Investors once again proved more bullish than the wider picture around the coronavirus crisis, with a mini rally yesterday. That’s despite the world coronavirus death toll now standing above one million.
Analysts observed that the trend was for “buy everything” with equities – notably banks and airlines – commodities and currencies, bar the dollar, all seeing a significant upturn.
Oanda senior market analyst Jeffrey Halley said: “Equities rose strongly in Europe and the United States, the US Dollar fell, and precious metals and energy rallied.
“Looks may flatter to deceive though, with the rallies in precious metals and oil likely propelled by the knock-on effects of the rise in equities, rather than a sudden structural change in their outlooks, especially oil.”
Today, the trend is set to continue, with the FTSE 100 expected to open up 16 points to 5929, according to Bloomberg data.
CMC Markets analyst David Madden said: “The health crisis might have not put off traders from buying into stocks, but the situation is still concerning.
“Relationships between China and the US government endured another setback after the Trump administration imposed tougher trade restrictions on the Chinese company SMIC – this is a continuation of the US government playing the national security card.”
Sterling will be in focus after it jumped against the dollar yesterday on signs of a more positive tone in the post-Brexit trade negotiations between the UK and the EU.
Investors are also fearful at the prospect of negative interest rates, and comments from the Bank of England’s deputy governor Sir Dave Ramsden suggesting the tactic would not be used imminently buoyed the pound. Today the currency has trade relatively flat, down 0.02c at $1.2851.
Madden noted a number of economic indicators, due at 9.30am, will also be a key point of focus today. He said: “The BoE consumer credit reading for August is tipped to be £1.45 billion, which would be an increase on the £1.2 billion posted in July.
“Mortgage lending is expected to improve to £3.65 billion from £2.7 billion, and mortgage approvals are anticipated to be 71,000, up from 66,300. Traders will be wondering if people are willing to go out and borrow money, and in turn spend.”
In corporate news, traders will get a read on the High Street from two established brands.
Bakery chain Greggs will release its third-quarter trading update, with all eyes on how the group has bounced back from lockdown. The chain was permitted to trade but initially kept stores shut with social distancing making it difficult to manage crowds. The setback will have been frustrating for investors who have observed Greggs grow rapidly and seen its stock shoot up in recent years thanks in part to clever marketing efforts.
Meanwhile, Hotel Chocolat will post its results after seeing a surge in online demand in lockdown. The company, which was founded as an online retailer, saw a huge uplift in digital sales through Mother’s Day and Easter and has reopened stores since non-essential shops were given the green light to reopen in mid-June.
Video: CalSTRS CIO Ailman Says Economy Worse Than Statistics Show (Bloomberg)