FTSE on a knife's edge

The FTSE is higher this morning, propped up by a strong rally in medical device maker Smith & Nephew but the news flowis gradually eroding any investor optimism.

The FTSE is higher this morning, propped up by a strong rally in medical device maker Smith & Nephew but the news flowis  gradually eroding any investor optimism.

First the good news: Smith & Nephew jumped 8% after it reported sales that for the first time surpassed $5 bn. Lloyds Bank also rallied close to 4% despite reporting a 26% drop in annual profits as the decline was within the range that analysts had predicted.

But on a heavier note, the coronavirus provided much more to worry about. The outbreak has now spread into South Korea with the city of Daegu becoming Korea’s Wuhan. If the spread of the virus doesn’t reach its peak until April China’s growth could drop below 5% this year instead of the previously forecast 6%, which would then have repercussions on the growth of technology companies, phone makers, miners, oil producers, airlines and shippers.

This morning Air-France KLM and Maersk were the latest to join the chorus of firms warning about their revenue in the coming quarter because of COVID-19. China is trying to balance out some of the hit to the economy by cutting the lending rate, but it remains to be seen if the cuts are enough to stem the losses.

Brent crude stabilises

Brent crude prices are flat after an overnight rally but the commodity is now trading at its highest level since the outbreak of the virus in China.  The ongoing disruption in Libyan supplies and concerns that US sanctions could stifle the outflow of Venezuelan crude into the market are helping Brent crude trade close to $59.20.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.