Stocks saw a lot of volatility today as health concerns weighed on sentiment in the morning, but the mood picked up on hopes of a Covid-19 vaccine.

Europe

Worries about the rising number of cases on the back of economies being reopened was a factor in the losses that were incurred in the first few hours of the session. The tick up in tensions in Hong Kong also contributed to the negative move. Beijing have introduced a controversial law that will give it more control over the former British Overseas Territory, and that could impact China’s international relations.

It was announced that Pfizer and BioNTech had positive results from an experimental drug which they are hoping will go on to be a vaccine for Covid-19. In this climate, any progress being made in relation to a possible treatment or vaccine tends to bring the bulls out in force. The FTSE 100 is set to finish fractionally higher, after previously nursing large losses.     

Sainsbury’s shares initially traded higher today on the back of the company’s well-received first quarter update. The pandemic assisted the group in terms of sales as some individuals decided to bulk buy food items for fear there would be shortages – which never happened. Also there was an increase in demand for house hold goods – electronic appliances and gardening items - as some people decided to spruce up their homes amid the lockdown. Total sales excluding fuel increased by 8.5% and the grocery division was the best performer as sales rose by 10.5%. General merchandise, including Argos, saw a 7.2% rise in sales. The clothing department suffered greatly as sales slumped by over 26%. On the bright side, fuel and clothing sales are rebounding at a faster rate than originally predicted. In late April Sainsbury’s cautioned the cost of the Covid-19 crisis might be up to £500 million, but now it believes the cost will exceed that mark. The jump in grocery sales combined with the business rates relief should help off-set the impact of the pandemic. The retailer said it expects demand to weaken, which isn’t surprising seeing as sales were very strong in March and April.

The property group, British Land, said that footfall at its assets in England is 64% of the level registered last year. For the quarter that ended in June, the firm only collected 36% of its retail rents, but it received 88% of office rents. In the last quarter the company waived £3 million in rents from tenants in the hospitability and retail sectors. British Land is in a difficult position as demand for commercial property is weak, but at the same time, many of its existing tenants, might not be able to pay the agreed rent. It is likely the firm will be granting rent waivers for many quarters to come.

B&M European Value Retail, the discount store chain, revealed stellar first quarter numbers. Group revenue jumped by 27.7% as the pandemic promoted some people to buy excessive amounts of food items. As industry standards go, the sales figures were fantastic. The French division posted a 32% rise in like-for-like (LFL) sales, while the UK unit saw a 26.9% rise in LFL sales. The stock is bucking the broader bearish trend today as it hit its highest level since late December.       

US

Stocks are showing small gains due to the Pfizer and BioNTech story in relation to the potential Covid-19 vaccine. Traders will be paying close attention to the Fed minutes which will be released at 7pm (UK time). At last months Fed meeting the central bank made it clear they will do what it takes to assist the US economy. Dealers will be listening out for more details about the Fed’s stance.    

The labour market is showing signs of recovery as the ADP employment reading for June showed that 2.36 million jobs were added. The May report underwent an enormous revision as the original report was -2.7 million, but it was revised to +3.06 million. The final manufacturing PMI report for June was 49.8, and that was a touch higher than the flash reading. The May report was 39.8. The ISM manufacturing update was 52.1 – its highest in 14 months.

Like many companies that managed to continue operating amid the lockdown, the health emergency has been both a positive and a negative for FedEx. The delivery specialist saw a huge jump in residential business, but there was a big fall in the commercial business as the aviation sector was severely impacted because of the travel bans. The group incurred pandemic-related costs of $125 million as funds were poured into health and safety measures. The fourth quarter EPS were $2.53, topping the $1.52 forecast, while revenue was $17.4 billion and equity analysts were expecting $16.4 billion. 

Macy’s shares are a little lower today as the company posted a quarterly loss per shares of $2.03. Revenue for the three month period was $3.01 billion, which was a huge fall from the $5.5 billion registered one year ago. The loss per share and the revenue were both in line with the preliminary results that were released in early June. The group confirmed that nearly all their stores have reopened, which is encouraging to see, but it expects the recovery to be gradual. 

United Continental shares are up on the back of the news its August schedule has nearly 25,000 more flights than what is planned for July. This adds to the view that things are going back to normal for the airline.

FX

The US dollar index has been very volatile today thanks to the sizeable swing in equities. The greenback was in demand earlier when stock markets were in the red as it has been a common flight to quality trade recently, but now it is down on the day as traders are content to take on more risk. GBP/USD and EUR/USD have been helped by the negative move in the dollar. The latest manufacturing PMI data from the major eurozone countries, France, Germany, Italy and Spain, all showed a big improvement in activity between May and June. The manufacturing report from the UK also showed a big rebound in activity.     

Commodities

Brent crude and WTI are slightly higher this afternoon thanks to the change in the wider sentiment. The overall mood has been lifted due to the optimism surrounding the potential coronavirus vaccine. The EIA report points to higher US demand for oil as stockpiles tumbled by 7.1 million barrels, while traders were only expecting a fall over 1.7 million barrels. 

Gold has had a choppy session too. The asset eked out yet another seven year high earlier on - when traders were in risk-off mode but in light of the change in sentiment, the metal is now showing a sizeable loss. The inverse relationship between the US dollar and gold has been strong lately, so it says a lot when the commodity is down, when the dollar is lower too.


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