CMC Markets | Aug 18, 2020 05:51
The FTSE 100 is outperforming its continental equivalents as mining and internationally focused stocks are showing respectable gains.
Firmer metal prices have helped Anglo American (LON:AAL), BHP Group (LON:BHPB) and Rio Tinto (LON:RIO). The dip in the pound has given a lift to AstraZeneca (LON:AZN), British American Tobacco (LON:BATS) and Diageo (LON:DGE) – they all derive a large portion of their revenue from outside the UK, so a slide in sterling helps the groups. AstraZeneca has finalised a deal with the EU to deliver up to 400 million doses of the Covid-19 vaccine, following the drug’s approval.
European equity benchmarks are broadly higher even though the headlines have been a touch on the negative side. Concerns persist in relation to the pandemic, both in terms of the infection rate, and the fear of tougher restrictions being imposed again. US-China trade talks were due to take place at the weekend but they were cancelled, and no replacement date has been set. This isn’t a major upset to their relations but it adds to the sour sentiment that has been building between the two countries for a while.
Cranswick (LON:CWK), the food group, saw healthy demand for its products amid the lockdown. Cooking at home took-off during the height of the pandemic as eateries were forced to close, so people stocked up on food items. Its stock price hit a record high as the company now expects its full year figures to exceed the previous forecasts. In the first quarter revenue jumped by nearly 25% on a yearly basis, but when you strip out the impact of acquisitions, the growth rate was just over 19% - so still impressive. The second quarter has had a positive start, but the company expects sales to return to a typical level as day-to-day life returns to normal.
There continues to be turbulence in the aviation sector as quarantine restrictions, and fears of further restrictions hang over the sector. Spain and France are popular holiday destinations for British tourists, and both countries are on the UK’s two-week self-isolation list. There are worries that Turkey, Greece and Croatia will be added to the UK’s list. The German government has cautioned its citizens about visiting Spain, and that has added to the pessimism in the industry. A few hours ago Ryanair (LON:RYA) announced that it will cut capacity for September and October by nearly 20% as bookings have been weak. The bulk of the cuts will be in regards to frequencies, rather than destinations. TUI (LON:TUIT), Wizz Air (LON:WIZZ) and easyJet (LON:EZJ) are down today.
Rightmove (LON:RMV) revealed that transactions hit a record high between mid-July and early August as the UK property market is experiencing a bullish run now that things have re-opened. The temporary lifting of the stamp duty threshold to £500,000 from £125,000 has helped the housing market too. Rightmove said that house prices in August rose by 4.6% on a yearly basis. Shares in Rightmove are a little higher, while Purplebricks (LON:PURP) and Foxtons (LON:FOXT) shares have jumped.
Hollywood Bowl (LON:BOWL) shares are in the red as the stock has handed back some of the massive ground it made on Friday when it revealed the vast majority of its sites in England would reopen on 15 August. A number of sites in northern England are ready to reopen but they are awaiting approval from local authorities.
It was reported that Cineworld (LON:CINE) might end up in a legal fight over unpaid rent. The group has pushed back the release date for its first half results until late September.
The tech sector is leading the way again as the NASDAQ 100 is up 0.9% and the S&P 500 is up over 0.3% - the broad index is not too far away from its all-time high. Lawmakers have yet to reach an agreement in relation to the coronavirus relief package, and traders are not holding their breath’s that anything will be approved soon.
The New York Fed manufacturing report for August was 3.7, which was a drop off from the stellar 17.2 reading that was posted last month. Economists were expecting 15, so it was a big miss in terms of what the market was expecting. Today’s report could be a sign the rebound is cooling, and if that is the case it will probably impact the likelihood of a V-shaped recovery
Barrick Gold (NYSE:GOLD) shares are in demand today after it was announced late on Friday that Berkshire Hathaway (NYSE:BRKa), Warren Buffett’s investment vehicle, has acquired a stake in the miner. Mr Buffett is a legendary investor and his investments tend to be carefully watched. Wells Fargo (NYSE:WFC) shares are a touch lower as Mr Buffett trimmed his stake in the bank by more than 25%.
Principia Biopharma (NASDAQ:PRNB) shares have jumped on the news that it will be acquired by France’s Sanofi (PA:SASY) for $100 per share, and that values the company at approximately $3.7 billion. The offer from the French drug maker equates to a 10% premium on Principia closing price on Friday.
The dollar index is in the red again as the lack of progress in relation to a stimulus package from the US is still hanging over the currency. Earlier this month the greenback fell to its lowest level in over two years, and seeing as it has now given up all the gains it made in the wake of the well-received jobs report at the start of the month, it might retest the recent lows in the near-term.
EUR/USD has been a big benefactor from the weaker US dollar. It was a very quiet day in terms of eurozone economic news.
AUD/USD is showing decent gains as currency traders are keen to take on more risk. The Australian dollar tends to do well when metals are strong as the country is heavily exposed to minerals. Copper and silver are higher this afternoon.
Bitcoin’s bullish run continues as the cryptocurrency has traded above the $12,000 – its highest level in one year.
Gold is being assisted by the slide in the US dollar. The inverse relationship between the two markets has assisted the metal a lot in the past few months. At the start of last week the commodity underwent a big pullback, but the rebound that started on Wednesday continues. Should the bullish move continue, it might retest $2,000.
WTI and Brent crude are up on reports that state-controlled companies in China will increase their oil imports from the US for August and September. It is understood the orders were placed ahead of the planned US-China trade talks – which didn’t materialise. China has failed to live up to their commitments with regards energy imports from the US, and the order is believed to have helped narrow the gap. Commodities across the board are doing well, so it appears that risk-on sentiment is doing the rounds.
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Written By: CMC Markets
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