New Wuhan cases prompt fears of second wave

European markets are marginally higher this morning following a jittery session in Asia overnight as Wuhan reports new coronavirus cases. The Chinese city, thought to be the original epicentre of the epidemic, had seemingly been getting back to normality with lockdown measures lifted. However, reports of five new cases yesterday have sparked fears of a second wave of infection. Similarly Germany, one of the first countries in Europe to ease lockdown restrictions, has seen the reproduction rate (R rate) of the virus rise back over 1 to 1.1. An R rate over 1 means the virus is spreading and this was referred to as a key metric by Boris Johnson in his update to the UK on Sunday evening. That infection rates are rebounding so soon after the transition from lockdown could be very worrying, and casts doubts on the effectiveness of strategies governments have in place.

Across the pond, in yet another expansion of its intervention into fixed income markets, the New York Federal Reserve announced yesterday that it will begin purchasing corporate bond ETFs today, including both investment grade and high yield debt. This is the first time the Fed will have bought ETFs, which are a faster way for the central bank to pump money into credit markets than via direct bond purchases.

In corporate news, Tesla founder and CEO Elon Musk dominated headlines yesterday after announcing that the firm will be restarting production at its factory in Fremont, California, in contradiction of quarantine orders from local authorities. Musk said on Twitter that he will be on the production line, and dared authorities to arrest him. Furloughed Tesla workers have reportedly said they have already been told to report to work this week, and the action from Tesla follows a lawsuit filed by the firm over the weekend asking for it to be allowed to reopen its factory. Musk’s rhetoric has been amping up over the past week, and he has threatened to move Tesla’s assembly line to Texas if he is not allowed to resume operations. Despite the shutdown in its manufacturing, Tesla shares have fared remarkably well, up over 90% year to date.

Pharma names lead the Nasdaq Composite higher

While the S&P 500 was flat yesterday, and the Dow Jones Industrial Average sank by half a percent, the tech dominated Nasdaq Composite Index continued its ascent with a 0.8% gain. Pharmaceutical names led the index hire, with Vertex Pharmaceuticals, Biogen, Gilead Sciences, Alexion Pharmaceuticals and Idexx Laboratories all gaining more than 4%. In the S&P 500, the biotechnology subsector jumped 4%, while healthcare stocks gained 1.7% overall. The financial sector faced the toughest day, falling 1.9%, with banks taking the biggest hit at 3.7%.

In earnings news, hotel giant Marriott International fell 5.6% after delivering its results for the first quarter, in which it fell short on profit expectations. CFO Leeny Oberg said destinations that guests can reach by car will be the first to rebound, such as US beach resorts. The company delivered an earnings per share figure of $0.26 for the first quarter, well below expectations of $0.80.

In the Dow, American Express and Boeing were the biggest losers on Monday, closing 4.7% and 3.4% lower respectively.

S&P 500: 0% Monday, -9.3% YTD

Dow Jones Industrial Average: -0.5% Monday, -15.1% YTD

Nasdaq Composite: +0.8% Monday, +2.5% YTD

UK stocks flat after lockdown guideline confusion

Both large cap and mid cap London-listed stocks posted a near flat day on Monday, after a confusing day in which the Prime Minister was forced to put out a substantial clarification about the advice he provided on the lifting of lockdown measures over the weekend. His statement was widely criticised for lacking clarity and raising more questions than it answered.

The FTSE 100, which closed the day 0.1% higher, was led by brokerage Hargreaves Lansdown, Auto Trader Group and consumer goods firm Reckitt Benckiser. Online grocery Ocado group also gained 2.7%, while takeaway delivery service Just Eat also rose by close to 3%. At the bottom of the index of the UK’s largest companies was energy firm Centrica, which fell 8.8%, while easyJet sank 5.9%. The budget airline has now fallen by close to 65% year-to-date, and 26.6% over the past month alone.

FTSE 100: +0.1% Monday, -21.3% YTD

FTSE 250: +0.1% Monday, -25.6% YTD

What to watch

Duke Energy: $59bn market cap energy firm Duke provides power to millions of customers spread across several US states. The company’s stock has fallen 10.5% year-to-date, pushing its dividend yield up past 4.5%. Utility stocks are better insulated than many industries from the economic turmoil caused by the pandemic, given the necessity of the services they provide, although nonpayment by customers and costs incurred from adapting their operations to cope with the disruption can still take their toll. Renewable energy and energy efficiency programs will likely be in focus for Duke when the company reports its first quarter earnings on May 12.

8×8 Inc: Business cloud communications firm 8×8 is smaller than many of the names we usually preview, but it has found itself in the spotlight thanks to mass working from home as a result of the pandemic. That situation provides a significant opportunity for the firm, particularly if its client firms change their working practices permanently. The company’s share price is up 8.6% year-to-date, and 20.4% YTD. 8×8 reports its latest set of quarterly earnings today. Currently, nine Wall Street analysts rate the stock as a buy, six as a hold, and two as an underweight or sell.

US Inflation: Another crucial data point on the state of the US economy will be revealed to investors today, when the consumer price index for April is reported. Economists are anticipating a substantially bigger decrease in the rate of inflation versus March, with the price of many consumer goods pushed lower by significant lower demand, and energy prices lower thanks to the collapse in oil prices.

Crypto corner: Bitcoin halving finally happens

The much-anticipated halving event of Bitcoin, the world’s longest-standing major cryptoasset, finally took place late last night. Miners produced the 630,000th Bitcoin to trigger the halving, which sees the amount of Bitcoins rewarded for mining halved from 12.5 to 6.25. This is the third such halving event in the cryptoasset’s history, which took place first in November 2012 and subsequently in July 2016.

The reaction in price has been muted so far, with BTC showing highs of $9182.66 yesterday, before falling away to $8185.00. In early trading this morning, it is moving around $8765. Elsewhere, XRP is trading around $0.1963 and Ethereum tokens around $189.71.

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