Good morning everyone,
In UK corporate news this morning, the bidding war for takeaway delivery company Just Eat plc has turned into a mudslinging contest with Takeaway.com feeling the need this morning to reach out to shareholders and clarify some of the terms of its deal.
In a statement, Takeaway.com said: “Prosus has made a number of claims over the last few weeks in an attempt to make its highly opportunistic cash offer for Just Eat appear more attractive. It persistently makes contradictory assertions about large future investment requirements and significant risks for shareholders in remaining invested in Just Eat, while itself wanting to assume those apparent costs and risks. Our strategy, management team, operational capability and perfect geographic fit make us the ideal partner for Just Eat.”
Link: City AM
Shares in Just Eat are trading flat this morning, up 30% for the year but still 15% from their 2018 peak.
With yesterday dominated by trade deal news, there were some substantial share prices moves that may have slipped under your radar. Streaming device manufacturer Roku fell by more than 15% after Morgan Stanley analysts downgraded their rating on the stock to “underweight”, arguing the risk outweighed the reward after a 400% plus share price rise year-to-date. The analysts said that Roku is facing down serious competition from large telecoms players and argued that earlier account growth was driven by working with television makers, which may be difficult to repeat without major new partnerships.
What does Brazilian steel and French champagne have in common?
Fresh trade tensions rocked US markets on Monday, with the three major stock indices all falling by around 1%. In response to US lawmakers signing legislation supporting the Hong Kong protestors last week, China banned US military visits to the territory and sanctioned a number of US non-government organisations for allegedly inciting protestors to commit violence. The escalation of tensions could disrupt US-China trade deal progress, the optimism around which has been one factor driving markets higher recently. President Trump then said he would increase tariffs on steel and aluminium imports from Argentina and Brazil and the US government proposed tariffs of up to 100% against imported French luxury goods after concluding that the country’s new digital services tax will harm US companies. Topping things off, the ISM manufacturing index, which we previewed yesterday, came in below expectations and contracted for the fourth month in a row. There was also a surprise in US construction spending figures, which unexpectedly fell 0.8% in October.
S&P 500: -0.86% Monday, +24.21% YTD
Dow Jones Industrial Average: -0.96% Monday, +19.1% YTD
Nasdaq Composite: -1.13% Monday, +29.13% YTD
UK manufacturers caught between a Brexit rock and an election hard place
The UK had its own disappointing manufacturing figures to contend with on Monday, with the IHS Markit/CIPS UK manufacturing purchasing managers’ index remaining in contraction territory for the seventh month in a row, albeit coming in above expectations. UK manufacturers also reported cutting jobs at a rate not seen since 2012. IHS Markit director Rob Dobson said that uncertainty around Brexit and paralysis ahead of the upcoming general election left manufacturers “squeezed between a rock and a hard place”. Escalating trade tensions also weighed on the UK, with the FTSE 100 closing down 0.82% and the FTSE 250 down 0.54%. In stocks, after riding high at the end of last week following the reveal of its first partnership in Asia, online grocery firm Ocado Group closed down 5.3% on Monday after announcing it will issue £500m of bonds in order to help fund its international expansion. In addition to its new Japan partnership, the company has done deals with firms such as Kroger in the USA, Casino in France and ICA in Sweden.
FTSE 100: -0.82% Monday, +8.29% YTD
FTSE 250: -0.54% Monday, +18.27% YTD
Stocks to watch
Salesforce: After an 18% share price climb in 2019 so far, and more than 170% over the past five years, Wall Street analysts still think there is near-term potential for enterprise software giant Salesforce, which reports earnings after the US markets close on Tuesday. The average 12-month analyst price target on the stock is $190.12, versus its $161 close on Monday. UBS analyst Jennifer Lowe said that more than 20% organic revenue growth is sustainable for the firm, which has already raised its guidance this year. The completion of its $15bn acquisition of analytics platform Tableau in August is likely to be a feature of its earnings call.
Workday: In addition to Salesforce, and Coupa Software which reported yesterday, the $39bn enterprise software firm Workday will report its earnings after the market close on Monday. Investors will be paying particular attention to Q3 costs, plus the performance of its human capital and financial management solutions. The stock has suffered since the mid-point of 2019, with its share price falling 14% since the end of July despite posting solid Q2 earnings. In October, a number of analysts took down their share price targets after an analyst day presentation. At present, 15 analysts rate the stock a buy, versus four at overweight, 14 at hold, and two at sell.
Marvell Technology: Rounding out a trio of tech earnings on Tuesday is semiconductor company Marvell Technology. The firm’s share price is up by around 60% year-to-date but has sunk by more than 8% since mid-November. On its Q2 earnings call at the end of August the firm beat analyst estimates, but CEO Matt Murphy said that the company faced a challenging macroeconomic environment and that it had been impacted by a ban on US companies selling components to Huawei. He added that those factors would continue to affect the firm in Q3 and analysts will be looking to probe for more information on both fronts.
Comparatively speaking, there was little movement in the big three cryptocurrencies in the past 24 hours. At the time of writing, Bitcoin was up 0.7% at $7,295.35, Ethereum up 0.13% at $148.33 and XRP down 0.2% at $0.22.
Price action is still battling against an overall downtrend with key levels still a little way off from being challenged.
Huobi has announced its membership in the state-led Blockchain Services Network (BSN) in order to provide an infrastructure for various institutions and services that use blockchain. These include telecoms giants China Mobile and China Telecom, as well as China UnionPay which is the equivalent of Visa or Mastercard
Link: The Block
Virgil Griffith to be released from jail pending trial
In the past few hours, a judge has ruled that the US Department of Justice has enough evidence to move a case against Ethereum developer Virgil Griffith to trial. Griffith was arrested on Thursday for conspiracy to assist the Democratic People’s Republic of Korea of evading US sanctions.
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