The FTSE 100 continues to outperform its eurozone equivalents as the rally in oil stocks has boosted the UK index.
Europe
The mood in Europe is positive across the board but the strong contribution of Royal Dutch Shell (LON:RDSa) and BP (LON:BP) to the FTSE 100 in terms of index points has given it a big advantage over the other markets. The FTSE 100 is up more than 3%, while the FTSE 250 is above 1%, as the gains are really concentrated in a few big oil and mining stocks – Anglo American (LON:AAL), Glencore (LON:GLEN) and Rio Tinto (LON:RIO). HSBC, Standard Chartered (LON:STAN) and Barclays (LON:BARC) are showing solid gains too. Andrew Bailey, the BoE chief, said he wants banks to be free to set their own dividends. Dealers took that as a sign that banks will resume pay-outs.
Eurozone stocks were already in recovery mode this morning and then the European Medicines Agency approved Moderna’s coronavirus vaccine for EU use so that added to the optimistic sentiment.
Greggs posted a mixed trading update but the stock has rallied nonetheless. Annual sales fell by 30% to £811 million and the full year pre-tax loss is anticipated to be up to £15 million. The lockdown has had a negative impact on the business but it struck up a partnership with Just Eat (LON:JE) as a way of reducing its exposure to the high street and at the same time grab a share of the lucrative delivery market. In the fourth quarter, company-managed stores saw a 5.5% increase in deliveries. The bakery company commented that the outlook is uncertain because of the latest lockdown but at the same time, it was quick to point out that it has access to a £100 million credit facility and it has a cash balance of £37 million. Greggs is clearly in good shape financially and it plans to open approximately 100 new stores in the new financial year so it's intentions suggest that it is optimistic in its long term outlook.
Aggreko (LON:AGGK), the supplier of temporary power and heating equipment, announced that it signed an updated contract in relation to carrying out work for the Tokyo Olympics and Paralympics. A new agreement was needed seeing as the pandemic prompted the postponement of the events. Aggreko anticipates that the contract will be worth roughly $315 million in terms of revenue. The firm now predicts that full year pre-tax profit will be between £170 million and £190 million, provided the events in Tokyo go-ahead.
Informa specialises in organising events and publishing, and it had a rough ride last year due to the mass cancellation of events. In its year end update, it said that it has been trading in line with the forecast it issued in September. Events are being hosted in mainland China and it expects to see vents being hosted in EMEA and North America this year.
US
The Senate elections in Georgia are being closely watched and it has been reported that the two Democrat candidates, Raphael Warnock and Jon Ossoff are leading their respective races but nothing is a done deal. Should they succeed, it would give the Democrats control of the Senate, albeit a slim majority. A robust Biden administration would be in a position to roll out additional stimulus should it be required, and the campaign pledges were infrastructure spending and green energy plans. The Dow Jones is hit a new record high while the NASDAQ 100 is down 0.4% as there are fears that Mr Biden will go after big tech in terms of taxes.
Traders are snapping up solar energy stocks as there is a possibility that the Democrats might take control of the Senate, and that would make it a lot easier for President-elect Joe Biden, to introduce his green energy policies. Sunrun, First Solar and Solaredge are in demand this afternoon.
Tesla (NASDAQ:TSLA) shares hit yet another record high as Morgan Stanley (NYSE:MS) lifted their price target for the stock to $810. The Wall Street bank maintained their overweight rating for the stock.
The ADP (NASDAQ:ADP) employment reading showed that 123,000 jobs were lost last month and keep in mind that economists were expecting 88,000 jobs to be created. The November report showed that more than 300,000 jobs were added so that adds to the fears that the US economy is cooling.
FX
The US dollar came under selling pressure again but it has since rebounded and that has put pressure on GBP/USD and EUR/USD. The rate at which the dollar turned around could suggest that we have seen the low in the dollar in the near-term. The fact the greenback continued to move higher despite the dreadful ADP update also suggests that we might have seen the bottom of the recent decline.
Commodities
Gold has retreated from the eight weeks high that it registered yesterday as it seems that traders are keen to book profits. The move higher in the US dollar has hurt the yellow metal. Some traders are keen to snap up stocks in the current risk-on environment.
Brent crude oil and WTI were already showing solid gains today on the back of the Saudi 1 million barrel per day cut that will come into effect in February and March, and the EIA inventory report added to the bullish move. Today, Saudi Arabia lifted its February crude prices to Asia. US oil inventories tumbled by 8.1 million barrels, while the consensus estimate was -2.1 million barrels. The reading suggests that demand is robust. It is worth noting that US gasoline stockpiles rose by 4.5 million barrels.
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