Where there’s smoke, there’s cash

Good morning,

In UK stocks, British American Tobacco’s trading update was one of the highlights on Wednesday. Despite cigarette sales volume falling in line with the industry, the company reported that it had eked out more revenue on what it does sell. Finance director, Tadeu Marroco, said that BAT expects revenue and profits for 2019 to fall in the upper half of its guidance range. The firm’s share price closed 3.2% higher, and was followed by rival Imperial Brands, which climbed 2.4%. There was one black spot, as the company said that the US vape market has slowed down as manufacturers are contending with a regulator crackdown on vaping, following health concerns. This week, Massachusetts signed into law a ban on flavoured vaping products, and the New York City Council approved a ban on all flavoured e-cigarettes.

US economic data dump offers reassurance

The major US indices once again edged to new record highs yesterday. The tech heavy Nasdaq Composite lead the way with a 0.66% gain. Wednesday was a busy day on the US economic calendar, with a number of positive data points to digest. A revised estimate of third quarter GDP growth came in at 2.1%, above the 1.9% previously projected. Additionally, the number of people applying for first-time unemployment benefits fell sharply for the week, while orders for durable goods and consumer spending both rose in October. Under Armour was one of the biggest winners on the day, closing 6% higher after Raymond James upgraded the stock to a strong buy despite an ongoing federal investigation into its accounting practices. Deere & Company, which we flagged as a stock to watch in yesterday’s edition, finished 4.3% down after warning that trade tensions and harvesting conditions have caused farmers to become cautious about making major investments. Boeing also struggled on Wednesday, with its share price falling 1.5% after reports of further delays to returning its 737 Max planes to service.

S&P 500: +0.42% Wednesday, +25.8% YTD

Dow Jones Industrial Average: +0.15% Wednesday, 20.73% YTD

Nasdaq Composite: +0.66% Wednesday, +31.2% YTD

Low roller

The FTSE 100 climbed again on Wednesday after President Trump said to reporters on Tuesday that the US is in “the final throes” of a trade deal. The index is still almost 4% off its peak this year at the end of July, but has been making up ground. One stock weighing on the index was Rolls-Royce, which fell 3.4% after ratings agency Standard & Poors downgraded the firm’s credit rating to one level above junk, reported the Financial Times. Earlier this month, the company revealed that its Trent 1000 engine program – which has been running into difficulties – was going to cost it an extra £800m. Over the past six months, its share price is down more than 18%. In the FTSE 250, which climbed by 0.43% on Wednesday, struggling luxury car maker Aston Martin Lagonda was once again among the frontrunners. The firm’s share price jumped 10.7%, taking its total gain for the past week close to 30%, however the current £5.87 share price is still a long way from its near £14 peak earlier this year.

FTSE 100: +0.36% Wednesday, +10.43% YTD

FTSE 250: +0.43% Wednesday, +19.72% YTD

Stocks to watch

US markets are closed today.

E.ON (EOAN.DE): On Friday morning German utility company, Eon, will report its latest earnings update. The firm has spent the year implementing a €43bn deal with RWE announced last March to acquire Innogy, along with a number of asset swaps that have reshaped the German energy market. Essentially, according to the Financial Times, the deal means Eon has become a retail focused company, while RWE has acquired Eon and Innogy’s renewables businesses and taken a stake in Eon. Much of the transfer work was completed in Q3 this year, and analysts will be keen to hear an update from management on the road forward from here. Overall, analysts tilt towards a buy rating on the stock, although that view is not universal.

UK housebuilders: Also ones to watch on Friday will be British housebuilders, as a raft of new economic data will be released, including the Nationwide house price index, consumer credit data from the Bank of England, mortgage lending data and more. Persimmon, Barratt Developments and Berkeley Group are among the biggest listed house builders in the UK. All are sitting on sizeable share price gains this year that have significantly outpaced the wider market. Barratt, for example, is up close to 50% in 2019.

Crypto Corner

Crypto sentiment improved sharply over the past 24 hours, with the three major currencies all achieving strong growth. At the time of writing, Bitcoin was up more than 6% at just over $7,500, while Ethereum was up 4% at just over $152 and Ripple’s XRP up 3.72% at $0.22. However, all three currencies are down heavily on the month, meaning they could present an attractive entry point for investors, despite recent gains.

In other news, Bitcoin futures exchange, Bakkt, reached a record number of contracts traded yesterday – 4,443 contracts, approximately $33 million at current Bitcoin prices. With institutional interest in Bakkt increasing month on month, bucking the overall market sentiment in Bitcoin, could this spark a resurgence in crypto spot markets?


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