Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for September 18, 2020.
Despite a slight reprieve from Asian shares overnight, markets have ended the week on a downbeat tone as overall expectations of increased central bank stimulus came up short. European markets are down as much as 0.5% this morning whilst US futures are flat, except the Nasdaq which is showing a small gain of 0.3%
Eight of the S&P 500’s 11 sectors were in the red on Thursday, as investors reacted to Wednesday’s policy statement from the Federal Reserve. After-hours, there were reports that the Fed is also considering an extension to restrictions on dividends and share buybacks imposed on large banks. The central bank took action in June to cap dividends and ban share buybacks, saying that while banks had sufficient capital, it wanted them to preserve capital levels. Now, the Fed has said it will test big bank resilience through two new tests simulating severe recessions, with the results to be released by the end of the year.
On the positive side, there was a marginal improvement in the number of weekly jobless claims, with the figure coming in at 860,000, down by around 30,000 on the previous week. This was the third week in a row where the figure came in under the one million mark, although momentum has stalled.
Elsewhere the price of oil has firmed up as OPEC signals its intent to crackdown on those members not complying with the production cuts. The price has also been helped by Hurricane Sally cutting US production. With the dollar now turning back down after its rally post-Fed plus a new storm brewing in the Gulf of Mexico, oil could be on track to build on the almost 10% gain it has made this week.
Southwest grounds 130 Boeing airliners
The Nasdaq Composite once again fell hardest among the major US stock indices on Thursday, losing 1.3%, with Illumina, Tesla and eBay among the names causing a drag. Illumina fell 7.6%, after an 8.4% loss on Wednesday, with the sell-off driven by rumours it is planning an $8bn acquisition of cancer-detection firm Grail Inc. In the S&P 500, which closed the day off 0.8%, Southwest Airlines was among the five worst hit stocks. The budget airline closed out the day 4% lower after announcing that it has grounded 130 Boeing 737-800 planes over discrepancies in weight data. Southwest said it made the decision “out of an abundance of caution” and it is not the first time weight issues have plagued the airline. The share price hit the firm took due to the grounding was relatively minor, given that it is already operating a reduced flight roster due to the pandemic.
- S&P 500: -0.8% Thursday, +3.9% YTD
- Dow Jones Industrial Average: -0.5% Thursday, -2.2% YTD
- Nasdaq Composite: -1.3% Thursday, +21.6% YTD
Next raises profit forecast for second time in two months
London-listed shares fell on Thursday after the Bank of England made an expected division to hold interest rates at their current level and warned that the fragile economy is at risk from the government’s furlough scheme ending at the end of October. Retailers topped the FTSE 100 despite bleak consumer sentiment, with Next the biggest winner. The high street fashion brand jumped 4.2% after it said that it expects to deliver a profit for the year, as its recovery from the pandemic accelerates. This is the second time in two months that the firm has raised its profit outlook for the year, with its £300m expected figure up significantly from the £195m it predicted back in July. Sainsbury’s and Ocado Group also posted significant gains of 3.3% and 2.7% respectively. Miner Polymetal International, advertising giant WPP and bank NatWest brought up the back of the index, with all three closing the day out around 3% lower.
- FTSE 100: -0.5% Thursday, -19.8% YTD
- FTSE 250: -0.3% Thursday, -18.9% YTD