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

US Stimulus Hopes Assist Stocks, Oil Tanks

By CMC Markets (David Madden)Stock MarketsOct 02, 2020 06:32
uk.investing.com/analysis/us-stimulus-hopes-assist-stocks-oil-tanks-200447663
US Stimulus Hopes Assist Stocks, Oil Tanks
By CMC Markets (David Madden)   |  Oct 02, 2020 06:32
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Stock markets are largely showing gains on the back of the optimism surrounding the US stimulus package.

Europe

The volatility in the pound because of the UK-EU trade talks caused some big swings in the FTSE 100. The sharp fall in oil has hit BP (LON:BP) and Royal Dutch Shell (LON:RDSa) – this is another factor as to why the British market is underperforming against some of its continental counterparts. Even though there have been some ups and downs, the mood in relation to the proposed US coronavirus relief package is positive. Earlier today, Nancy Pelosi, of the Democrats, said she was sceptical of the Republicans willingness to make a deal, but a short while ago her language was more hopeful, and that has lifted investor confidence over here.

H&M posted well-received third quarter numbers. The pre-tax profit was SEK2.37 billion, which easily topped the SEK2 billion that equity analysts were expecting. Like with other retailers, it experienced a jump in e-commerce – online sales increased by 27%. As a way of embracing the changes in shopping habits, the company plans to close approximately 250 of its stores in 2021, and that would equate to 5% of all outlets. In the long-run this should benefit the company as the high streets are becoming less relevant, and they are costly too.

Rolls Royce (LON:RR) shares have dropped to a 17 year low on the back of the announcement that it plans to raise £3 billion to bolster its balance sheet. £2 billion will be raised from a rights issue, and an additional £1 billion will be raised from a bond issue. It has agreed to a £1 billion loan facility too. UK Export Finance has agreed to extend its guarantee of 80% of its existing £2 billion five year loan term. The proposed rights issue will be a 10-for-3 scheme and the rights price will be 32p, and it will need to be approved by shareholders at the AGM on 27 October. The engineering company – which supplies aircraft engines - has been struggling recently because of the huge disruption caused to the aviation sector. It worth noting the company was already having issues with the Trent -1000 engine before the health crisis. Rolls Royce mentioned the need for additional capital a few months ago, but it dragged its heels, and that seems to have weighed on the stock price recently. The group are keen to pursue opportunities in the areas of defence and power.

DCC (LON:DCC) shares are in the red because Goldman Sachs (NYSE:GS) cut its price target to 5,000p from 6,800p.

Smith and Nephew (LON:SN) group issued a trading statement and it expects third quarter underlying revenue to drop by 4%. The group has experienced stable monthly growth recently. The group confirmed that the three units has undergone a significant rebound in activity from the second quarter when underlying group revenue dropped by 29.3%.

US

The major indices are showing modest gains on the back of hopes that policy makers will reach a compromise on the stimulus package. The economic data has helped too. The initial jobless claims report fell from 870,000 to 837,000 – the lowest reading since the pandemic. The continuing claims reading dropped from 12.74 million to 11.76 million, which was better than the 12.22 million that economists were expecting. Keep in mind that the ADP report yesterday was better-than-expected. The solid jobs data helps the economy and lifts market confidence but it might take some of the pressure off the Republicans with respect to making a deal with the Democrats when it comes to the coronavirus stimulus package. Tomorrow’s US non-farm payrolls report will be closely watched from a political point of view.

Bed Bath & Beyond (NASDAQ:BBBY) revealed much better than expected set of first quarter numbers. EPS was 50 cents, while equity analysts were anticipating a loss of 23 cents. Revenue dipped by 1% to $2.69 billion, which was slightly ahead of forecasts. Online revenue surged by 80% and same store sales performed well too as they grew by 6% and keep in mind the consensus estimate was for a decline of 2.1%.

Pepsi Co (PS:PIP) announced respectable third quarter numbers. Revenue increased by 5.3% to $18.09 billion, topping the $17.23 forecast. EPS was $1.66 and that exceeded the $1.49 consensus estimate.

FX

The CMC GBP Index saw a lot of volatility today as the back and forth of the UK-EU negotiations led to the pound having a large trading range. In the morning, sterling lost ground on the back of the news that the EU launched legal proceeding against the UK because of the passing of the internal markets bill. The move by Brussels wasn’t a shock, but nonetheless it hit the pound. In the middle of the session sterling had recouped its earlier losses, but it hit another speed bump when the EU announced that no progress had been made with respect to fisheries.

EUR/USD is up on the day even though the US dollar index is basically flat. Broadly speaking, the manufacturing PMI data from the eurozone countries were well-received. The readings from Spain, Italy, France and Germany were 50.8, 53.2, 51.2 and 56.4 respectively – all showed improvements on the month. It seems that the recovery in the bloc is getting a bit of a second wind, in light of mixed the August numbers.

Commodities

Gold hit its highest level in over one week. In the past two sessions the US dollar has been largely flat and in turn that helped the metal – the inverse relationship between the two assets have been strong lately. The commodity has fallen a lot since hitting a record high in August but while it holds above $1,900 the broader uptrend should continue.

WTI and Brent crude oil are showing large losses because of oversupply worries and demand concerns. It has been a double whammy for oil as OPEC confirmed that output in September was up 160,000 barrels per day when compared with August. The rise in output was largely down to an increase in production from Libya and Iran. To make matters worse for the oil market, health concerns are persistent, so that has chipped away at traders’ perception of demand.

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

US Stimulus Hopes Assist Stocks, Oil Tanks
 

Related Articles

US Stimulus Hopes Assist Stocks, Oil Tanks

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
Continue with Google
or
Sign up with Email