Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for April 16, 2020.
Markets have opened firmer this morning, led by travel stocks, after their dismal showing yesterday. This has been driven by some optimism from two of Europe’s largest budget airlines. easyJet is up over 6% after reassuring investors it has the reserves to last out the grounding of flights. Ryanair is up over 3% after saying it was well placed to cope with the possible price war when movement restrictions are lifted and competition heats up as people look to get away post-lockdown.
In the UK, the British Retail Council announced that retail spending had fallen by a quarter in the first two weeks of lockdown in Britain. Compared to the five weeks to April 4 2019, sales were down 4.3%, the biggest monthly fall since 1995.
Across the pond it was a similar story as US retail sales also suffered a record breaking drop, sinking 8.7% in March — the largest fall since the data series started in 1992. With most Americans impacted by orders to stay at home, the drop in sales caused by the restrictions was well beyond the uptick in online orders. The downbeat data did not end here as manufacturing output charted its biggest decline since 1946, slumping 6.3% in March — around double economists’ prediction. Manufacturing represents 11% of the US economy, and has been decimated by disruptions to supply chains globally and a reduction in demand for everything from motor vehicle parts to oil drilling machinery.
Fashion brands tumble amid rumblings of JCPenney bankruptcy
Investors met results posted by Bank of America (BofA) and Goldman Sachs with two very different responses on Wednesday. While both firms posted year-over-year profit declines of around 45% in Q1, and set aside billions in provisions for loan losses, the more investment banking dependent Goldman enjoyed a 28% jump in trading revenue. BofA’s share price fell 6.5% on Wednesday, while Goldman Sachs stock was flat.
In other corporate news, Apple introduced the new iPhone SE, priced at $399 — which will be available for preorder on Friday. Apple’s share price fell 0.9% following the news. All three major US stock indices fell on the day, with the S&P 500 down furthest at a 2.2% loss. Clothing brands and retailers were among the worst performers. PVH, the firm behind brands including Tommy Hilfiger and Calvin Klein and L Brands both fell double digits, while Nordstrom and Ralph Lauren both sank by more than 9%. The poor showing from the sector came amid rumblings that retailer JCPenney may be about to go bankrupt, after missing a $12m debt payment on Wednesday. The company’s stock sank 27.3% on the news, having already lost three quarters of its value in 2020.
- S&P 500: -2.2% Wednesday, -13.9% YTD
- Dow Jones Industrial Average: -1.9% Wednesday, -17.6% YTD
- Nasdaq Composite: -1.4% Wednesday, -6.5% YTD
OBR forecasts UK economy will shrink by a third in Q2
London-listed shares slumped on Wednesday after the Office for Budget Responsibility (OBR) said late on Tuesday that the British economy could shrink by 35% in Q2 2020, and 13% for the year.
The FTSE 100 fell by 3.3%, with only seven stocks posting a positive day, including Ocado, Sainsbury’s and United Utilities. At the bottom of the index, turnaround specialist Melrose Industries was the only double digit faller, with easyJet, RBS and JD Sports Fashion all sinking by more than 8%.
In the FTSE 250, which was down 4.6%, pub chain JD Wetherspoon was one of the biggest losers with a 14% loss, after analysts warned that the firm may be forced to turn to its investors for funding in order to survive the coronavirus pandemic. Cineworld was the worst performer in the FTSE 250, however, falling 21.2% as cinema chains face an uncertain financial future with US chain AMC Entertainment reportedly in the early stages of considering bankruptcy.
- FTSE 100: -3.3% Wednesday, -25.8% YTD
- FTSE 250: -4.6% Wednesday, -30% YTD