Europe
The same old health fears are doing the rounds, and that is driving the bearish sentiment. Italy pledged €25 billion to tackle the health crisis but the FTSEMIB is lower on the session.
Rishi Sunak, the Chancellor of the Exchequer, delivered a very bullish Budget. Mr Sunak revealed plans to tackle the health emergency, assist the high street, as well as improve infrastructure. The government will invest £600 billion over the next five years. Business rates will be abolished for this year, and that should help out retailers as well as firms operating in the services and leisure sectors. There are big spending plans for the rail as well as the road networks, and that has helped the likes of Kier Group (LON:KIE) and Galliford. The pub trade was given a helping hand too as duty on beer, cider and wine will be frozen, but the wider negative move has hit JD Wetherspoon, Mitchells & Butlers (LON:MAB) plus Marstons.
The Bank of England followed in the footsteps of the Fed and delivered a surprise interest rate cut of 0.5% to 0.25% - a joint record-low. In addition to slashing rates the UK central bank revealed plans for a new term funding scheme, and the aim will be to assist SME’s. Helping small companies gain access to financing should help support the economy as there are fears the coronavirus crisis could seriously damage economic activity, so the assistance could prove to be a shrewd move.
The rate cut from the BoE initially helped housebuilders such as Persimmon (LON:PSN), Redrow (LON:RDW), Taylor Wimpey (LON:TW) and Berkeley Group, but the gains were short lived as The Budget revealed a new stamp duty surcharge on overseas buyers on a bid to boost domestic house ownership.
Costain Group shares tumbled today after the company swung to a pre-tax loss of £6.6 million, which was a big difference from the £40.2 million profit registered last year. The firm said it plans to raise up to £100 million in the coming weeks. The group has extended its existing banking facilities too. Costain’s final dividend was trimmed as a way of conserving cash too. The group has already undergone a lot of ‘transition’ but it seems there is further reshaping to come – that’s why they are beefing up their cash position.
Balfour Beatty (LON:BALF) posted robust full-year numbers as underlying pre-tax profit increased by 10.5% to £200 million, while underlying revenue increased by 7.7%. The value of the order book ticked up by 13.5% to £14.3 billion. The group is five years into a tough, but very successful restructuring programme and the benefits of the scheme are obvious as the full-year dividend was upped by 33%, and the net cash position jumped by over 50%.
Lookers shares slumped after the group said it will delay releasing its full-year results because it has ‘identified potentially fraudulent transitions’. The figures will be posted in the second-half of April. The firm is appointing an external adviser to conduct the investigation. Even though nothing has been confirmed, the very mention of the word ‘fraudulent’ was enough to prompt a wave of selling. Until the matter has been cleared up sentiment, is likely to remain sour.
Lufthansa will cancel 23,000 flights between late March and late April on account of the coronavirus. The news echoes similar updates from Norwegian Air Shuttle as well as American Airlines (NASDAQ:AAL) who revealed cuts yesterday.
Prudential (LON:PRU) confirmed it has begun plans to carry out a minority IPO of its US business, Jackson. Third Point, an activist investor has been calling for a break up of the London-listed group for a few weeks, so no doubt they will take credit for the decision.
US
The major indices are nursing major losses as traders are fearful of the health crisis. US Treasury Secretary, Steve Mnuchin, is hoping to provide $200 billion in liquidity by delaying tax payments. Government intervention is seen as a sign of weakness by traders as they feel if the administration needs to take such action, the situation must be dire. Mr Mnuchin hopes to have progress made on first stage of the stimulus package in 48 hours.
US CPI cooled to 2.3% from 2.5%, and the core CPI level ticked up to 2.4%. The core report is deemed to be a more accurate gauge of demand so the update was encouraging. It is worth noting the coronavirus crisis didn’t take hold in the US until late February, so the March reading will be closely watched.
Boeing (NYSE:BA) shares are in the red as the Air Canada cut its order for 737 Max planes by 18%. The move by the Canadian company equates to 11 aircrafts, which brings Boeing’s net order losses in February to 28 planes. In light of the turbulence in the worldwide aviation industry, we could see other airlines cancel or cut their orders too.
Apple (NASDAQ:AAPL) shares have been hit by Bank of America (NYSE:BAC) who have cut their price target on the stock to $320 from $350. The Wall Street firm predicts the group will suffer from supply chain issues that might last until May.
FX
GBP/USD initially sold-off in the wake of the BoE rate cut, but it recovered all the loss within the 2 hours. The pound pushed higher versus the US dollar in the wake of the bullish Budget. Mr Sunak was very generous in terms of relief schemes to combat the coronavirus crisis, in addition to spending plans. Traders took the view UK government will be able to cushion the British economy to a certain extent from the health emergency, but the dollar pushed higher and in turn, pulled the pound into the red.
EUR/USD is lower on the session on the back of the move higher in the US dollar. There were no major economic announcements from the eurozone today so the move has been dollar-driven. The euro is likely to see volatility tomorrow as the ECB will hold their meeting.
USD/CAD is up on the session as the weakness in the oil market is weighing on the Canadian dollar. The currency pair was jolted higher on Monday on the back of the Saudi Arabia-Russia oil price war, and a break above 1.3790 might pave the way for 1.4000 to be tested.
Commodities
Gold is flat as dealers are diverting their cash away from stocks and into assets that are deemed to be lower risk such as gold. The move lower in global stocks has prompted higher demand for the metal, but the firmer US dollar chipped away at gold’s earlier gains.
WTI as well as Brent crude are down in excess of 2.5% as fears of weakened demand and higher supply levels are circulating. The health fears are chipping away at demand perceptions, while the Saudi’s are keen to raise supply. The EIA report showed that US inventory jumped by 7.66 million barrels, topping the 2.4 million barrels forecast. Keep in mind that gasoline inventories fell by more than 5 million barrels.
"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. "