30 April - investment news from one of our investment partners

  • 30th April 2020

Markets rally over the last two days

Investment Bulletin from Brewin Dolphin

  • FTSE 100 opened higher initially up to 6,151 before dropping back to 6,096 (11am)
  • Bond Markets – Generally good this morning – Gilts just marginally tighter.
  • US & Euro equity markets have been trading in a range however in the last few days they have broken out of that range.
  • Still danger of a correction and markets have priced in a lot of good news
  • Shell, latest big name to cut its Q1 dividend (cut by 2/3rds and rebased)
  • Some potential good news with C19 treatment drug REMDESVIR

What are the drivers for this recent mini equity rally against backdrop of some poor economic data;

Recent economic data;

  • European Conditions Economic Sentiment Index – now lower than at any point in time
  • Advanced GDP Report from US – worse than expected in for Q1 and will be lower still in Q2
  • Daily Index from FT shows that China is still operating at levels much lower than this time last year

So what have been the Drivers;

  • Evidence is building that the first wave spread is easing, new cases & deaths lower in most regions
  • In Europe although levels of activity is extremely weak some high frequency daily indicators are showing mild improvement like electricity usage in Spain & Italy
  • Earnings is another factor, although the Stock 600 index which is a blend of companies that have reported for Q1 and expectations for those that are yet to report shows that earnings are going to be down 25% in q1 year on year there has however been a slightly better than average number of both earnings & revenue surprises relative to expectations contributing to analysts slowing the rate at which they are marking down expectations
  • In the US Mega Cap – Alphabet missed earnings estimates but reported good news on its cloud and costs which has been taken positively by the market. Facebook & Microsoft reported results the market liked
  • There has also been more recent good news in the beaten down oil space in terms of weekly inventory levels, which are not as bad as feared

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