Good morning everyone,
Stock prices are continuing to grind higher despite the ongoing coronavirus epidemic and warnings from companies including Apple and Adidas, with the latter revealing yesterday that its business activity in China has tumbled by 85%. However, equities are not the only asset attracting attention as the price of gold surged yesterday to a high of $1,614 an ounce, its highest level in seven years. The gold price has been on a tear since the crisis started, having already climbed from below $1,300 to over $1,500 in 2019. One firm that has benefited handsomely from the price rise is FTSE 250 constituent Hochschild Mining, which reported yesterday that its profits doubled in 2019 compared to 2018, on the back of a 7% increase in revenues. It put the revenue growth down to record performances at two mines in Peru and Argentina, in addition to the 2019 price recovery. The stock was the best performer in the FTSE 250 yesterday, closing 12.9% higher after reporting the news.
The dollar has also been backed as a safe haven with the greenback making gains against the Japanese yen. The yen is normally considered a safe haven itself, however it has sold off recently after concerning data which could signal the country is already in recession. USD/JPY broke through a significant level of resistance around 110 to trade at the highest level since May last year.
Lloyds shares climb despite PPI claims surge
Lloyds Banking Group shares rose this morning despite reporting profits 26% lower than in 2018, at £4.4bn, thanks to an extra £2.5bn provision to pay complainants of mis-sold PPI. The update doesn’t read particularly well however the rise in share price has been put down to a more positive than expected outlook on the bank’s capital reserves. The banking group, which is the UK’s largest domestic bank, also announced its dividend would be 3.37p.
Nasdaq Composite closes in on double digit 2020 gain as Tesla soars again
Another day, another 5% plus share price gain for Tesla. The electric carmaker soared once again yesterday, climbing 6.9% after Wall Street firm Piper Sandler pushed its price target up to $928 a share, highlighting the firm’s push into clean energy development. Tesla also closed its new stock issuance, which raised $2.3bn. Alongside Tesla, Nvidia also helped push the Nasdaq Composite 0.9% higher, taking its year-to-date returns close to 10%. Nvidia’s 6.1% share price pop was also analyst driven, as Bernstein’s Stacy Rasgon upgraded his rating, admitting that not being more bullish on the stock was “an error”. He provided a new $360 price target, versus Nvidia’s $314.70 on Wednesday. The S&P 500 also climbed by 0.5%, with Garmin closing 6.7% higher after beating its Q4 earnings targets and upping its guidance for 2020.
S&P 500: +0.5% Wednesday, +4.8% YTD
Dow Jones Industrial Average: +0.4% Wednesday, +2.8% YTD
Nasdaq Composite: +0.9% Wednesday, +9.4% YTD
Qantas ups stake in British Airways parent IAG
In the UK, London-listed stocks jumped on yesterday, as the day-by-day swings in investor sentiment regarding the coronavirus epidemic fell in their favour. The FTSE 100 jumped by 1%, led by Flutter Entertainment, Evraz and Melrose Industries. British Airways parent International Consolidated Airlines Group (IAG) was one stock making headlines, as Qatar Airways announced that it had increased its holding in the firm from 21.4% to 25.1%. IAG stock closed 1.6% higher following the news. In the FTSE 250, Man Group was the biggest winner after Hochschild Mining (detailed above), gaining 9.1% thanks to an upgraded analyst rating on the stock. Investors also had monthly consumer inflation figures to digest, which unexpectedly hit a six-month high of 1.8% for January driven by increasing petrol prices.
FTSE 100: +1% Wednesday, -1.1% YTD
FTSE 250: +0.8% Wednesday, -0.2% YTD
Stocks to watch
Southern Company: Atlanta-headquartered utilities firm Southern Co reports its Q4 earnings today. Its share price has been on a tear since the start of 2019, gaining more than 50%, after years of moving horizontally and lagging its peers. In Q3 it delivered earnings that came in significantly above expectations. A likely feature of the earnings call is the firm’s ongoing project to construct two new nuclear reactors at the Vogtle plant in the state of Georgia, in which it is investing $800m. In the last quarter, management said that the entire project is around 81% complete. Investors will be watching for progress.
Newmont Goldcorp: Gold mining giant Newmont reports its latest quarterly update today, after a year in which its 30% share price rise lagged the 53% delivered by key rival Barrick. The ongoing benefit being derived from the firm’s $10bn acquisition of Goldcorp last year is likely an area analysts will probe on the earnings call, as is the potential for further industry consolidation. Technology investments may also feature. On Wednesday, the firm announced an investment into an automated trucking fleet for an Australian mine, which it claims will be a world first when operational in 2021.
SBA Communications: Wireless infrastructure firm SBA has had a monster year, climbing 58.4% over the past 12 months, including a 14.8% gain over the past month alone. Earlier this month, the stock got a bump from the final approval of T-Mobile’s merger with Sprint, as the newly combined firm is expected to ramp up spending. SBA reports its Q4 results after market close today. Wall Street analysts are mixed on the stock, with six buy ratings, nine holds and one sell. The average 12-month price target sits at $267.86, versus its $289.85 at yesterday’s close, but the range goes from $240 to $338.
Cryptoassets took a sharp tumble late on Wednesday as investors reassessed their exposure to the sector.
Bitcoin took a sharp late drop, bringing it back below the $10,000 mark, before recovering slightly to trade at $9,579 this morning. Likewise, Ethereum suffered a late-day sell off dropping below the $250 mark before recovering to trade at $258.93 this morning. XRP was a victim of the selloff too, but has not recovered as strongly, with its price well off recent peaks at $0.2738.
SEC orders refunds for Enigma ICO
Enigma raised $45 million selling its ENG token back in 2017, which has now been deemed an unregistered securities offering by the SEC. Enigma settled with the SEC, agreeing to refund investors and pay a $500k penalty. The price of the token was down 25% at the time of writing.
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