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Banks, Miners Outperform As FTSE 100 Breaks Out

By CMC Markets (Michael Hewson)Market OverviewMar 18, 2019 15:16
uk.investing.com/analysis/banks-miners-outperform-as-ftse-100-breaks-out-200206767
Banks, Miners Outperform As FTSE 100 Breaks Out
By CMC Markets (Michael Hewson)   |  Mar 18, 2019 15:16
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Europe

It’s been a mixed start to the new week for European stocks with the DAX underperforming.

The FTSE100 on the other hand has seen a strong start to the week posting its best levels this year, helped by a strong performance from the basic resource sector and a weaker pound, pushing above its 200 day MA for the first time since October last year, and up towards the 7,300 level.

The gain in mining stocks has been helped by a Brazilian court ordering mining giant Vale to shut one of its mines, raising concerns about a supply shortage, which has helped push iron ore prices sharply higher, with BHP Billiton (LON:BHPB) and Rio Tinto (LON:RIO) leading the risers.

Sainsbury (LON:SBRY) shares have also pushed higher, on the day senior management met with the Competition and Markets Authority, for the first time since the regulator ruled against the Asda merger. The CMA’s rather dubious view was that the merger would lead to higher prices. Sainsbury management have pushed back on that as well as arguing that Marks and Spencer (LON:MKS) misled the regulator about its upcoming deal with Ocado (LON:OCDO), when it said it had no plans to evolve its on line delivery operations, only weeks before the announcement of the deal was made.

Having acquired US based Finish Line a year ago for $558m JD Sports is on the acquisition trail again, this morning announcing it was acquiring the rest of the FootAsylum PLC shares it doesn’t already own for 82.5p a share, a 77.4% premium on the closing price from last week, at total cost of £74m, valuing FootAsylum at £90m. While other retailers are finding life difficult and peers like Sports Direct (LON:SPD) have seen their shares nosedive JD Sports has managed to maintain its presence and brand with a string of shrewd acquisitions which has seen its shares rise over 350% since 2015.

The banking sector has had a decent day with Lloyds (LON:LLOY) and RBS (LON:RBS) shares hitting ten month highs, while in Europe both Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG) shares have rallied strongly on weekend reports that senior management are discussing a merger plan, that could see thousands of jobs slashed.

For all the enthusiasm about such a merger, it remains far from clear how the two banks would be able to raise the necessary capital to make a tie up work. Furthermore it is difficult to see where the value is given that neither bank is particularly profitable. While investors may well be buying into the early narrative of some form of deal today, the old saying that you can’t make a silk purse out of a sows ear has never been more true.

US

US markets had a mixed open today with Boeing (NYSE:BA) dragging on the Dow, while the S&P500 and Nasdaq pushed to new multi month highs.

In other M&A news US based financial services technology company FIS has agreed to buy payment solutions specialist WorldPay in a $43bn deal, which would create a payments company with $12.3bn of revenues, with the company retaining the FIS name, and be based in Jacksonville Florida.

Boeing shares slid back on the open in the wake of weekend reports that the US Department of Transport is set to begin an investigation into the company’s approval processes and its relationship with the FAA over the certification process. Talk of a grand jury subpoena has also prompted some caution over the long term prospects of the stock particularly the likelihood of litigation if flaws in safety processes are found.

Apple shares (NASDAQ:AAPL) have risen on the open after announcing the launch of a new iPad Air and a new iPad Mini earlier today, with support for pencil and uprated chip which is expected to boost performance by up to 70%. Analyst are now looking towards next week’s media event where it is expected the company will unveil a new video streaming subscription service.

In another boost to the IPO market, ride sharing app LYFT (NASDAQ:LYFT) announced that it would be listing 30.77m shares between $62-$68 a share, raising an expected total of $1.9bn. The big question given that the shares being listed have no voting rights, is whether there is a compelling case for investing in a company that is seeing decent revenue growth, but is also seeing losses rise as well. If the performance of Snap is any guide, which has a similar share voting structure the answer is probably no.

FX

The pound has been the worst performer today giving back some of last week’s gains as the clock ticks down to another possible vote on Prime Minister May’s withdrawal agreement and this week’s EU Council meeting, with it looking increasingly unlikely that she will be able to muster the votes to get the deal through at a third attempt, even if she is allowed to.

This would suggest that she will have to go to Brussels on Thursday with still no backing for her deal and reliant on the mood of 27 EU leaders as to whether to grant an extension on either a short or long term basis. Faced with the loss of a potential £39bn will they grant an extension or risk the prospect that we could see a “no deal” happen in just over a weeks’ time?

The US dollar has also underperformed ahead of the start of tomorrows FOMC meeting, where officials are expected to be much more cautious on the economic outlook than they were at the January meeting, as they await more evidence as to the damage the US government shutdown may have done to the US economy.

Commodities

Iron ore prices have jumped after Vale was ordered to close one if its mines by a Brazilian court, raising concerns of a supply shortage.

Crude oil prices have also pushed higher after OPEC cancelled its April meeting, leaving the current status quo of output cuts in place until June.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original post

Banks, Miners Outperform As FTSE 100 Breaks Out
 

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Banks, Miners Outperform As FTSE 100 Breaks Out

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jaffar ammar
jaffar ammar Mar 19, 2019 4:36
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Oil price will come again to 55$ becuse of trump advises.
 
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