European markets have edged up this morning, with commodities pushing up the FTSE 100, which is currently gaining 0.4% on the day. The biggest riser is JD Sports which is up over 6% as they announce a deal to buy US sportswear brand Shoe Palace for $325 million in an all cash deal. The deal sees Britain’s largest sportswear retailer expand its influence across the pond, specifically on the West Coast where Shoe Palace are predominately based.
The gains come despite increasing infection worries as London enters tougher restrictions from midnight tonight. The recent rapid rise of cases in certain areas has been linked to a new strain of Covid-19 which spreads much faster, Health Secretary Matt Hancock announced yesterday in a briefing.
Monday was a mixed day for stocks, as news of the first Covid-19 vaccinations being administered to the American public played off against a potential new wave of pandemic restrictions in New York. The S&P 500 and FTSE 100 were both in negative territory, while the Nasdaq Composite delivered gains.
In corporate news, investors reacted negatively to AstraZeneca’s planned $39bn takeover of Alexion Pharmaceuticals. Although the deal significantly expands the firm’s presence in immunology, its Nasdaq-listed shares were down 7.8% while its London price fell by 5.9%. On the other end of the deal, Alexion’s share price jumped by 29.2%. The deal appears to have taken investors by surprise, as recently the firm has been heavily focused on its cancer business and Covid-19 vaccine, per Reuters.
Elsewhere, energy stocks continued a recent run of volatility on Monday, with the S&P 500’s energy sector slipping by 3.5%. Of the S&P 500’s worst 10 performing stocks on the day, nine came from the energy sector. The falls for the energy sector came amid some weakness in the oil price, although both WTI and Brent oil remain well above previous lows, with the latter staying above $50 per barrel.
Tesla helps Nasdaq Composite higher
Of the three major US stock indices, only the Nasdaq Composite was in the green on Monday. Tesla was a major contributing factor, as the now $600bn-plus market cap electric car maker added 4.9% to its share price, after reports that the company has already achieved its delivery goals for some of its models in Q4. Netflix and a number of pharmaceutical names also helped the index higher, with the streaming giant adding 3.8% to its share price.
In corporate news, Boeing announced that it has expanded its investigation into defects with its 787 Dreamliner aircraft. According to The WSJ, the firm is inspecting more jets after finding additional manufacturing defects to what it has previously disclosed. ExxonMobil was also in the spotlight, as it put out a new climate change plan following pressure from activist investors. The oil behemoth announced a new five-year plan to reduce emissions, where it currently lags rivals in terms of the progress it has made.
S&P 500: -0.4% Monday, +12.9% YTD
Dow Jones Industrial Average: -0.6% Monday, +4.6% YTD
Nasdaq Composite: +0.5% Monday, +38.6% YTD
Cautious optimism around Brexit deal, although path remains narrow
The more domestically-focused FTSE 250 index posted gains on Monday, amid cautious optimism that a Brexit deal may be reached. Per The Guardian, EU chief negotiator Michel barnier said on Monday that a deal could be possible this week after Prime Minister Boris Johnson made a key concession over the weekend, but added that the path to an agreement remains narrow. The FTSE 100 fell back by 0.2%, as sterling gained value, which is generally a drag for the index. Within the FTSE 250, piping and heating firm Polypipe, Dixons Carphone and retirement firm Just Group were among the biggest winners, adding 11.4%, 6% and 5.1% respectively. In the FTSE 100, AstraZeneca, miner Polymetal and oil giant Royal Dutch Shell were the biggest drags on the index, while fashion firms Next and JD Sports Fashion were among the day’s best performers.
FTSE 100: -0.2% Monday, -13.4% YTD
FTSE 250: +0.7% Monday, -9.7% YTD
What to watch
Dixons Carphone: While 2020 has been an unusual one for many companies in terms of share price falls, Dixons Carphone has experience of this kind of sell-off. The company lost more than 50% of its value when the March sell-off hit, and remains a long way from its 2020 high. It also suffered a 50% plus sell-off in 2017 and has lost more than three quarters of its value over the past five years. That said, from its 2020 low to now, the firm’s share price is up by around 80%. The firm delivers its latest set of earnings on Wednesday, where investors will be watching for insight into whether recent momentum can continue, or if the firm will slip back into its long-term trend. The Telegraph pointed out over the weekend that the Carphone Warehouse side of the business, which has been a drag on the overall firm, is being wound down, but that it will “bequeath the group a huge pile of cash” before it does.
UK inflation: Inflation figures for November will be reported in the UK on Wednesday, after a small uptick in October driven by price increases in food and clothing, among other categories. Economists are expecting little change in November, but any surprise figures would likely be met with a reaction in markets.
UK economic data: Purchasing manager indices for the UK services and manufacturing sectors will be released on Wednesday. The data provides a window into the health of the services sector, which is a dominant portion of the UK economy. It is ‘flash’ data, meaning it is not the complete data set that will be included in the final tally, but the figures are typically closely watched. The consensus forecast, according to Trading Economics, is for the indices to show the UK’s service and manufacturing sectors are just back into expansion territory, after contracting in November.
Crypto corner: Bitcoin back above $19,000 as investors back it to beat other assets over long-term
Bitcoin will outperform gold, real estate and the stock market over the next 5-10 years, but will stop shy of a level above $50,000, a new survey has claimed.
According to a report on CoinTelegraph, a survey of 1,000 current and former bitcoin investors, carried out by British Virgin Islands-based institutional mining platform, Genesis Mining, found two-thirds believe it is a better long-term store of value than the dollar.
The cryptoasset itself has moved back above $19,000 this week, rallying off lows seen on the weekend near the $18,000 mark. However, just 17% of those surveyed predicted that bitcoin’s price would exceed $50,000 by 2030. This is despite the fact it would only require the price to increase by 160% over the next 10 years, something which the cryptoasset has more than surpassed in 2020 alone.
All data, figures & charts are valid as of 15/12/2020.
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