The FTSE 100 is underperforming against its eurozone equivalents as traders await the outcome of the EU rescue fund discussions.
Europe
There is a feeling of cautious optimism surrounding the meeting as progress has been made and a further compromise could seal the deal. The traditional north-south divisions are playing out. Some Northern members would like to have a more balanced portfolio of grants and loans, while southern nations would prefer a higher percentage of grants. It is understood the Dutch are pushing for €390 billion in grants and the remaining €360 billion to be issued as loans. On the other side of the divide, the French want to issue at least €400 billion in grants. The EU is known for bickering, but it is also known for brokering deals.
Positive sentiment is still circulating around the University of Oxford-AstraZeneca story, as the potential vaccine for Covid-19 has shown positive results so far. It was published in the Lancet medical journey that there was a strong immune response in the early stage human trial. In keeping with the pharma sector, BioNTech and Pfizer are also working on a potential coronavirus vaccine too, and today it was confirmed it received positive results from the German phase one and phase two studies - this complements the results from the US trial.
Future shares hit their highest level since early June after the company said that it expects full year adjusted EBITDA will be at the upper end of market expectations. The consensus estimate for the earnings is to be between £86.3 million and £91 million. Last year’s reading was £54.5 million. In the current environment, not many companies are issuing such upbeat updates. The group confirmed the integration of TI Media is going well, and it said it has consulted it employees about reducing the size of the headcount.
It has been a broadly positive day for home builders thanks to a report from Rigthmove that claimed that house prices in England, Scotland and Wales are up 2.4% since March – the month the lockdown was introduced. The update points to high demand being released now that the industry has gone back to normal. Bellway (LON:Bellway) is leading the gains for the house builders.
British American Tobacco (LON:BATS) shares fell to their lowest level in over three months on the back of the downgrade from Jefferies. The bank changed its rating on the stock to hold from buy, and the price target was slashed from 4,800p to 3,000p.
Barclays (LON:BARC) downgraded their rating on Standard Life Aberdeen (LON:SLA) to underweight from equalweight. At the same time, the finance house lifted its price target 240p from 195p.
The decline in the oil market has put pressure on Royal Dutch Shell (LON:RDSa) and BP (LON:BP).
As a part of its wider restructuring plan, Marks and Spencer (LON:MKS) will cut 950 jobs. Store management and office roles will be cut. The group revealed plans to reorganise itself over one year ago and it wants to focus more on the online side of the business. The pandemic most likely hammered home the importance of having a robust e-commerce unit.
According to one newspaper article, Ted Baker (LON:TED) is tipped to reduce its UK headcount by 500, and keep in mind the workforce stands at 2,000.
US
Normal service has resumed in New York as the NASDAQ 100 is outperforming the S&P 500. In the past week or so, the teach-heavy index underperformed as it seemed that well-known names like Amazon and Netflix lost some of their appeal, but big-tech is back in demand. The US market is being helped by positive pharma stories and the hopes of the EU striking a deal on the rescue package is a factor too.
Nikola (NASDAQ:NKLA) announced plans for a share offering. The warrants will be connected up to 23.9 million shares. The manufacturer of electric and hydrogen-powered trucks has enjoyed a very bullish run since April, and it clearly wants to tap into that positive sentiment by raising funds.
Moderna (NASDAQ:MRNA) are working on a potential Covid-19 vaccine and so far the results have been positive, but that didn’t stop JPMorgan (NYSE:JPM) from downgrading it from overweight to neutral. The pharma stock is currently trading at $86, but the Wall Street firm lifted its price target to $89 from $60.
FX
The broad dip in the US dollar has helped EUR/USD and GBP/USD. The euro is still up on the session but some of the gains have been handed back. The single currency was boosted earlier on the back of hopes the EU would strike a compromise in relation to the rescue package, but it seems that some dealers have squared up their positions ahead of the announcement. It has been a very quiet day in terms of economic news from Europe. The pound had a few lacklustre sessions last week but it has made decent gains versus the dollar.
Commodities
Brent crude and WTI are in the red this afternoon as traders are concerned the health crisis will curtail demand for the energy. Even though there are positive stories in relation to possible vaccines doing the rounds, the health emergency is still on some traders’ minds. Last month, Japan’s oil imports fell by nearly 15% on an annual basis, so traders are worried that is likely to be replicated around the globe. Last week it was confirmed that OPEC+ will row back on their very steep cuts that were introduced in May. The prospect of higher supply and possibly lower demand is hurting oil.
Gold is higher today and the dip in the US dollar has played a role in the upward move. The metal has been popular lately, for several reasons. The slide in the greenback has been a factor. Some traders have sought out gold for fears there could be a second wave of the health crisis. There are concerns about inflation jumping in the months ahead too on account of all the stimulus packages from central banks.
Disclaimer: CMC Markets is an execution-only service 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.