Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for June 5, 2020.
We have seen a strong European open this morning buoyed by continued resurgence from airline stocks as well as oil majors getting a boost ahead of the greatly anticipated OPEC meeting, which will take place tomorrow. Saudi Arabia and Russia both back extending production cuts as the market recovers from a supply glut on top of the slashing of demand as a result of global lockdown measures. There have been concerns with the level of compliance by some countries with regard to the production limits, and any extension to cuts could be in name only if they continue to be flouted. US crude is up 1% this morning at just under $38 a barrel. UK listed oil heavyweights BP and Royal Dutch Shell are up over 4% each.
Across the pond, once again mass protests across the US dominated headlines, with President Trump taking further criticism for his response to the unrest, including from members of his own party. On Thursday Trump threatened to attempt to unseat Republican senator Lisa Murkowski, after she threw her support behind criticism levelled at the President by former defence secretary Jim Mattis. Significantly for investors, this round of criticism seems to be taking a genuine toll on Trump’s reelection hopes in November, although a Biden White House is unlikely to lead to the wholesale change for corporate America that Sanders or Warren would have meant. Polls from Fox News, typically a Trump ally, show Biden now leading in key states, including Arizona, Ohio and Wisconsin. The last Democratic presidential candidate to win Arizona was in 1996. Biden is also within the margin of error in Texas, which hasn’t gone Democrat in a presidential election since 1976.
Slack earnings fail to match up to expectations, airline stocks soar
One of the more interesting pieces of corporate news on Thursday was Slack’s earnings figures, which disappointed versus sky high expectations, sending its share price down more than 15% in late trading – after a 4.9% fall during regular market hours. The fall came despite Slack announcing a partnership with Amazon to roll out its service to all employees of the e-commerce giant, and a 50% year-over-year revenue increase. The 50% figure was in line with the annualized growth number Slack posted last quarter; and didn’t match up to the blockbuster figures delivered by video-calling platform Zoom – another firm viewed as a beneficiary of mass working from home – earlier in the week. Of the three major US stock indices, the Dow Jones Industrial Average was the only one to eke out a gain, while eight of the S&P 500’s 11 sectors were in the red. Financials stocks were a bright spot, climbing 2% overall, while utilities names fell hardest. Airline stocks were by far the biggest winners of the day, with American Airlines jumping 41.1%, United Airlines 16.2% and Delta Air Lines 13.7%. The trio, along with others, were buoyed by American Airlines announcing it is increasing capacity again, which investors took as a signal that the worst is over for airlines.
- S&P 500: -0.3% Thursday, -3.7% YTD
- Dow Jones Industrial Average: +0.1% Thursday, -7.9% YTD
- Nasdaq Composite: -0.7% Thursday, +7.2% YTD
Airlines standout performers in negative day for UK stocks overall
While stocks fell overall on Thursday, with the FTSE 100 down 0.6% and the FTSE 250 0.4% lower, airline stocks enjoyed a positive day – although nowhere close to the daily gains posted by US airlines. International Consolidated Airlines Group (IAG) was 3.2% up, and easyJet climbed 6.2%. Despite IAG getting into a row with the government over plans to quarantine travellers for 14 days when they enter the UK, investors were given confidence by Virgin Atlantic announcing it plans to resume passenger flights from the UK in July. This week, easyJet also said it plans to restart flights in July, between the UK and Europe. The bottom of the FTSE 100 was peppered with asset managers and utilities stocks, with Intermediate Capital Group down 7.6%, Pennon Group down 5% and Schroders down 3.3%. Bringing up the back of the FTSE 250 were property developer Hammerson, media company Future and travel firm Trainline, which fell 13.7%, 5.1% and 5.1% respectively.
- FTSE 100: -0.6% Thursday, -15.9% YTD
- FTSE 250: -0.4% Thursday, -18.5% YTD