Market News & Analysis
FTSE higher as UK hits grim milestone
May 6, 2020 7:04 PM
The FTSE is trading higher even as the UK hit the unenviable milestone of being the country with the highest number of coronavirus deaths in Europe. The disconnect between what is happening in the hospitals around the country and the optimism in the markets has mainly to do with investors looking ahead to businesses and shops shortly coming back on line. The lockdown is beginning to wear thin with more and more calls for a swift reopening and the Prime Minister is expected to reveal a reopening plan as the country goes into a three-day weekend.
The anticipation could explain why investors are holding back slightly this morning with volumes on some of the most popular stocks about 20% lower than usual. ITV and Smith & Nephew are trading higher following trading updates, both showing declines in revenue of close to 7%. In contrast, grocery delivery group Ocado which at the beginning of the lockdown ended up booked three to four weeks ahead recorded a 40% y-o-y increase in retail revenues in the second quarter.
There will be trouble ahead …
Trouble is brewing on a tectonic scale after Germany’s High Court ruled that the ECB’s massive quantitative easing exceeded the bank’s powers. Today ECB’s Christine Lagarde showed her defiance by pledging to continue to do everything to revive inflation and arguing that Europe's top court previously said quantitative easing was legal. Some form of financial support has become even more pertinent after data showed that Eurozone’s Composite Purchasing Managers’ Index plummeted to 13.6, far below the 50 mark that indicates expansion.
If Germany and the ECB don’t find middle ground over the next three months the disagreement could end up with Germany pulling out of the ECB and completely undermining the existence of Europe’s central bank. The euro has already lost close to 95 pips after the ruling yesterday and continued to decline by another 40 pips this morning.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.