Equity markets are firmly in the red on account of the major declines suffered in the oil market. 

Europe

It is a similar picture to yesterday whereby the aggressive move lower in oil rattled equity traders. Brent crude was relatively calm yesterday amid WTI’s meltdown, but Brent has seen large declines today, and that has fed into a narrative that global demand is under attack.

London-listed oil and oil field services stocks have come under pressure. BP and Royal Dutch Shell are in the red, while smaller stocks such as Tullow Oil and Premier Oil are nursing big losses.

The negative sentiment in the oil market has hit copper too. There is a sense that demand for natural resources across the board will fall. Mining stocks like Antofagasta, BHP Group plus Glencore are offside. Fresnillo, the silver and gold miner is bucking the trend, as it is slightly higher on the session.  

Halma is a group of lifesaving technology companies. The firm anticipates that full-year adjusted profit before tax will be £265-£270 million, which would be in line with management’s guidance. Revenue is expected to be £1.33 billion. A number of the group’s subsidiaries are involved in the manufacturing of personal protective equipment, so some of its services are in high demand right now. The group has a robust liquidity position as it has access to £750 million in credit, and it can tap into the Covid Corporate Finance Facility (CCFF), if required. Senior management will take a temporary pay of 20%, the reduced pay will last for at least three months. The stock is up 3%

Wizz Air confirmed that it is eligible to access finance through the CCFF. Wizz reiterated the point that it has a cash position of €1.5 billion – one of the strongest cash positions in the airline sector. The robust liquidity position projects a very positive image.

Sainsbury’s, Morrisons and Ocado are higher today as grocery stocks prove to be popular in these uncertain times.

London Stock Exchange has benefitted from the volatility in the markets. Total income in the first quarter increased by 13%, on an annual basis. Higher equity trading, and an increase in activity in both listed and OTC products contributed to the strong performance. The group continues to prepare for its planned merger with Refinitiv. LSE remains committed to completing the deal in the second half. The liquidity position is strong as the company has access to a £600 million in credit. In recent weeks we have seen a raft of companies cancel or postpone their dividends in a bid to conserve cash, but LSE still intends to pay its final dividend for the last financial year.

Associated British Foods posted it’s interim results. The firm owns Primark – which has seen all it’s stores closed on account of the coronavirus crisis. Pro forma group revenue ticked up by 2% to £7.64 billion, while statutory profit slumped by 41% to £298 million. The tumble in earnings includes a £309 million charge for the closure of its Primark stores. The clothing division has traditionally been the outperformer of the group, but now the parent company it will have to rely on its other units. The sugar business has benefited from higher EU sugar prices plus lower costs. The grocery operation is performing well thanks to increased demand, which helped adjusted operating profit rise by 13%. The food division will continue to operate fully amid the health crisis, so that should help offset the Primark situation. The board of directors will take a temporary pay cut of 50%, while non-executive directors will see their fees fall by 25% on a temporary basis. The group has £1.5 billion in cash, and it can access the CCFF, so from a liquidity point of view the firm is healthy. On account of the current environment, there will be no interim dividend, and no group guidance was issued.   

US

The mood on Wall Street is downbeat as the continued weakness in the oil market has soured sentiment in stocks again. The turbulence in the energy market has shaken confidence in companies that are not even connected to the industry – it is a broad based sell-off. Companies like Exxon Mobil and Chevron are in the red. President Trump said that funds would be made available for the energy industry, so the declines in the sector today have been somewhat cushioned. There is also hope of a deal bring struck between lawmakers over a fund aimed at supporting small businesses gaining access to cash. Chuck Schumer, the Senate Democratic Leader believes it will pass in the Senate today.

Netflix will post its first quarter figures after the close of trading. The stock has recently gone on to hit record highs recently as traders felt that social distancing policies should lead to more subscribers for the company. In January, when the company issued its fourth quarter numbers, it also revealed its guidance. EPS and revenue are tipped to be $1.66 and $5.73 billion respectively, and 7 million new subscribers are expected to be added. In light of the current environment, dealers have high hopes for the stock.

Coca-Cola shares are now higher after opening lower, the company confirmed that global sales volumes have tumbled by 25% since April. The lockdowns have hit the company hard as the closure of venues, theatres, stadiums and restaurants has had a huge impact on the group. Sales of its drinks via commercial avenues and stores has increased as roughly 50% of the group’s drinks are consumed at home. At least the group can fall back somewhat on domestic consumption sales, but while social distancing remains common place, the firm is likely to muddle along.

IBM revealed its first-quarter numbers last night, and revenue slipped by 3.4% to $17.57 billion, which narrowly undershot forecasts. EPS were $1.84, topping the $1 80 consensus estimate. The cloud and cognitive software unit saw revenue rise by 5% to $5.24 billion, but equity analysts were anticipating $5.30 billion. The company saw a notable drop off in client activity when the Covid-19 crisis struck as consumers priorities shifted to the health emergency at hand. IBM pulled its guidance.

FX

The US dollar is higher again today as the currency has been acting as a safe-haven recently. The move to the upside hasn’t been huge. Volatility in currencies has been low when you compare it to the moves seen in stocks and commodities. It has been another poor day for the pound. The UK have extended their lockdown into May and that has sent out a negative message to the markets. The UK claimant count for March was over 12,000, but the reading only went up until 12 March – before the lockdown, so we still don’t have a report covering the state of the UK labour market since the pandemic struck. The German ZEW economic sentiment report swung from -49.5 in March to 28.2 in April – the highest in over four years. The news helped the single currency. USD/CAD is up on the day again thanks to the fall in the oil market. 

Commodities

WTI and Brent crude oil have racked up large losses today. It’s the same old story with oil, the market has been plagued with demand, over supply and storage capacity concerns recently. The aggressive move lower in Brent crude caught traders’ attention today, as the energy contract didn’t get caught up in the madness that engulfed WTI yesterday. At one point Brent crude traded at a level last seen in late 2001 – which underlines the weakness in the market.     

Gold is in the red as the slightly firmer US dollar is hurting the asset as the two usually have an inverse relationship. Gold is not the only metal to suffer today as copper, silver, platinum and palladium are all offside – palladium is down over 10%. The moves witnessed in the metals market today are reminiscent of the intense sell-off last month, when dealers were dumping all assets across the board. 

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