Vaccine hopes, stimulus rumours Brexit risks, earnings optimism– choose your narrative and apply it accordingly. The truth is the major indices are not really going anywhere right now. Treasury yields have barely budged with 10s holding 0.77 per cent, gold is holding a little above $1,900 and the dollar index sits in the middle of the 93.30-93.90 range. WTI (Dec) trades above $41 ahead of today’s OPEC JMMC meeting which will discuss compliance with cuts. A full meeting at the end of Nov could see OPEC+ put on hold plans to scale back production cuts to 5.8m b/d from the current 7.7m.
European shares rose strongly at the open as investors put an unsatisfactory week behind them and indices continue to run over very well-trodden turf. The FTSE 100 pushed above 5950 as the bounce from last week’s test of the 5780 support zone held. Wall Street was mixed, with the Dow up 0.4 per cent and the Nasdaq down the same. The S&P 500 split the difference to be flat on the day, arresting three days of losses and finish back where it was the previous weekend. Futures indicate a higher open for US markets.
UK Company Announcements
| Boohoo (BOO) | Boohoo shares plunged after the fast fashion retailer admitted that PwC was not taking part in its tender for its audit, following media reports that the Big Four firm had quit over reputational concerns linked to working practices in Boohoo's supply chain. |
| Tristel (TSTL) | Revenues climbed by more than a fifth to £31.7m over the 12 months to June, with overseas sales rising by almost a third to £19m – representing 60 per cent of the overall top line. The pandemic drove a £0.5m reduction in medical-device decontamination sales and a £2m rise in hospital surface disinfectant sales. |
| AstraZeneca (AZN) | ‘Trixeo Aerosphere’ has been recommended for marketing authorisation in the EU to work as a maintenance treatment for adults with a type of chronic obstructive pulmonary disease (COPD). Meanwhile, the group’s ‘Forxiga’ therapy has been recommended for an indication extension of its marketing authorisation in the EU, to treat a type of symptomatic chronic heart failure. |
| G4S (GFS) | The group has reiterated its objections to a hostile takeover bid, rejecting the narrative that GardaWorld is swopping in as a saviour. Calling GardaWorld “a very highly leveraged business”, G4S believes that “GardaWorld needs G4S in order to realise its aspirations”. Shareholders have until 7 November to accept the offer and G4S is advising that they take no action. The current share price is sitting above the 190p offer price and US rival Allied Universal has expressed an interest in making a bid. |
| Ceres Power (CWR) | The company has expanded its strategic collaboration with South Korean industrial group Doosan, which has signed a non-exclusive license to manufacture Ceres’ solid oxide fuel cell stacks. Focusing on applications for utility scale power markets, the agreement is worth £36m over three years, with a further £7m contingent on meeting certain key performance indicators. |
Rising case numbers across Europe is raising the risk of a second recessionary wave, but ample central bank support means we are holding the Sep-Oct range. Meanwhile in the US, House Democrat leader Nancy Pelosi said she is ‘optimistic’ about getting a pre-election stimulus deal agreed. Lots of chatter around this dictating some of the price action but not a lot of substance – what we do know is that some kind of stimulus package is on its way. What we don’t know is whether the market is really reflecting this just yet. News on Friday that Pfizer will apply for emergency approval for it Covid-19 vaccine candidate is also underscoring a more positive view for equities this morning.
Rebounding growth in China helped lift sentiment a bit after the initial headline miss, and gave bulls the excuse to drive up European stocks. China GDP up 4.9 per cent, which was a little short of the 5.2 per cent expected but still shows solid recovery. Industrial production was up 6.9 per cent. Meanwhile Japanese exports fell 4.9 per cent year-on-year in September, vs –2.4 per cent expected. But this was much better than the double-digit declines registered in each of the last six months.
Data on Friday showed US retail sales rose sharply in September with spending above the pre-pandemic level, but there are fears the lack of stimulus will start to bite. A University of Chicago survey showed that pandemic relief funds worth $600 a week in additional jobless benefits boosted the savings of unemployed Americans, but the bulk of this had run out by the end of August.
Both the UK and EU are trying to revive faltering Brexit talks by saying the other needs to change approach. Michael Gove said on Sunday the door was ‘ajar’ for discussions should the EU be prepared to compromise. GBPUSD rose at the start of the session to 1.29750 and approached near term resistance around 1.30. We saw last week how headlines and announcements can create significant volatility in sterling crosses but there is no real direction to GBP right now as traders wait for a clearer steer from the trade talks. Right now a skinny deal looks most likely.
Election Watch – 15 days to go
Early voting in the key state of Wisconsin starts Tuesday. Trump has to win this one to stand a chance. Biden’s national lead fell to 8.9pts, whilst in the battlegrounds Trump trails by 4.3pts, which is narrower than it has been for some time. At this stage in 2016 Trump was 5pts behind in the top battlegrounds but still pulled off a surprise election night win. Fears of a contested election result have receded. Our friends at BlondeMoney crunched the numbers to forecast the outcome of the most important battles in the Senate race. (spoiler: it’s called 51/49 for the Democrats, in line with current polling).
Neil Wilson is chief markets analyst at Markets.com
