Good morning everyone,
Markets have taken another leg down this morning as the ongoing geopolitical tension continues to guide price movement. Iran launched a missile strike at US military targets in Iraq. Following this, Iranian officials intimated that their response was now complete and they did not want a war. We will now see if both sides will indeed put an end to the conflict or if there will be a US response.
It hasn’t all been doom and gloom though. Anglo American, the FTSE 100 listed mining giant, has revealed it is in talks with fertiliser manufacturer Sirius Minerals in a deal which it says could provide the company with a “world-class, long-life, low-cost asset.” The group, which had a market cap of £29.4bn at yesterday’s close price, said it is in advanced discussions about making an offer of 5.5p per share for Sirius, valuing it at around £386m. The share price has soared nearly 35% to match the bid price this morning. 2019 was a tough year for Sirius and even from the current level, shares would need to increase four-fold to get back to last year’s high.
Apache strikes oil
Resources were also in focus in US stocks yesterday after oil exploration firm, Apache, closed 26.8% higher, following an announcement that it had struck oil off the coast of Suriname. The one-day gain was Apache’s biggest in decades as there was significant relief that the project wasn’t a bust. In December the company’s share price took a hit after it put out a disappointing progress report that didn’t provide details on whether it had found oil. Bank of America immediately upgraded its rating on the stock after news of the discovery, saying that the news is a potential game changer. Apache has been a poor performer of late, with its share price slumping by more than 60% over the past three years, prior to this week’s development.
Chip stock rally props up the Nasdaq
All three major US indices posted a negative day on Tuesday, although major gains in tech stocks brought the Nasdaq Composite close to parity. Microchip-linked stocks soared after announcements at the CES conference in Las Vegas and analyst updates. Micron Technologies closed 8.8% higher, Microchip Technology gained 6.7% and Qualcomm finished up 2.8%. Storage giant, Western Digital, also climbed 6.8% thanks to an analyst upgrade a day after demoing an 8TB solid state drive prototype at CES. Goldman Sachs was another firm making headlines on Tuesday, as it revealed an overhaul of what it discloses to investors. As the company steps further into the consumer banking world, it plans to hold its first investor day and provide more granularity on precisely how it makes money. Goldman stock closed 0.7% higher following the news.
S&P 500: -0.28% Tuesday, +0.2% YTD
Dow Jones Industrial Average: -0.42% Tuesday, +0.16% YTD
Nasdaq Composite: -0.03% Tuesday, +1.07% YTD
NMC Health continues to feel the pain with double digit daily loss
The FTSE 100 was essentially flat on Tuesday as US-Iran tension continued, but there were standout performances from Ocado Group, Kingfisher and Associated British foods, which closed 4.3%, 3.8%, 2.2% higher respectively. We mentioned Morrisons yesterday, its shares gained 1.6% with their Christmas update not as bad as expected. Chief executive David Potts said the firm had also worked to offset some of the impact. At the bottom of the FTSE 100, NMC Health’s share price continued to tank on Tuesday, closing 10.6% lower, which is a three year low. Last month the firm was targeted by American short-seller Muddy Waters and yesterday it announced a review of its finances. In the FTSE 250, Aston Martin Lagonda’s share price sunk by 16.5% after issuing a profit warning following a “very disappointing” year of sales.
FTSE 100: -0.02% Tuesday, +0.42% YTD
FTSE 250: +0.33% Tuesday, -0.23% YTD
Stocks to watch
Walgreens Boots Alliance: Pharmacy and retailing firm Walgreens had a tough 2019. It posted a negative share price return despite a rally in the final quarter and was the biggest loser for the year among the 30 stocks in the Dow Jones Industrial Average. The company reports earnings before the market opens on Wednesday, and analysts are expecting an earnings per share figure of $1.41, versus $1.43 in the same quarter last year. Investors will be wary of a repeat of Q2 2019, when the company missed estimates.
Constellation Brands: Alcoholic drink giant Constellation, which counts Corona and Modelo among its brands, has had a rocky 18 months. The company’s multi-billion dollar investment into cannabis led to a huge share price hit in late 2018, and significant stock volatility since. Investors will be watching closely for updates on the cannabis bet when the company reports its quarterly earnings update on Wednesday morning. Analysts’ earnings per share expectations for the quarter being reported are $1.82 but have been falling over the past three months.
RPM international: Coatings, sealants and specialty chemicals firm RPM posted a share price gain of more than 30% in 2019, in line with the S&P 500. Investors will be watching for an update on attempts to control costs in order to protect margins when the company reports earnings on Wednesday. Wall Street analysts have an average 12-month share price target of $77.09 on the stock, versus its current $74.97.
Marks and Spencer: The UK retailer received a double upgrade from Berenberg to ‘buy’ from ‘sell’ giving the share price a near 3% boost yesterday. They are due to release a trading statement tomorrow which will include the all important Christmas period. After a tough 2019 which saw the company relegated from the FTSE100 for the first time ever, they have since launched a joint venture with Ocado for their grocery business and appointed Richard Price, formerly of Tesco’s F&F, to revamp their clothing range.
Cryptoassets have continued their rally, driven by or coinciding with the continuing US-Iran tensions, whichever side of the debate you fall on, regarding Bitcoin as a safe haven asset.
Having traded at $6,934 on the second of January, Bitcoin is now up nearly 20% in the last five days, trading at $8,280 this morning.
It’s worth noting crypto prices are now approaching key resistance levels, particularly XRP, which could challenge the long standing downtrend going back to June 2019. A break of this trend line, from a technical perspective, is essential for any significant drive upwards in price.
Former Bakkt CEO sworn into Senate
Kelly Loeffler, the former CEO at crypto trading exchange Bakkt has been sworn in as Georgia’s newest senator. President Trump had actually been pushing for a different candidate, Doug Collins to be appointed but Governor Brian Kemp opted for Loeffler instead. It is as yet unclear whether or not Loeffler’s background in Intercontinental Exchange’s (ICE) Bakkt will have any bearing on the prospects of any crypto based initiatives in the US, particularly as President Trump has been vocally anti-Bitcoin in the past.
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