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Europe joins the rally plus unicorn earnings & NFP

EQUITIES

Global stock markets have been blessed with four straight days of gains this week. Whether we can get five-for-five will probably rest with the monthly US jobs figures later.

On Thursday, the Dow Jones and S&P 500 rose 0.3% to hit record highs. It’s the first time both US benchmarks struck simultaneous new highs since the coronavirus outbreak. Underlying much of the optimism is a sense the enduring strength of the US economy means it can weather any effects of the coronavirus. So far, the S&P 500 is up 3.7%. If we can hold onto gains today, it will be the biggest weekly rise since June.

We’ve seen some big gains across European stock markets this week. Italy’s FTSE MIB is up over 5 ½ % this with a 1% daily gain on Thursday. The DAX is up 4.5% while the FTSE 100 has risen 3%. The jury is still out on the European economy. German factory orders for December were horrific and the more up-to-date PMI survey data hasn’t been much better. The going logic for adding Europe to the portfolio is that the economic rebound is just lagging the US.

The shares of unicorns that had IPOs in 2019 are starting to look interesting. Uber and Pinterest both reported earnings after the close and look set to make gains when Wall Street opens. The results were a bit shaky but investors like that Uber is now forecasting profitability in 2020 rather than 2021. With Facebook facing some headwinds, Pinterest is another place to look in social media that still has double-digit user (MAU) growth.

FOREX

It’s been all about the buck in forex markets this week. That should continue into Friday ahead of the release of non-farm payrolls (at 13:30 GMT). The Dollar has been up across the board: GBPUS fell -2.01% while EURUSD is lower by -1.04% over the week through Thursday. On top of the economic performance, Trump’s acquittal and the China tariff reductions also underline a bullish case for the buck.

Consensus expectations are for the US to have created 160k jobs in January, up for a lacklustre 145k in December. Our bias is for an upside surprise given the almost universally good data from the US of late. Bearing in mind average hourly earnings growth was soft last month, we could get a blowout on jobs growth and wages. Jobs growth above 200k and we can probably kiss 1.10 goodbye in EURUSD.

It’s setting up as a rough week for the pound ever since Boris’ post-Brexit speech went down like a tonne of bricks with investors. Traders are bracing for phase two of Brexit where the two central scenarios both look unattractive for investors. Neither an FTA that diverges heavily from the EU nor crashing out with no deal succeed in achieving the economic stability that markets are craving.

COMMODITIES

Gold looks resilient above $1550 per oz but its hard to see how a blowout NFP number wouldn’t be damaging for the yellow metal. If gold can finish lower by less than 1% this week (-0.8% so far), we’d view that is a good result for a haven asset given the exuberance across stock markets. Also, if one were to look at gold in euros, it’s almost breakeven this week.

Oil markets are feeling the pressure though there are tentative signs of a rebound as coronavirus fears ease. Brent crude oil is down 5% this week. We think Russia probably made the right call in blocking the Saudi efforts at OPEC to further slash output. It would have been too soon to act without the evidence of the genuine economic impact of the coronavirus. The result is that oil investors now know OPEC doesn’t have their back, which probably limits the upside for oil prices.

18-3-2020

The rebound on stimulus hopes loses momentum. Brent < $30
A bigger picture is starting to emerge of how governments are responding to the pandemic and that in itself offers some needed certainty. Authorities are trying to balance economically damaging travel restrictions and social distancing rules with cheap loans f… Read more

17-3-2020

Stocks Rebound after rout, Airline bailouts? Gold holds $1450
Governments are stepping up their response to the coronavirus outbreak which is allowing markets a chance to recuperate on Tuesday.   Following the worst day since Black Monday on Wall Street, US futures went ‘limit up’ – meaning prices could not rise of ove… Read more

16-3-2020

Central Bank Bazooka Misses Target, Stocks in Freefall
Central banks led by the US shot off a bazooka of lower interest rates and quantitative easing but it has missed target. Markets are back into freefall.     Friday’s gains have evaporated and shares are headed deeper into bear market territory. Bank shares a… Read more

12-3-2020

Dow falls into bear market, FTSE to tank, little hope for ECB
Dow drops into bear market, S&P to follow after Trump speech Trump managed to spook an already spooked market. European share markets are set for sharp opening losses. The FTSE is on course to tank 300 points to take it down 30% off its May 2018 peak. The… Read more

10-3-2020

US tax cuts lightening the mood in market hangover
There will be investors waking up today and wondering if it was all a bad dream. But it was all too real. Oil did fall by the most since the Gulf War and global stock markets did have their worst day since the 08 crisis. Today will be a like a hangover. All yo… Read more

5-3-2020

OPEC meeting, Flybe administration & fortune favours a brave BOE
Shares in Europe look set for higher open following the wake of a ‘Biden bounce’ on Wall Street. The Dow saw another +1000-points day led by healthcare companies on the hope the US can avoid a national healthcare service under a President Sanders. Actually, we… Read more

28-2-2020

Next step bear market (unless oil can bounce). Euro rally continues
This week has been quite the doozy. Recapping oil is down 12% and the Dow Jones is down 11% and we haven’t had Friday yet. Futures are pointing to another 900-point slide on Friday in the Dow on Friday’s open after the biggest one-day points fall ever on Thurs… Read more

27-2-2020

Shares and yields slide in coronavirus spotlight. Sterling a haven?
There have been few places to hide while the coronavirus takes the spotlight across global markets. It’s looking like a defensive start to Thursday with shares pointing lower, bond yields falling, and haven currencies bid. Investors don’t like the uncertainty… Read more