Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Health Woes Rock Sentiment, Dollar Pops, Gold Drops

By CMC Markets (David Madden)Stock MarketsSep 22, 2020 06:16
uk.investing.com/analysis/health-woes-rock-sentiment-dollar-pops-gold-drops-200447070
Health Woes Rock Sentiment, Dollar Pops, Gold Drops
By CMC Markets (David Madden)   |  Sep 22, 2020 06:16
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The fear of a London lockdown has clobbered the British stock market.

Europe

The prospect of economic activity being curtailed across the board because of a potential reintroduction of tougher restrictions has hurt all sectors, but the hospitality industry has suffered the most today. Restaurants and pubs have had a brutal 2020 thanks to the pandemic and things only started to pick up for them in the past two months. The government scheme ‘Eat Out to Help Out’ gave the sector a lift, and that was evident in last week’s UK retail sales numbers. Today the speculation about a lockdown in London has hammered Marstons, Mitchells & Butlers (LON:MAB), JD Wetherspoon (LON:JDW) and Restaurant Group (LON:RTN).

The travel sector has also been rocked by the health emergency. The recent self-quarantine rules chipped away at sentiment and now the chatter of a lockdown in London has hit the industry again. International Consolidated Airlines Group (LON:ICAG) owns British Airways and Iberia, and the stock traded below 100p today – its lowest level in eight years.

Worries about the health crisis has spread bearish sentiment in all directions, which has rippled out into mining, energy, retail and house building stocks. The risk-off sentiment has impacted commodities such as silver, copper and oil, hence the fall in Glencore (LON:GLEN), BHP Group, BP (LON:BP) and Royal Dutch Shell (LON:RDSa).

The chatter of a London lockdown has pushed up Morrisons and Tesco (LON:TSCO). Supermarkets saw a surge in demand for groceries when the lockdown was introduced in March, so now it seems that dealers feel there will be an increase in shopping activity again.

Rolls-Royce (LON:RR) is connected to the commercial aviation sector as it is manufacturers’ aircraft engines. The engineering giant was having problems before the pandemic set-in as it had issues with its Trent-1000 engine, so the chaos that engulfed the air travel sector made matters worse. It was reported that Rolls-Royce is in talks to raise £2.5 billion in funding. It is understood the group has been in discussions with sovereign wealth funds. Traders are turning their back on the stock as the need for a fresh capital injection is a sign of weakness.

According to a report, a number of major European banks notified the US Treasury department that they facilitated suspicious transactions in the past couple of decades. The financial institutions are right to inform the authorities, but it calls into question their practices. Regulation in relation to money laundering has become tighter in recent years, but perhaps it is not strict enough. There are concerns that some banks continued to facilitate suspicious transactions. Deutsche Bank (DE:DBKGn), HSBC (NYSE:HSBC), Standard Chartered (LON:STAN) and Societe Generale (PA:SOGN) were listed in leaked files.

US

The mood on Wall Street is bearish as traders are worried about the health crisis. The fear factor with regards to the pandemic has soured sentiment, which is why dealers are dumping equities.

Nikola (NASDAQ:NKLA) shares have had a rough ride recently as there have been allegations of fraud – which the truck manufacturer has denied. Stocks typically come under pressure whenever the validity of their accounts are being called into question. Trevor Milton, the firm’s founder resigned as executive chairman, and that sparked a fresh round of selling. The stock is down 21%.

JPMorgan (NYSE:JPM), BNY Mellon, Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are down on the back of the story about major banks facilitating suspicious transactions.

The travel sector is one of the largest fallers because of the renewed health concerns. Airlines such as American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Air (NYSE:LUV) and United Continental are all down more than 7%. Royal Caribbean Cruises (NYSE:RCL), Carnival Corp (LON:CCL) and Norwegian Cruise Line (NYSE:NCLH) holdings are incurring losses as a body representing the industry has put forward tougher health regulations in a bid to get back to business.

FX

The US dollar index has hit its highest level since mid-August. Lately, the greenback has been a popular safe haven play and that is what we are seeing today. At the start of the month, the dollar fell to its lowest level in over two years, so this recent positive move started from a low base. In the past six weeks, the dollar has made a number of attempts to snap out of the wider bearish trend. If the US dollar index breaks above 94, it could point to further gains.

EUR/USD and GBP/USD are nursing large losses due to the rebound in the dollar. In the last few weeks the pound has come under pressure because of the uncertainty surrounding the UK-EU trade talks. Traders are fearful the two sides could wind up trading on basic WTO terms come January.

The CMC AUD index and the CMC CAD index are showing large losses as natural resources are feeling the pain. The ‘commodity currencies’ are suffering as dealers are in risk-off mode.

Commodities

The rally in the US dollar has pushed gold into the red. The strong inverse relationship between the metal and the greenback is working against the commodity today. Gold has traded below $1,900 – its lowest level since mid-August. Further losses from here might encounter support at $1,863. Silver is in a similar situation to gold as it is down more than 9%.

WTI and Brent crude have been knocked by oversupply concerns as well as demand worries. It is understood that production at Libya’s Sharara field has recommenced, but the picture is less clear when it comes to what level of production is on the horizon. The energy market is also being hit by the rising number of Covid-19 cases as traders are fearful that demand will be hit.

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.

Original Post

Health Woes Rock Sentiment, Dollar Pops, Gold Drops
 

Related Articles

Edison Group
RTW Venture Fund Limited: Initiation Of Coverage By Edison Group - Jan 12, 2022

RTW Venture Fund (LON:RTW) (RTWVF) is managed by healthcare specialist RTW Investments (RTW), which was founded in 2009 by Dr Roderick Wong. It has an innovative approach, focusing...

Health Woes Rock Sentiment, Dollar Pops, Gold Drops

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The inherent concept of such investments means that they are not suitable for the investor seeking income from such investments, and are only suitable for those who have the required experience and understand the market risks. You should carefully consider your investment objectives, level of experience, and seek advice from an independent financial advisor if you have any doubts.
Continue with Google
or
Sign up with Email