Adam Vettese
By Adam Vettese
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Another record for the US, Europe to follow suit?

Good morning,

European markets have opened strongly this morning, pushing back towards record levels with Germany’s DAX less than 2% away from the all-time high it reached back in January 2018. This follows on from their US counterparts hitting another new record yesterday, comments from President Trump signalling the imminent end of the long running trade war being the main driving force.

Tuesday Roundup

In stocks, the share prices of several US drugmakers and distributors were sent plummeting on Tuesday, after federal prosecutors opened a criminal investigation into the opioid epidemic. According to The Wall Street Journal, at least six companies have received grand jury subpoenas in New York. Teva Pharmaceutical Industries’ share price fell 7.9%, McKesson’s 4.9% and AmerisourceBergen’s 3.1%. Pharma giant Johnson & Johnson, which was ordered to pay a $572m fine to Oklahoma earlier this year for its role in the state’s opioid crisis, initially took a 1.3% share price hit but had recovered by the time the market closed. The risk of legal action related to the opioid crisis is not an abstract one; in September Purdue Pharma, the maker of OxyContin, filed for bankruptcy in the face of thousands of lawsuits.

Further afield in Hong Kong, Alibaba successfully raised $11bn from its float on the Hong Kong stock exchange, despite recent unrest in the city.

Best Buy leads the way ahead of Black Friday

The major US indices notched another day of record highs on Tuesday, with the S&P 500 leading the way with a 0.22% gain, after climbing 0.75% the day before. Optimism around a US-China trade deal carried through from Monday, but there were big share price moves from individual firms at both ends of the spectrum. Electronics retailer Best Buy gained 9.9% after beating earnings expectations and raising forecasts ahead of the holiday season. Other winners on Tuesday included Under Armour and Chipotle Mexican Grill, which climbed 3.6% and 3.7% respectively. At the bottom of the pile was the $22.5bn market cap discount chain Dollar Tree, which sank 15.2% following a poor third quarter earnings report. On the earnings call, CEO Gary Philbin said the firm had been having to take action to reduce the impact of tariffs on Chinese goods. For computer makers Dell Technologies and HP Inc, which both reported earnings on Tuesday, chip shortages from Intel proved to be a common pain point – read more on that here from MarketWatch.

S&P 500: +0.22% Tuesday, +28.28% YTD

Dow Jones Industrial Average: +0.2% Tuesday, +20.55% YTD

Nasdaq Composite: +0.18% Tuesday, +30.33% YTD

UK mid-caps extend their lead over the FTSE 100

The mid cap – and more domestically oriented – FTSE 250 extended its 2019 lead over the FTSE 100 on Tuesday. It climbed 0.78% while its large cap sibling rose 0.09%. The index hit a 15 month high signalling at least for now, the prospect of Brexit is not deterring investors from investing in UK-focused companies.

Luxury car maker Aston Martin Lagonda’s (AML.L) share price popped 7.1%, with the gain since it unveiled its new SUV a week ago nearing 20%. The firm’s value has been cut in half in 2019 amid a struggle to stay profitable, and the current 530p share price is a long way from its £19 per share IPO last year.

FTSE 100: +0.09% Tuesday, +10.03% YTD

FTSE 250: +0.78% Tuesday, +19.21% YTD

Stocks to watch

Deere & Company (DE): Agricultural machinery firm Deere reports quarterly earnings on Wednesday morning, having already cuts its full-year guidance twice this year. JPMorgan analyst Ann Duignan, quoted by Barron’s, has a sell-rating on the stock. She argues that deeper cuts to production schedules will be needed to take care of an overstocked inventory. In both cases this year when the company has issued warnings the share price fell by double digits before recovering; in 2019 so far, it is up more than 18%. Wall Street analysts have become more split on the stock in recent months, with 11 rating it as a buy or overweight, six as a hold, and two as an underweight or sell.

While it’s relatively quiet out there in terms of earnings announcements, Wednesday is a busy day for economic data in the US, with October consumer spending numbers, pending home sales, and the Federal Reserve’s beige book – its commentary on current economic conditions – all being published. See here for a calendar of what’s coming.

Holiday season closures:

US markets are closed tomorrow for Thanksgiving and early on Friday.

Crypto corner:

The three major cryptoassets were muted overnight, holding steady after recovering from multi-month lows the day before.

Bitcoin was holding firm above $7,000, while Ethereum was at $144.7 and Ripple at $0.216. Investors are still spooked somewhat by the “death cross” seen for Bitcoin which can be a sign of heavy selling to come.

Nonetheless, this may well prove to be an attractive entry point for many investors to get into crypto, with prices sharply lower than highs seen earlier this year.

UpBit gets hacked

Outside of prices, the main news this morning is around the South Korean exchange UpBit after it notified it users of the theft of 342,000 ETH (approximately 51million USD) from the Exchange’s hot wallet.

Lee Seok-woo, the CEO of Doo-myeon who operates UpBit, confirmed the hack in a statement posted on the Exchange’s website early this morning.

With the hacker’s wallet address visible on the blockchain, no doubt the crypto community will be monitoring where this stolen Ether will end up. This development could spell bad news for crypto prices, going forward, if the hacker decides to start dumping the stolen ETH onto other exchanges, especially if market liquidity stays thin.

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