Adam Vettese
By Adam Vettese
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Trade war see-saw

Good morning everyone,

Have we had enough of hearing about the trade war yet? Unfortunately, it appears this is not going to go away anytime soon with markets seemingly following the ongoing rhetoric.

Asian markets also posted gains overnight on trade-deal optimism, the traditional safe-haven Japanese yen weakened as a result. US markets seemed happy to take reports that a US-China trade deal is on track at face value, after the President’s comments that a deal might wait until after the US election next November. I am not overly convinced by this as I’m sure President Trump is fully aware that a phase-one deal would be a great trophy to take into his reelection campaign. Furthermore, the next date for US imposed tariffs on Chinese goods is December 15th so if no deal was done by then and these were in fact implemented, I can imagine this would not do the negotiations much good. For that reason, could a deal actually be fairly imminent?

Wednesday Roundup

Meanwhile overnight in stocks, Nasdaq listed online travel firm Expedia was the scene of a dramatic boardroom showdown on Wednesday. CEO Mark Okerstrom and CFO Alan Pickerill were forced out over disagreements with the board over the direction of the company.

As we detailed last month, Expedia took a huge 25% plus share price hit after reporting disappointing Q3 earnings. At the time management said the firm had run into headwinds that included a shifting search engine landscape and increased competition from Google itself on hotel listings. While the board decides what to do leadership-wise, chairman Barry Diller and vice chairman Peter Kern will oversee the company. Diller said in a statement that a reorganisation put in place earlier this year “while sound in concept, resulted in a material loss of focus on our current operations.” Investors greeted the news with open arms, as Diller also said that the board believes growth can be accelerated in 2020. Expedia’s share price closed 6.2% higher. Despite this, as you can see on the chart below, it is still some way off paring the losses off the back of the earnings report.

Elsewhere, business software firms Workday and Salesforce, whose earnings we previewed yesterday, fell by 4.7% and 3.2%. Both beat earnings expectations after reporting results after market close, but disappointed on their forecasts. Salesforce’s fourth quarter earnings outlook came in under analyst expectations, while Workday said that a recent acquisition and new product launches won’t provide an immediate boost to revenue next year.

S&P 500: +0.63% Wednesday, +24.17% YTD

Dow Jones Industrial Average: +0.53% Wednesday, +18.53% YTD

Nasdaq Composite: +0.54% Wednesday, +29.11% YTD

M&G property fund closure echoes summer 2016 panic

On Wednesday the FTSE 100 clawed back a fraction of what it had lost the previous day amid positive US-China trade deal headlines. Nonetheless, the UK lagged major European benchmarks such as the Dax and Euro Stoxx 50 indices, which both gained more than 1%. The UK took another economic data knock along the way, as the IHS Markit/Cips services purchasing managers index showed the UK services sector contracted in November, after holding flat in October. In stocks, the FTSE 250 recovered more strongly than its large cap counterpart, gaining 0.8% on the day. Two of the biggest winners were Cineworld with a 5.9% gain and Premier Oil at 5.8%. Also of note in the UK was the suspension in trading of a £2.5bn property fund by M&G. The decision was taken due to the rush of investors heading for the exits exceeding the pace at which M&G could sell properties, echoing the crisis that faced a host of property funds immediately after the 2016 referendum on Brexit. M&G was spun out as a listed company in its own right in October by parent Prudential, and the $6bn market cap asset manager’s share price closed down 2.7% after the news broke.

FTSE 100: +0.42% Wednesday, +6.84% YTD

FTSE 250: +0.8% Wednesday, +18.07% YTD

Stocks to watch

Zoom Video Communications: Nasdaq listed Zoom Video is one of a trio of technology companies in the $10bn to $20bn market cap range that went public in the past few years reporting earnings on Thursday. The firm listed in April, as a rare example of an IPO by an already profitable tech company. Its shares are trading at close to double its $36 IPO price, although have sunk by more than 30% from their peak in June. In its last quarterly results, the company announced that it had added customers at a year-over-year rate of 78%. It has been aided by authorisation received in May for its services to be used by US federal government agencies. Investors will be watching for the impact of sales and marketing expenses when the company posts its results after the market close.

Okta Inc: Identity authentication firm Okta has been publicly traded since 2017 and has delivered a 90% plus share price return this year alone. Again, investors will be looking at expenses, and analysts are expecting the firm to produce a negative Q3 earnings per share figure of -$0.12, down from the -$0.04 it posted in the same quarter last year. Despite that, 13 analysts rate the stock as a buy, with seven at a hold rating. The average 12-month analyst price target is $141.53, versus the $121.85 Wednesday close price. In the last four quarters, the EPS figure has come in above expectations, although it has failed to get into positive territory.

Docusign: A name that anyone who has rented a property recently will likely be familiar with, San Francisco-based Docusign offers an automated process for signing and managing agreements. The company’s share price close of $70 on Wednesday is a long way above its $29 IPO price last year. Last quarter the company crushed its sales forecasts but posted a loss, and the share price soared. As with any of the three firms here, customer acquisition will be a key metric watched by investors when the company reports earnings on Thursday. RBC analyst Alex Zukin described Docusign as “a company with a large, sustainable leadership position in a newer, underpenetrated total addressable market capable of sustaining durable growth”. Of the 14 Wall Street analysts covering the stock, 11 rate it as a buy.

Crypto corner:

Bitcoin edged higher overnight and was up over 1% this morning as investors and commentators eyed a potential Santa rally for crypto assets.

Trading at $7,266 this morning, up 1.3%, the positive sentiment was also witnessed across the other major crypto assets. Both Ethereum and Ripple were on firmer ground, at $144.2 and $0.21 respectively.

One of the possible drivers for the move could be recent $6.5m record high open interest on Bakkt Bitcoin futures.

France to test its central bank’s digital currency in Q1 2020

Yesterday, the Banque de France confirmed that it would begin testing a central bank digital currency for financial institutions early next year. It seems as though France is trying to get ahead of the game of private currency projects such as Facebook’s Libra, which has come under widely-reported scrutiny from the EU in general. Along with Germany, France is becoming a major adopter of blockchain among the largest European nations.

Link: Cointelegraph

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