Market News & Analysis


Top Story

Morrisons Soars 11%, More To Come?

The FTSE may be down over 4% but Morrisons has soared 11% across the morning session, thanks to business rates holiday, consumers stockpiling and the recession proof nature of supermarkets. 

Morrison’s was the first of the big four supermarkets to release full year results:
  • Like for like sales excluding fuel -0.8%
  • Full year revenue -1.1% £17.5 billion
  • Underlying pre-tax profit +3% to£408 million

Last year already seems like an eternity ago! Like for like sales declined across the previous year owing to political uncertainty, strong comparisons from the previous year and increased sales. However, investors have been quick to shrug off last year’s concerns, focusing instead on the Covid-19 impact.

Morrisons confirmed like for like sales in the first 6 weeks of this year jumped 5%. The coronavirus fear factor became really noticeable a few weeks later. Judging by the empty shelves in the supermarkets like for like sales have continued to soar, and not just at Morrisons, but at supermarkets across the board.

Recession proof stock
The UK is heading for a recession. With stricter social distancing, isolation and quarantine measures coming into play consumption has dropped sharply and thousands of jobs will be lost. A recession is inevitable. The Government and BoE are doing what they can to prevent the oncoming recession becoming a depression. Supermarkets across the board will benefit from the business rates holiday. 

With a recession coming and the FTSE in free fall now is the time to buy stocks that we simply can’t live without. These are recession proof stocks; defensive stocks outperform the broader market in a time of economic downturn. Supermarkets and consumer staples fall into this category. The demand of most of a supermarket’s products will remain constant even in a recession because they are necessities rather than luxuries.

Morrisons have announced it is creating 3500 jobs to cope with the increased demand, almost all of which is online. 
The risk will be if supply chains start to experience large disruptions and stock doesn’t arrive to the shops. Whilst we are still a long way from this position it is worth keeping in mind given the rapidly changing nature of the coronavirus impact.

Levels to watch

Morrisons has surged back above its 50,100 and 200 sma on a bullish(4 hr) chart. At 200p it is trading around where it was at the start of the year, recouping all losses year to date.
Immediate resistance csn be seen at 203p, (today’s high) perior to 210p (Sept’19 high).
Support exists at 186p (200 sma) prior to 180.4p (today’s low) and 179p (100 sma)



Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.