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Shares bounce after WHO, Amazon back to 1tril, BOE bottled it

Amazon should be worth over $1 trillion again today after its well-received Q4 earnings.

The WHO recommendation that travel continues is great news for oil prices

Brexit day can be a watershed moment for the FTSE

EQUITIES

The World Health Organisation designating the coronavirus a global public health emergency turned out to be a positive because of the simultaneous recommendation not to restrict travel. It was the barrage of airlines cancelling flights and the resulting slowdown in economic activity that would bring which had really spooked markets.

Blowout earnings from Amazon should see the shares hit new record highs today and the company’s big weighting on the Nasdaq could see the index reach new highs too. Wall Street closing near session highs after big declines is a positive sign for European shares today. If a recovery does take hold, we’d expect it to be weaker in Asian markets where the coronavirus is centred.

Amazon confounded the sceptics with a shock 7% rise in earnings to $6.47 per share when expectations were for a heavy drop to $4.05. Amazon Web Services remains the centre of profitability while the core retail business consumes almost all the costs. AWS did see a decline in revenue growth but at 34% investors weren’t complaining.

The FTSE 100 has taken a royal beating because of its heavy weighting of oil and mining companies that depend on China for demand growth. The UK index was down -1.36% yesterday. ‘Brexit Day’ is not a catalyst for buying British shares in of itself. But put together with the overall scenario we think it could be watershed moment. Brexit is officially done, UK markets are at attractive valuations and the recent sell-off gives a lower entry point.

FOREX

After weeks of unreliable boyfriend references, we are kicking ourselves for being taken in again! The Bank of England of course didn’t cut interest rates and maintained its guidance towards hiking rates. The guidance was softened, and growth forecasts were lower but that was largely about the disparity between the sluggish hard data and the uptick in business surveys since the election. We are glass-half full on the UK economy and expect the hard data will improve to catchup with the business surveys. That to us means no rate cuts in 2020 saving some wider global disaster.

With the benefit of hindsight, the decision to hold was very straightforward for the Bank of England. Britain is about to leave the European Union and Chancellor Sajid Javid will most likely offer up a high-spending budget next month. So circumstances are changing, and it is better the BOE holds off making a decision until all the information is at hand.

COMMODITIES

Oil bounced back yesterday after taking a drubbing that took prices back to the lows reached in October. Brent crude oil bounced back above $59 yesterday and we are eyeing a move over the key $60 threshold on Friday.

Gold prices failed at $1585 per oz and closed down and near lows of the day. Gold will be the punching bag in any risk-recovery but for its outlook we just need to monitor the extent of the declines.

18-9-2020

USD/JPY sub-105 and UK retail sales
MARKETS US stocks fell in volatile trading on Thursday amid renewed pressure in shares of major tech companies. Conflicting messaging on the coronavirus vaccine front and uncertainty around further stimulus also weighed on sentiment. European equities fell aro… Read more

16-9-2020

Buffett-backed Snowflake IPO & Fed Preview
MARKETS The Dow Jones ended roughly flat on Tuesday, pressured by a fall in financials and a u-turn in Apple after the tech giant launched a new services bundle and hardware. The S&P 500 was up 0.52% while the Nasdaq added 1.21%. Apple rose 0.2% but had be… Read more

14-9-2020

Brexit bill first debate & tech stock sell-off
Markets The major U.S stock indexes fell for the second week in a row, as technology stocks experienced their worst pullback since March. The market was volatile in a holiday-shortened week, with the Nasdaq posting a 4% decline on Tuesday followed by a nearly… Read more

18-5-2020

Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more

14-5-2020

Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more

13-5-2020

“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more

12-5-2020

Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more

20-4-2020

US oil lowest since 1999, European shares diverge from Wall St
Another oil crash US crude prices have plummeted over 15% to the lowest since 1999. The 21-year low came as sellers were trying to get ahead of the expiry of the May contract tomorrow. Open interest was five times the average. A condition of Super Contango in… Read more