Stocks sink worldwide on stimulus, renewed virus concerns

European markets have had a slight reprieve this morning following yesterday’s bloodbath with the FTSE opening 0.5% higher and the Dax recovering 1%. Gains could well be capped as lockdown restrictions tighten up again as the second wave of Covid infections accelerates. UK Prime Minister Boris Johnson is expected today to ask the country to go back to working from home, and last night announced a 10pm curfew on bars and restaurants, effective from Thursday.

Stocks sank around the world to start the week, with the FTSE 100 off by 3.4% and the Dow Jones Industrial Average down 1.8%. US markets were saved from a more dire day by a late rally, which saw the S&P 500 close down 1.2%, versus -2.5% at midday. Concerns about economic stimulus were the theme of the day in the US, with increased tension between Democrats and Republicans over a looming Supreme Court seat fight running into an existing standoff over the next pandemic relief package. The Federal Reserve has also come in for criticism in recent days, with some lawmakers suggesting the central bank has not done enough to help “main street” America, according to the Financial Times – an accusation Fed chairman Jerome Powell is set to defend before Congress this week.

Tech stocks hold up in broad market sell-off

After leading selling activity in recent weeks, the information technology sector was the only one of the S&P 500’s 11 sectors in the green yesterday. Industrials, materials, and energy stocks were hit the hardest, with all three sinking by at least 3%. Airline stocks were among the hardest hit names individually, with Delta Air Lines, United Airlines and Alaska Air Group all among the 10 worst performers in the index. The trio each lost more than 8%, fueled by fears of renewed pandemic lockdowns in Europe. Of the three major US stock indices, the Dow Jones Industrial Average faced the worst day, closing 1.8% down, taking its year-to-date loss to 4.9%. Only four of the Dow’s 30 constituent names closed higher, led by Apple’s 3% gain. At the back of the pack was American Express, which sank 5%.

S&P 500: -1.2% Monday, +1.6% YTD

Dow Jones Industrial Average: -1.8% Monday, -4.9% YTD

Nasdaq Composite: -0.1% Monday, +20.1% YTD

British Airways parent down double digits

Similar to the US, airlines and travel names were among the hardest hit in the UK yesterday, when the FTSE 100 closed down 3.4% and the FTSE 250 was off by 4%. Renewed second wave and lockdown fears were the order of the day, with British Airways owner IAG hit particularly hard after a report detailed that the closed air corridor between the US and UK will cost the UK 32 million pounds a day by the beginning of October. IAG closed the day 12.1% down, with Rolls Royce the other double digit faller among FTSE 100 stocks.

In the FTSE 250, easyJet, Tui, Wizz Air, Trainline Plc and more all fell by more than 8%. Only five FTSE 100 stocks were in the green yesterday, with three of those major UK supermarket chains. Year-to-date, the FTSE 100 and 250 are both down a near identical 23%.

FTSE 100: -3.4% Monday, -23% YTD

FTSE 250: -4% Monday, -22.9% YTD

What to watch

Nike: Sports apparel giant Nike delivers its latest set of quarterly earnings today immediately after US markets close. Digital sales and the success of store reopenings will be key features of the earnings call, as will demand from China. The firm also recently took a step to stop sales to some third-party stores and focus on building its direct to consumer relationship, including investment in its digital channels. Currently, Wall Street analysts skew heavily towards a buy rating on the stock, which has returned 11% year-to-date.

Autozone: Car parts retailer Autozone also delivers its latest quarterly earnings update today, after successfully climbing out of the share price hole it dug during the broad market sell-off when the lockdown restrictions first hit. The firm sits at the center of multiple trends tied to the pandemic; while consumer footfall is down and car sales/use have plummeted, many car owners will look to keep vehicles running instead of replacing them during this period of economic uncertainty. Analysts are split between a buy and hold rating on the stock at present.

Crypto corner: World’s first bitcoin ETF to launch

Brazilian fund management firm Hashdex is working with Nasdaq to launch the world’s first bitcoin ETF on the Bermuda stock exchange, according to CoinTelegraph.

The exchange announced on 18 September it had approved the Hashdex Nasdaq Crypto Index ETF which will be issuing 13 million shares. The ETF should be available for purchase by the end of the year. Fund manager Hashdex manages four funds worth around $46 million, some of which hold cryptoassets.

The launch of an ETF will allow investors to track the price of bitcoin without holding the underlying asset. Hashdex reportedly picked Bermuda thanks to it’s more crypto-friendly regulations. Proposals for bitcoin ETFs in the US have so far been rejected in recent years by the Securities and Exchange Commission (SEC).

All data, figures & charts are valid as of 22/09/2020. All trading carries risk. Only risk capital you can afford to lose.