Oil prices tumbled again overnight, with WTI crude oil June contracts sitting at $10.50 a barrel this morning, a fall of more than 30% in just over 24 hours. The spot price is around $12.60 a barrel having fallen further below the significant support level, just above $20 a barrel, which was broken yesterday. 

The dramatic plunge was sparked when The United States Oil Fund (USO), the largest oil-backed ETF, started offloading all of its short-term contracts due to concerns about prices turning negative again, with an oil storage capacity crunch incoming. The multi-billion dollar fund has lost more than half its value over the past month, and is making structural changes, increasing its exposure to longer-dated oil contracts — although the fund’s mandate is to track the near-term price of oil. 

South Korea has already reportedly run out of commercial storage space for oil, and Goldman Sachs analysts anticipate that global storage capacity will begin to be tested in a few weeks. 

Oil major BP this morning reported its first quarter results, announcing its underlying replacement cost profit — its proxy for profitability — was $800m, down 67% year-on-year. Although on the face of it this reads pretty badly, this was actually ahead of forecasts, which were pessimistic given the “exceptional level of uncertainty” facing oil prices at the moment. Shares are down 2% and what has perhaps saved them from a sharper fall is that they maintained their dividend at 10.5c per share, representing a very healthy 10% yield.

Banks and retailers lead the way in positive Monday for US stocks

All three major US stock indices posted a positive start to the week, with the S&P 500 and Dow Jones Industrial Average both gaining 1.5%. In the S&P, financials was the best performing sector, with the banks gaining 5.5% collectively. JPMorgan Chase (JPM) and Goldman Sachs (GS) jumped by 4.3% and 3.7% respectively and were among the bigger movers. All 11 sectors in the index of America’s 500 largest companies delivered a positive day, with consumer staples delivering the weakest gain at 0.3%. 

In corporate news, Apple (AAPL) announced that it is delaying mass production of its 2020 flagship iPhones, while Keurig Dr Pepper (KDP) beat Q1 2020 earnings expectations, causing its share price to jump 7% in late trading. Boeing’s (BA) chief executive David Calhoun told shareholders on Monday that the firm will need to borrow more money over the next six months and does not anticipate paying dividends again for years. 

In the Dow Jones Industrial Average, Walt Disney (DIS) led the pack with a 4.8% gain, as investors reacted to the early stages of coronavirus lockdown being eased in some states. In the S&P 500 retailers Kohls, Nordstrom and Gap were among the stocks that led the way, all posting double digit gains — although the trio are all still down more than 50% year-to-date.

S&P 500: +1.5% Monday, -10.9% YTD (SPY)

Dow Jones Industrial Average: +1.5% Monday, -15.4% YTD (DIA)

Nasdaq Composite: +1.1% Monday, -2.7% YTD (COMP)

FTSE climbs, Tesco begins laying off temporary workers

London-listed stocks mirrored the US with a positive start to the week yesterday, with the FTSE 100 and FTSE 250 rallying by 1.6% and 1.7% respectively. Chancellor Rishi Sunak told Parliament that small businesses will get access to 100% taxpayer-backed loans of up to £50,000 that they can get days after applying. 

At the top of the FTSE 100 were firms including Carnival (CCL), InterContinental Hotels Group (IHG) and ITV (ITVPY), which all gained more than 5%. Homebuilders Berkeley Group, Persimmon and Taylor Wimpey were among the stocks at the back of the pack. 

In corporate news, Tesco (TSCDY) has reportedly begun to lay off some of the 45,000 temporary workers it hired to handle consumer demand at the height of Covid-19 panic buying. In the FTSE 250, travel operator TUI, events company Hyve Group and gambling firm William Hill led the way, with all three posting double digit gains.

FTSE 100: +1.6% Monday, -22.5% YTD

FTSE 250: +1.7% Monday, -27.1% YTD

What to watch 

Alphabet (Google): Google parent company Alphabet (GOOGL) will unveil its Q1 2020 earnings today after the market closes, investors will be watching for how large the hit to the firm’s advertising business will be. Alphabet stock is down 5.1% year-to-date, well ahead of the broader market, along with many technology names. The firm has been quieter than firms including Facebook and Twitter, which have both warned on the impact that a cutback in company advertising budgets is likely to have on earnings. Wall Street analyst expectations for the firm’s Q1 earnings per share have fallen from $12.32 three months ago to $10.67 now. The second quarter is likely to be even more painful, as analysts are expecting an earnings per share figure of $8.85, down from the $13.40 they were predicting three months ago. 

Pharma and healthcare giants: A slate of pharmaceutical and healthcare names report quarterly earnings on Tuesday, including pharma firms Merck & Co (MRK), Pfizer (PFE) and Novartis (NVS), plus health insurer Centene (CNC). In the UK, both GlaxoSmithKline (GSK) and AstraZeneca (AZN) will report their Q1 earnings on Wednesday. Investors will be watching for updates on how the firms’ various efforts towards Covid-19 treatments and vaccines are progressing, in addition to what the current environment — where people are putting off regular healthcare visits due to the pandemic — are affecting sales of other product lines.

Starbucks: Coffee chain giant Starbucks (SBUX) reports its Q1 earnings after market close on Tuesday, giving investors a glimpse into how the reopening of stores in China is translating into sales, and the toll that store closures across the US are having on its revenues. Starbucks’ share price is down 11.6% year-to-date but has rebounded 15% over the past month. Analyst expectations for the firm’s Q1 earnings figures have halved over the past three months, and Wall Street analysts lean towards a hold rating on the stock. 

April consumer confidence: The Conference Board will report its US consumer confidence index figures for April on Tuesday. The index fell from 132.6 in February to 120 in March, and expectations are for the index to sink below 100 in April. 

Other major US listed names reporting today: Pepsico, United Parcel Service, 3M, Mondelez, S&P Global, Advanced Micro Devices, Caterpillar, Ecolab, Roper Technologies, DexCom, MSCI, Ford Motor Company, Southwest Airlines.

Crypto corner: Bitcoin powers on as halving approaches

Leading cryptoasset Bitcoin (BITCOMP) reached highs not seen since before the mid-March crash as the date for its halving approaches. The question is, can this rally continue its momentum right up to the halving in two weeks time, or will it run out of steam? The last few days have seen somewhat shallower price moves as the price consolidates, potentially for another leg higher but we could first see a retracement back to test the prevailing trend line. $8,000 does remain a milestone hurdle in terms of upcoming potential resistance.

The halving has been long anticipated by investors who started positioning for it some months ago, and internet searches for the process are booming. U.Today reports that Google searches of Bitcoin halving are 33% higher than they were for the last such event in 2016, suggesting a much greater level of interest this time around.

The anticipation has translated into sharp gains for Bitcoin, which hit a six-week high of $7,794 yesterday having risen 70% off lows in mid-March.

All data, figures & charts are valid as of 28/04/2020.