Quiet start to the week for most markets as investors wait to hear more from both governments (on the next steps to reopen the economies) and Central Banks (on further stimulus measures). Asian equities closed in the green, boosted by the BoJ announcing more stimulus and EU equities have followed that trend. All indices are trading up by at least +1.5% and seem likely to stay in the green.
Another busy morning ahead of a well-deserved weekend! We had negative news overnight after the WHO published a draft paper suggesting that Gilead’s covid-19 drug (remdesivir) study failed. Our Pharma analyst has suggested that we should wait though as bigger studies are still underway. Elsewhere, the latest US Aid Package got through the White House overnight and is subject to Mr. Trump’s approval today. Apparently another package is on its way so let’s see if we hear anything else on that front this afternoon. Here in Europe, leaders managed to come up with an agreement in the short-term (worth €540 billion) but failed to agree on a long-term plan.
Right into the mix now in earnings season as we heard from multiple companies across different sectors. Oil erased some of its recent losses overnight, which has brought some positivity back to the market (CL1 16.69 and CL2 22.62). We are seeing a slight pickup in volumes as well but overall they are still quite low vs last week. Investors’ focus remains on the EU Council meeting at 2pm this afternoon so keep an eye on it. European equities have been trading mixed since the open with 11 of its sectors trading in the green. Banks are amongst the winners and Retailers are leading the losers.
Although we had a busy morning full of earnings updates and macro news, it does feel like investors have taken a pause for breath as they try to figure out what are the real implications of the recent move in Oil. Volumes are lower across the board with all EU indices trading below their AVATs. Focus is now the video conference with the EU council members tomorrow afternoon (with the risk of Italy falling out with the EU) and of course, any noise on the Oil output cuts front.
Oil is back in the spotlight today after the May WTI collapsed below zero overnight. It managed to trade just above water this morning but it is now back trading in the negative territory (CL1 $-4.77). Adding to the bad mix (and as predicted by our oil specs sales), June WTI (CL2) also plunged and is now trading at $14.47. We remain cautious in the sector and reiterate that the only way oil prices can recover is by addressing the oversupply issue in the short-term. SXEP remains the looser today (-5%) although not quite new relative lows.
Quieter start of the week with all indices trading below their AVATs. Lots of encouraging virus updates throughout the weekend with Germany partially opening its economy today and various countries starting to see a decrease in fatalities (Spain, UK, Italy and also NY). Despite that, lockdowns remain in place for most of Europe, with the political downside of opening early still outweighing the economic benefits (for now). EU equities ticked higher at the open but have since turned to trade in the red. Focus this week will be further stimulus updates (Mnuchin signalled that a new aid package is on the way overnight), any more news in the oil space and of course, Q1 earnings (especially EU banks, which remain amongst the losers).
Although Chinese economic data didn’t show any positive signs this morning (YTD GDP fell to -6.8% vs est. -6% and YoY Retail sales to -15.8% vs est. -10%), equities surged after the White House set a three phase plan to reopen the economy overnight and some positive results from a trial of Gilead’s covid-19 drug (remdesivir). Volumes spiked and we are seeing most EU indices trading above their AVATs. The IBEX is the only exception, which is fair given recent volumes were driven by BBVA. Investors have their risk-on mood and amongst the SXXP sectors, Travel & Leisure is the top performer and Healthcare the worst.
Fairly quieter day after yesterday’s sell off although we should consider that volumes are lower today (on an up day) vs yesterday’s. The S&P had its worst day in 2 weeks and the Russell closed down -4.3% overnight. Short term support levels are at 2600 / 2621 on the S&P and 1252 / 1266 on the Russell. Here in EU, equities erased some of the losses at the open but have since traded sideways. Our main concern remains the FTSE MIB, which faltered below the Dec 2018 low of 17914 yesterday. Short-term support is at 16000 / 16400 – worth keeping an eye on it.
European equities have turned to trade in the red since the open as earnings are starting to show the consequences of Covid-19. Second round of US banks recently reported and as expected, neither have surprised us. BoA, Citi and GS all had a bad Q1 – BoA mainly due to reserve build, GS mainly impacted by asset management losses and Citi’s focus will be on credit (despite a good top-line). Here in Europe, Banks continue to underperform (currently the worst sector of the SXXP) with relative lows for Banco Santander, Intesa SanPaolo, Caixa Bank, Danske Bank and Standard Chartered.
Signs of life in the Chinese trade data coupled with the agreement by Eurozone Finance Ministers at the back end of last week around their COVID response has seen Europe start the week on the right foot. Over the weekend, we also saw OPEC+ come back to the negotiating table and establish a new output agreement. Stuart Joyner, our spec sales sees “clear upside risk to our forecasts for $35/bbl Brent in 2020 and $40/bbl in 2021”. Be aware though that we have seen WTI fade intraday. All in all though we have returned from the break with a lot to be positive about, however today also marks the beginning of a new earnings season and one that will likely not be forgotten for some time to come. Volumes wise, we are having a quieter day today with the Stoxx 600 currently trading -25% below its 10day AVAT.