the US dollar index has fallen to a two month low. The political uncertainty in the US continues to hang over the greenback. It looks as if Mr Biden will take the presidency, but at the same time the Democrats are unlikely to win control of the Senate. In turn, any fiscal support from the US government is likely to be in the region of $500 billion, and not the $2 trillion that the Democrats were initially requesting. This will probably keep pressure on the Fed to keep monetary policy very loose. EUR/USD has been boosted by the broad decline in the dollar.

The CMC CAD index is in the red on the back of the mediocre Canadian jobs report. The unemployment rate dipped from 9% to 8.9%, but economists were expecting it to fall to 8.8%. The employment change report increased by 83,600, undershooting the 100,000 forecast. The fact that over 378,000 jobs were added in the past update points to a cooling of the economic rebound.   

Commodities

Gold is in the red as traders are booking their profits from the recent bullish run. Yesterday, the yellow metal hit a level last seen in late September. Lately, the commodity has been assisted by the weakness in the US dollar, and even though the dollar is in the red, the metal is lower on the session. While, the metal holds above the 50-day moving average at $1,913, the recent uptrend should continue.

WTI and Brent crude have tumbled on the back of fears for demand as the rise in the number of new Covid-19 cases have dented sentiment. Coronavirus cases in the US and Italy have increased at a worrying level and that has impacted the mood in the energy market. The prospect of a Biden presidency has impacted oil too as there are fears that his administration could take a softer stance on Iran, and that could bring about an increase in supply from the nation.