Thursday, April 23, 2020

Asia Times: Chipotle shares spike after posting digital sales growth of more than 80% amid Covid-19 crisis

Tags
  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil
  • US earnings' season
  • Brent

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Market Recap: Chipotle shares spike after posting digital sales growth of more than 80% amid Covid-19 crisis

US equities jumped on Wednesday likely thanks to oil's recovery. Earnings continued to be mixed amid the Covid-19 crisis, with Delta airlines being the highlight of yesterday's earnings reports. The DJIA closed Wednesday just shy of a 2% gain, while both the S&P500 and Nasdaq advanced more than 2%, driven mostly by energy and technology stocks. The technology sector led gains in the S&P500, rising 3.87% while the energy sector was close behind, increasing 3.58% on the day.

In company news, Chipotle's stock surged 12.15% after topping analysts’ estimates for its Q1 sales and earnings. The fast food chain reported more than 80% YoY growth in Q1 for its digital sales segment, while also signalling that the most recent April week sales trend improved from the last week of March. The better-than-expected earnings report prompted multiple analysts to increase their price target on the company, as the Covid-19 crisis is expected to help drive digital adoption.

Delta airlines reported its first quarterly loss in more than five years amid the global lockdown resulting from the Covid-19 crisis. The airlines reported net losses amounting to US$534mn for Q1 2020, down from a profit of US$730mn during Q1 2019. Delta executives remain firm that the reduction of its cash burn will be prioritised, aiming to cut its cash burn rate of US$100mn per day down to US$50mn by the end of June. Delta CEO Ed Bastian also told employees that he expects the recovery to take two to three years. Delta’s shares fell 2.73% on Wednesday.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +1.99% +456.94 23,475.82
S&P500 +2.29% +62.75 2,799.31
Nasdaq +2.81% +232.15 8,495.38
*Source: Bloomberg

In the forex market, traders mostly shifted toward riskier positions as oil recovers, allowing the Aussie, Cable and Loonie to recover some losses from earlier in the week. But the dollar managed to inch higher as tension between the US and Iran escalated when US President Donald Trump said that he had told the US Navy to shoot down and destroy any Iranian gunboats harassing US ships. The reports came after 11 gunboats from Iran's Islamic Revolutionary Guard Corps reportedly crossed US ships at close range last week.

The euro lagged the most among major currencies, falling to a two-week low even as the EU floated a two trillion euro plan to help the bloc's economic recovery. The decline in the euro signals that financial markets are mostly not expecting the deal to pass with EU leaders, as the richer countries in the bloc have shown little support for other EU members that have been severely affected by the Covid-19 virus.

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Safe haven assets were mixed, with bonds falling while gold and yen gained. Gold gained 1.65% to break 1,700's level once again while the yen inched just slightly higher against the greenback. US Treasuries fell across the board, as risk started to ease in financial markets as oil recovers and more economies starting to hint at potential reopening amid the global lockdown. Benchmark 10-year yields advanced 5bps to 0.62%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +1.65% +27.88 1,714.08
Silver +1.41% +0.21 14.69
JPY +0.05% +0.05 107.75
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +1.0 0.21%
10-Year +5.0 0.62%
30-Year +5.2 1.21%
*Source: Bloomberg

Oil recovered on Wednesday after a historic rout earlier in the week. US WTI benchmark was up 19.10% on Wednesday, pushing the price to US$13.78 per barrel. Brent also rose back above US$20 per barrel. The recovery came despite US' Energy Information Administration (EIA) reporting rising US crude oil inventories, which increased by 15 million barrels to 518.6 million. Inventories at the Cushing, Oklahoma storage hub is now much closer to its maximum capacity of roughly 76 million barrels after jumping 4.8 million barrels to 59.7 million.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +5.38% +1.04 20.37
WTI Crude +19.10% +2.21 13.78
*Source: Bloomberg

In Asia, stocks in Japan, South Korea and Australia tracked gains in the US, with each of the country's major index rising in the first hour of Thursday's trading session. Futures tracking major US indices were in the red as of 8.58am (GMT +8) however, likely as a result of normalisation of Wednesday's surge in equities as well as the escalation in tension between the US and Iran.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +0.71% +136.22 19,274.17 8:48:00 AM
KOSPI Index +1.11% +20.98 1,917.13 9:08:00 AM
ASX200 Index +0.60% +31.45 5,252.70 9:08:00 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.29% -67.00 23,289.00 8:58:07 AM
S&P500 Futures -0.23% -6.50 2,782.00 8:58:07 AM
Nasdaq Futures -0.35% -30.50 8,607.50 8:58:04 AM
*Source: Bloomberg

Companies reporting earnings for the day ahead include (all timings in GMT +8 where available):

  • China Life Insurance Co
  • Credit Suisse (2.15pm)
  • Citigroup (10pm)

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany May Consumer Confidence Survey (Gfk) (2pm)
  • Germany Apr Manufacturing/Services PMI (Markit) (P) (3.30pm)
  • Eurozone Apr Manufacturing/Services PMI (Markit) (P) (4pm)
  • UK Apr Manufacturing/Services PMI (Markit) (P) (4.30pm)
  • US Apr 17 Initial Jobless Claims (8.30pm)
  • US Apr Manufacturing/Services PMI (Markit) (P) (9.45pm)