Stock Markets Rose this Morning
Markets.com | Mar 25, 2020 09:09
Stock markets rose this morning. To be a little more descriptive, it’s a sea of green on the boards with investors lapping up the $2tn stimulus package finally agreed by the United States Congress last night. Ahead of this the Dow Jones surged over 11%, notching its best day since 1933. The DAX in Germany also climbed 11% higher to breach the 9200 resistance. The FTSE 100 climbed 9%. Japan’s Nikkei rose 8%.
This morning shows more progress for equity markets although gains are more modest as it looks like the market found bid chiefly on expectations of the deal – buy the rumour, buy the fact more carefully at this point. The FTSE 100 rallied again through last Friday’s peak at 5428. The next step forward is to the previous Friday’s peaks at 5700. You can note the positive MACD turn on the daily chart through the signal line in relatively oversold territory plus emerging three white soldiers after a period of intense volatility and indecision evinced by the long wicks on a series of dojis.
The DAX is also showing positive momentum and we note a tentative formation of a three white soldiers candle pattern, a traditionally bullish formation that often marks the end of a downtrend. Again the MACD looks promising.
As I’ve noted for the last few days, there have been growing signs of stabilisation. The kind of bear market bounce yesterday was rather against the narrative, but nonetheless pulls us further off the lows. You get these kind of mega-rallies when the market is heading lower. Therefore, as I keep saying, I’d prefer to see smaller daily swings to believe that stabilisation, or even a market bottom, has been established. The stimulus is now by and large in place, the question is whether it’s enough for the markets or whether the expected spike in cases and deaths in the US and Europe, combined with the emerging picture of the economic damage, means we need to take another leg lower before the bottom is found.
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US futures markets are somewhat more cautious looking this morning and again we look to Friday’s highs during normal trading hours at 2453 as the pivot.
Crude oil has stabilised around $24.75 for WTI, with momentum rather falling flat for bulls seeking to make new highs north of $28 to break the bears’ hold. Gold is paring gains after three straight days of progress, finding support at $1606 and the 61.8% retracement of the decline through the middle of the month.
Equities
More bad news on RNS this morning. Halfords is modelling for sales to fall by a quarter and is cutting orders with suppliers drastically. Dividend suspended. We’re also seeing dividends suspended at housebuilders Persimmon (LON:PSN) and Bellway (LON:BWY).
Likewise DFS, where management has cancelled the interim dividend to save £8m. DFS has closed all showrooms, manufacturing and distribution operations in the UK, Ireland and Spain. Ignore this hopefully short-term furlough, the broader economic impacts of Covid-19 – specifically a likely recession, expected high unemployment and generally consumers pulling larger purchases will create a tough environment for DFS.
Rentokil Initial (LON:RTO) had thought the impact would be limited and largely confined to China – much like many of us. But today management say they expected a much more significant impact on operations in Q2 and beyond. Guidance pulled.
Utility companies are defensive for a reason – United Utilities today said full year results are in line with profits ahead of last year. Revenues are fixed for five years, so it can recover any losses in subsequent years.
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