Stock markets are set to finish the day in the red as lockdown worries have replaced the recent optimism generated on the back of the vaccine hopes.
Europe
Concerns about the health crisis and the lockdowns are the main theme of the session. Traders haven’t forgotten about the hopeful news from Moderna and Pfizer-BioNTech with respect to vaccines but concerns about the damage being done to the economy is in focus today. In London, it is the usual suspects that are feeling the most pain because of the health concerns, as airlines, transport and hospitality stocks are under pressure. Oil, mining and banking stocks are suffering too. Broadly speaking, the supermarket sector is upon the session.
The parcel business at Royal Mail (LON:RMG) Group continues to deliver the goods as the first half update showed that the division registered a 33.2% rise in revenue. The pandemic prompted a surge in online shopping so that really helped the parcel delivery unit. For the third quarter, the subsidiary is expected to see robust demand. Letter delivery, stripping out elections, declined by 28%. In the first half, total revenue increased by almost 10%, but profit before tax dropped by 90% - Covid-19 costs ate into the bottom line. Royal Mail expects that total full year revenue will rise by between £380 million and £580 million on the year. In addition to that, the firm is hoping to reinstate its dividend next year. The optimistic outlook pushed up the stock to its highest mark in almost two years.
It was reported that the short interest in Metro Bank (LON:MTRO) shares increased by 47.1% between mid-October and the end of the month. In early, November the stock fell to a fresh all time low but in the past two weeks it surged by over 40% - it’s possible the rebound in the stock was fuelled by a short squeeze.
Cineworld shares are in the red on the back of a report the cinema group is considering entering into a company voluntary arrangement (CVA). Those types of agreements are usually entered into as a way of trying to avoid going out of business. There is speculation that Cineworld’s UK cinemas will remain permanently closed. CVAs usually require a large amount of restructuring, so if the group dodge bankruptcy, it would probably require a huge overhaul of the operation.
US
Worries about tighter restrictions have dented sentiment a little as the S&P 500 is down over 0.2%. The Philly Fed business index reading for November was 26.3, and that was higher than the 22 that economists were anticipating. The October update was 32.3 – the best in eight months. The initial jobless claims reading rose from 711,000 to 742,000, but the counting claims metric slipped to 6.37 million from 6.8 million. It is worth remembering that the initial jobless claims update is more up to date than the continuing claims reading. Judging by the reports, it would suggest the US economic recovery is fading.
Nvidia, like other chipmakers, has experienced a jump in demand as video gaming, artificial intelligence, and electronic items, require them for processing power. The third-quarter numbers were posted last night, and they were impressive. Revenue jumped by 57% to $47.73 billion – a record level. EPS was $2.91, and that easily topped the $2.57 consensus estimate. Compute and Networking is the largest division and it registered a 146% surge in sales. Gaming and graphics revenue rose by 37% and 25% respectively.
Macy’s, the department store, suffered greatly because of the lockdown. In the third quarter, same store sales fell by 20.2% but keep in mind that analysts were anticipating a fall of 23.3%. Digital sales rose by 27%, but that wasn’t enough to offset the fall in store sales. Total revenue fell by 22% to $3.99 billion. The loss per share was 19 cents, which was better than expected as the consensus estimate was for a loss per share of 79 cents.
:Tesla Motor Inc shares set a new record high – post stock split – as the electric vehicle market continues to motors along.
FX
The US Dollar Index is up after falling for five consecutive sessions. In recent months the greenback has attracted safe haven flows, and that is in play today. Uncertainty is running through the markets as health woes are back in the mix, and dealers are seeking out assets that are perceived to be lower risk. GBP/USD and EUR/USD have been pushed into the red because of the upward move in the dollar.
AUD/USD is lower as the overall risk off move has hurt the currency pair. The Australian dollar is considered to be a risk-on currency, while lately the dollar has been a common risk-off trade. Metal prices are under pressure and that is adding to the Aussie dollar’s negative move. The unemployment rate in Australia ticked up from 6.9% to 7%.
Commodities
Gold has been hit by the rise in the US. The metal is traded in US dollars so when the dollar becomes more expensive, so does the asset. Gold has been moving lower this week and if the bearish move continues it could retest the late September lows - in the $1,848 region.
WTI and Brent crude are down on the session due to the overall bearish mood in the markets. Dealers are worried the lockdowns will chip away at the demand for the energy, and that is why the commodity is offside. Today’s negative move needs to be put in the wider context as oil hit a one week high yesterday on the latest vaccine hopes.
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