Health woes are back at the forefront of traders’ minds as the new strain of Covid-19 that is doing the rounds in the UK has brought about tougher restrictions.
Europe
It is bad enough that large portions of Britain will have to deal with harsher restrictions because of the fear surrounding the fast spreading strain of the coronavirus, but now many countries are distancing themselves from the UK. Belgium, The Netherlands and Ireland have imposed bans on flights from Britain. France has taken more drastic action as its ban also includes freight that has been handled by humans. There have been reports about shortages of vegetables at shops on account of the disruption brought about by the situation. The isolation treatment the UK is receiving has rocked market confidence all over Europe. Seeing as the new strain of Covid-19 is at the root of this problem, there are fears that other countries might have already been infected too.
This health-related sell-off is one of the worst we have seen in months so not that long ago equity markets in Europe were at multi-month highs. The usual sectors have been hit the hardest – travel, transport and hospitability. It is a broad based sell-off as there are declines seen in supermarkets, banks and housebuilders. Concerns about disruptions to food supply chains are hanging over the sector. Banks are feeling the pain too as there is a view in the markets that they will come under extra pressure in the form of increased bad debts provisions – if the economy suffers, banks will probably suffer indirectly.
Metro Bank (LON:MTRO) shares are up over 20% on the back of the news that it has sold £3 billion a residential mortgage book to NatWest, the news was published after the close of the business on Friday. Metro wants to optimise its balance sheet and the asset disposal will free up cash to pursue more unsecured lending.
Frasers Group (LON:FRAS) shares are in the red on the back of the announcement that it had to scrap its previous full year guidance of a 20-30% improvement in full year EBITDA. The pulling of the forecast was as a result of the newly announced tougher restrictions. Mike Ashely controls Frasers and he is determined to build up a dominant position on the high street, so the current climate will is weighing on sentiment.
Royal Dutch Shell (LON:RDSa) and BP (LON:BP) are some of the biggest fallers on the FTSE 100 in terms of index points. The underlying oil market has been hit hard by the fear surrounding the health crisis but keep in mind the commodity hit a nine month high on Friday, so traders were all too happy to use the health crisis as an excuse to book profit. Royal Dutch issued a trading update ahead of its fourth quarter earnings report which will be posted in February. The energy group expects to post a charge of between $3.5 billion and $4.5 billion, which will relate to impairments and asset restructuring. The integrated gas trading business is expected to post results for the fourth quarter that will be below average. Gross refining margins from oil products are expected to be a slight improvement on the third quarter.
Ocado (LON:OCDO), the online grocery, and Just Eat (LON:JE) Takeaway.com (LON:JETJ) are in demand today as the e-commerce companies have traditionally outperformed whenever lockdowns have been imposed.
RBC lifted its price target for JD Sports (LON:JD) from 825p to 900p.
US
Equities are in the red as worries about the health crisis are weighing on sentiment. Yesterday it was announced that US lawmakers agreed upon a $900 billion relief package – discussions have been going on for weeks. The positive news has been overshadowed by fresh health concerns. At the end of last week, the S&P 500 and the NASDAQ 100 posted record highs so profit taking has been doing the rounds.
Today is the first day that Tesla (NASDAQ:TSLA) shares are included in the S&P 500. The electric vehicle automaker has seen its shares surge over 650% on a year-to-date basis and now that it is included in the well-respected index, tracker funds will have to purchase the stock to replicate the index. The stock is now flat on the session but keep in mind it was down over 3% in the pre-market.
Nike (NYSE:NKE) shares are bucking the wider negative trend as the company posted well-received second quarter numbers. Revenue increased by 9% to $11.2 billion and that easily topped the $10.56 billion that equity analysts were expecting. EPS was 78 cents and that easily topped the 62 cents consensus estimate. Digital sales of the Nike brand surged by 84% as e-commerce has been very popular amid the pandemic. Greater China and North America saw sales growth of 24% and 1% respectively. The fashion house lifted its full year sales guidance too so that added to the bullish update. The stock hit a new record high.
JPMorgan (NYSE:JPM) shares are up on the session after the bank announced plans to carry out $30 billion worth of share buybacks.
FX
The US dollar index is up roughly 0.5% on the session as traders have been seeking out assets that are deemed to be considered lower risk. The greenback was up over 1% earlier – when stocks were at the low of the day. The slight turnaround in stocks coincided with the cooling of the greenback.
The isolation of the UK has put pressure on the pound. There are concerns that there will be massive disruption at UK ports because of the news that France has banned freight from the UK. Such a drastic move is likely to lead to huge supply chain issues across Britain, hence why the CMC GBP Index is down over 1%.
Commodities
Gold is basically flat on the day as the metal continues to be heavily influenced by the US dollar. When the greenback was at the high of the day, the metal was in the red but since it has pulled back, the gold market moved upwards.
West Texas oil and Brent crude are in the red as traders are fearful for the health of the global economy on account of the new strain of Covid-19. Dealers are worried the British economy will take a knock on the back of this, and there is a possibility that other European countries could suffer the isolation treatment too.
Bitcoin saw a lot of volatility and in the early hours of the session it traded above $24,000 – a new record. The cryptocurrency has retreated and it is trading just above $23,200.
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