Coronavirus cases are back at the top of the news agenda as spikes are reported around the globe. Countries including the UK, the Netherlands and India yesterday revealed multi-week or month highs in confirmed cases, while several US states also reported climbing numbers of both new infections and deaths.
Amid the resurgence of the virus, all eyes were on US tech shares once more after a sell-off lasting multiple days. Yesterday they bounced back, recovering some ground; Tesla and Nvidia led the way, with gains of 10.9% and 6.7% respectively. Prior to the rebound, Tesla had lost more than a third of its value in a little over a week, while Nvidia had fallen 17% over three trading sessions. Apple and Microsoft joined in the rebound, with both adding around 4%. The gains helped the tech-heavy Nasdaq Composite rebound almost 3% yesterday, giving it year-to-date gains of 24.2%, although it remains down 7.6% over the past five days. According to Marketwatch, the index has posted 42 record closes so far in 2020.
The snap back in the US helped lift Asian markets overnight, with Japan’s Nikkei up 0.9% and Hong Kong’s Hang Seng 0.2% firmer.
In corporate news, French luxury goods giant LVMH said that it is backing out of a $16.2bn deal to take over American-listed jeweler Tiffany & Co. LVMH said that the deal was being dragged into trade disputes between France and the Trump administration, and had received a letter from the French foreign ministry asking it to delay the acquisition. Tiffany has in turn sued LVMH in an attempt to force the deal under the agreed terms.
US job openings increased
All three major US stock indices jumped yesterday, with the Nasdaq Composite enjoying the best day after falling the hardest on Tuesday. In earnings news, Slack stock plunged double digits after delivering revenue growth in line with its rate over the past two quarters, rather than the huge pandemic-induced growth other virtual communication tools such as Zoom have enjoyed. The firm also failed to see a year-over-year change in how often it is winning business versus Microsoft’s Teams product, CFO Allen Shim said on the company’s earnings call.
Lululemon also slumped after its own earnings report, in which the athleisure firm beat revenue growth expectations and reported 157% online revenue growth year-over-year. In a sign of how high investor expectations of companies that stand to benefit from pandemic trends are, the company’s share price still fell 7.4%.
S&P 500: +2% Wednesday, +5.2% YTD
Dow Jones Industrial Average: +1.6% Wednesday, -2.1% YTD
Nasdaq Composite: +2.7% Wednesday, +24.2% YTD
AstraZeneca holds firms after positive news on Covid-19 vaccine trial hiccup
After reporting late on Tuesday that it had paused its Covid-19 vaccine trial due to participant illness, AstraZeneca’s London listed shares closed the day in the green. Per CNBC, the company’s CEO Pascal Soriot told investors on a private conference call on Monday morning that the participant was a woman in the UK who experienced symptoms that lined up with a rare spinal disorder. The diagnosis is awaiting confirmation, with her discharge from hospital likely imminent. A similar problem happened in July, where a participant was diagnosed with multiple sclerosis, deemed unrelated to the Covid-19 vaccine.
Overall, the FTSE 100 gained 1.4% on Wednesday, led higher by gains from BT Group, Ashtead Group and Unilever. Rolls Royce and British Airways parent International Consolidated Airlines brought up the back of the index, with each suffering a 3.5% plus loss. The FTSE 250 was close to flat for the day, held back by firms including JD Wetherspoon and Cineworld, which fell back on the government’s new restrictions around social gatherings.
FTSE 100: +1.4% Wednesday, -20.3% YTD
FTSE 250: -0.2% Wednesday, -19.6% YTD
What to watch
Oracle: Database and cloud solutions firm Oracle has added 7.5% year-to-date, lagging well behind rival Salesforce’s 54% gain in 2020. The firm’s earnings call today will be one to watch, as co-founder Larry Ellison has made no bones about criticizing rivals such as SAP and Workday. Wall Street analysts favour a hold rating on Oracle stock, and are anticipating an $0.86 earnings per share figure. One factor likely to be raised on the earnings call is the company’s involvement in a bid for TikTok’s US operations.
Chewy: US listed online pet food retailer Chewy has seen its share price soar by more than 100% year-to-date, as the pandemic has been a catalyst for delivery service demand. As Lululemon and Slack both proved yesterday, investor expectations for stocks poised to benefit from the pandemic are sky high. Chewy is now a $24.4bn market cap company that has not yet posted a quarterly profit, and whether the shift to online driven by the pandemic will shorten the firm’s route to profitability will be a key point to watch for on its Thursday earnings call.
Peloton: Home exercise equipment firm has added 221% to its share price year-to-date, sending it past the $20bn market cap marker. The company reports its latest set of quarterly earnings today, one challenge it is likely to report is its ability to keep up with demand. On Wednesday, Peloton stock jumped 6% in normal trading and climbed further after hours, after the company said it plans to cut the price of its flagship exercise bike and release a more premium model, plus a cheaper treadmill option. The company also makes money from interactive classes and software subscriptions that integrate with its equipment, so the more bikes the firm ships, the more repeatable revenue it can generate. Wall Street analysts overwhelmingly favour a buy rating on the stock.
Crypto corner: Pandemic ‘to speed bitcoin adoption’ says Singapore bank
The chief economist of Singapore-based multinational bank DBS Bank has said the COVID pandemic is “speeding adoption” of cryptoassets.
Speaking about demand for cryptoassets, Taimur Baig at DBS Bank said there were two distinct phases of demand: pre-pandemic and post-pandemic.
“Pre-pandemic demand was largely speculative. People saw bitcoin had a spectacular run and wanted to be part of that game, so what’s wrong with putting in 1% of assets under management,” Baig reportedly said in an interview.
“But I think post-pandemic is beyond speculative. It’s more about, ‘this thing has fixed circulation, it will not be debased.’ People are worried about dollar outflow and wondering if they should hold crypto in addition to gold as a safe-haven currency.”
Bitcoin has started to make gains this week, rising yesterday to $10,300, it’s highest level in almost a week, although it remains some 17% off recent peaks.
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