The monster rebound in the oil market has boosted sentiment in stocks, and in turn the major equity benchmarks are set to finish the day deep into positive territory. Oil has been the driving force in the markets this week, so the feelgood factor has boosted confidence across the board. The energy acts as a proxy for global demand, so its sharp recovery from the recent colossal losses, sends out a positive message.

Not surprisingly, BP, Royal Dutch Shell, Premier Oil and Tullow Oil are in demand this afternoon. It is worth noting they all suffered recently, so now the bargain hunters are stepping into the fold. On a similar note, mining stocks like Glencore and Antofagasta are showing modest gains thanks to firmer metal prices.

CRH is one of the best performers on the FTSE 100 today. The building materials group confirmed that first quarter sales ticked up by 3%. As a reaction to the health emergency, the firm will tighten its belt. Capital expenditure has been restricted to essential maintenance. Temporary layoffs have been introduced, while other workers have been furloughed. Senior management have taken a 25% pay cut. CRH is in a very strong position in terms of liquidity as it has $6 billion in cash. The group is proposing a final dividend, which makes it stand out from the crowd, as these days many companies are cancelling their cash payouts. The share buyback scheme has been suspended until further notice, and no guidance was issued.

Boohoo shares are in fashion today following the release of the company’s full-year figures. Pre-tax profit surged by 54% to £92.2 million, while revenue jumped by 44% to £1.23 billion. Keep in mind the company raised its revenue guidance in January to 40-43% growth. The international division outperformed as revenue rose by 51%, by comparison, the UK unit saw a 39% rise in revenue. The overseas business is playing a larger role in the wider group as it now accounts for 45% of total revenue. The group highlighted there was a marked dropped off in activity when the Covid-19 crisis took off in Europe, but business ticked up again in April. Boohoo’s cash position now stands at £240 million – which is a big improvement on last year’s £190 million. The fashion house didn’t issue a guidance because of the uncertainty caused by the coronavirus.

Fevertree announced their preliminary full-year figures today, and they were well received. Revenue increased by 10% to £260.5 million – thanks to a great performance in the US. Gross margin slipped to 50.5% from 51.8%, hence why profit after tax dropped by 5% to £58.5 million. The group derives 55% of its revenue from ‘Off’-Trade’, customers purchasing drinks in stores as opposed to in pubs and restaurants, and that side of the business saw an increase in activity on account of the lockdown. The balance sheet is strong, and shareholders are set to receive a 9.88p final dividend. The firm is in a robust position to weather the Covid-19 storm.

Jefferies downgraded their outlook for Centrica to ‘hold’ from ‘buy’. The energy provider has had performance issues for years as smaller and more nimble firms have managed to poach some of its customers. In light of the pandemic, the bank feels the firm will suffer a fall in demand as well as a rise in bad debts – both would potentially stem from an economic downturn.

US

The Dow Jones and the S&P 500 are showing decent gains. The aggressive U-turn in the energy market has raised the mood on Wall Street as equity dealers are now less fearful because the oil market is no longer in freefall. The tumble in oil sparked fears that demand across the board would collapse, but now the outlook as isn’t as pessimistic. Chevron, ConocoPhillips and Exxon Mobil have been boosted by the oil rally.  

Traders are snapping up Snap shares on the back of the company’s first-quarter update. On an annual basis, revenue jumped by 44% to $462 million, topping the $428.8 million forecast. The loss per share was 8 cents, slightly greater than expected. Average revenue per user (ARPU) is a crucial metric for social media companies, and Snap saw it rise by 20%. It would appear the social distancing policies of governments has prompted more people to use social media.  

Social distancing has helped Netflix too, judging by the company’s latest quarterly update. In the three-month period, the streaming service added 15.77m new paid subscribers – which hammered the 8.2m consensus estimate. The earnings metric was less impressive, as EPS came in at $1.57, missing the $1.65 expectation. Revenue was $5.76 billion, broadly in line with analysts’ forecasts. The firmer US dollar apparently held revenue back. It would appear that Netflix has become very popular amid the health crisis, but the group cautioned that it might see its customer base dip once restrictions have been eased. In terms of creating content, that side of the business has essentially ground to a halt, but then again that’s a problem for the entertainment business. Netflix’s documentary, Tiger King, sprung to popularity during the Covid-19 crisis, and mostly likely that helped the latest figures. The Netflix share price is slightly lower today.

United Continental Airlines plans to raise more than $1 billion through the issue of shares as way of beefing up its balance sheet. The stock is down 6%. Delta Air confirmed it was burning through nearly $100 million per day in March on account of the chaos caused by the travel ban, but the group hopes to bring that rate down to $50 million per day by the second quarter.

FX

The rebound in oil and metals lifted the Canadian dollar as well as the Australian dollar. The ‘commodity currencies’ have been under pressure recently, but now they are enjoying an upward move. Playing into the risk on theme is the dip in the US dollar too. In recent sessions, the greenback has acted as a safe haven during the volatile times, so now we are seeing a reversal of that.

The CMC GBP index is up on the day as it is trying to break out of the recent downtrend that it has been in for nearly one week. The UK CPI rate dropped from 1.7% in February to 1.5% in March. A fall in clothing and fuel prices were cited as the reason behind the drop. Seeing as what is going on in the world at the moment, I doubt the Bank of England are too concerned the cost of living has cooled.  

Commodities

WTI and Brent crude have enjoyed massive rebounds in the wake of horrendous decline suffered in the past two sessions. Volatility remains high, but for now the bulls seem to be in control. Oil was already moving higher before President Trump warned the Iranian regime that attacks on US ships will be met with an extreme retaliation. Some traders viewed this as President Trump flexing his muscels, but one could argue he was stoking up tensions to put a floor under the oil market. US oil stockpiles jumped by 15 million barrels, topping the 14.8 million barrels forecast.    

Gold is back above the $1,700 mark as the ease up in the US dollar has assisted the commodity Yesterday was a painful day for metals as there was selling across the board. Today the mood has lightened, and in turn we are witnessing a rebound in silver, platinum as well as palladium – which dropped by more than 10% yesterday. After a couple of negative sessions, it would appear that gold has resumed its upward trend, and should it continue it might retest the recent highs.

 

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