Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for November 25, 2019. The text below is an excerpt and does not contain the full analysis.
Highlights include:
- Fidelity Digital Assets Set to Onboard its First Exchange Platform: The move to offer an exchange could give the crypto markets a much needed liquidity boost, by giving institutional and large individuals, the confidence to now trade crypto under the umbrella of a well established name.
- BTC Approaches Dangerous Territory: After breaching the $7,000 mark, BTC is approaching a “death cross” – a sentiment indicator where the 50-day moving average price falls below the 200-day moving average to the downside. On both occasions when this has happened previously, bitcoin fell by more than 60%.
- US Indices Look to Bounce Back from Fall Last Week: The continued wait for substantial news on a US-China trade deal (plus mixed earnings results from retailers) held markets in check last week. The key thing now will be how far Trump will want to push for further concessions with the election in mind.
Hello everyone,
Late last week Tesla unveiled its latest vehicle, the “Cybertruck”, aimed at taking on the lucrative but fiercely competitive US pickup truck market. The launch didn’t go to plan, with the “armour glass” windows smashing during a demonstration.
Visually, the Cybertruck has divided opinions among consumers and Wall Street analysts alike, and it has been met by a cool reception from investors. On Friday, Tesla’s share price fell by over 6%, wiping out a chunk of the gains the stock had made this month.
Bernstein analyst Toni Sacconaghi predicted that the truck’s looks will make it a niche offering, while Credit Suisse’s Dan Levy put it most bluntly, saying that legacy carmakers can “breathe a sigh of relief, as we don’t expect Cybertruck to encroach on large pickup share”.
Trade wars: in, out, in, out, shake it all about
Source: Reuters
After six straight weeks of gains, the major US indices fell slightly last week. The continued wait for solid news on a US-China trade deal plus mixed earnings results from retailers held markets in check. For much of the week there was conflicting news reports and statements from both sides in the trade war, with investors largely in wait and see mode. The key thing now will be how far Trump will want to push for further concessions with the election in mind. A victory he can announce will surely be better than a further extension to the ongoing 16-month saga.
- S&P 500: +0.22% Friday, +24.07% YTD
- Dow Jones Industrial Average: +0.39% Friday, +19.5% YTD
- Nasdaq: +0.16% Friday, +28.4% YTD
Sinking pound boosts major UK stocks
Before Friday the FTSE 100 index had been set to post a negative week, with trade concerns – both relating to US-China and US-Europe – outweighing optimism. However, a tumble in the value of the pound after disappointing data on the output of the UK private sector provided a boost on Friday. As many of the constituent companies in the FTSE 100 derive most of their income overseas, any drops in sterling provide a lift. The index climbed by 1.22% on Friday, finishing the week 0.33% higher, while the FTSE 250 ended 0.4% higher for the week. Among the UK’s largest firms, JD Sports Fashion, Centrica and Glencore were the biggest climbers on Friday, at 3.8%, 3.7% and 3% respectively. In company earnings last week, life-saving technology company Halma was the big winner, with its shares popping 8% and maintaining that level after both revenues and profits exceeded expectations.
- FTSE 100: +1.22% Friday, +8.9% YTD
- FTSE 250: +0.57% Friday, +17.05% YTD
Stocks to watch
LVMH (MC.PA), Tiffany & Co (TIF): Louis Vuitton parent company LVMH has today agreed to buy Tiffany for $16.2bn in its biggest acquisition yet. Investors have been backing the luxury goods maker this year with shares up close to 60% in 2019 with a 2% pop this morning off of the news of the purchase. Not to mention the brand value, the acquisition of Tiffany will strengthen LVMH’s position in the United States. It will be interesting to see how Tiffany’s share price reacts when it opens this afternoon.
Source: Reuters
Hewlett Packard Enterprise: Not to be confused with HP Inc, which is currently in the middle of an attempted acquisition by Xerox, Hewlett Packard Enterprise is the other company formed when Hewlett Packard split its business in 2015. HPE provides servers, storage and more to businesses, while HP Inc is focused on personal computing and printers. Since the split, the $22.4bn HPE’s share price has climbed more than 70%.
This year, it has gained 29.6%, but with multiple double-digit drops along the way. In September it completed the acquisition of supercomputing firm Cray, which will almost certainly be a topic of interest on its Monday earnings call. The company has exceeded earnings estimates in its past four quarters, but analysts overwhelmingly favour a hold rating on the stock, with the 12-month average price target of $16.69 slightly below the current share price.
Pets at Home: In the UK, pet supplies firm Pets at Home will be reporting earnings on Tuesday. Investors have enjoyed a mammoth year, with the share price up 80% in 2019 so far, snapping a decline that saw the price fall from over £300 in 2015 to below £115 at the end of 2018.
In the face of stiff online competition, the firm has invested in cutting prices and offering discounts to repeat customers. Pets at Home stock was recently upgraded to a buy rating by broker Liberum for the first time in three years. Analysts will be looking for signs that the recovery momentum is continuing when the firm reveals its earnings.
Firms that built themselves on the backs of non-employees are facing a reckoning
The spread of the so-called gig economy, through the popularity of companies such as Uber and Deliveroo, has created legions of users who have become accustomed to on-demand services at incredibly low prices. The rise of these firms has largely been predicated on being able to see themselves tap into an on-demand workforce entirely made up of casual workers. Indeed, the bulk of those working for them are not classed as employees.
Now, that concept is facing serious challenges. Earlier this month, the state of New Jersey ordered Uber to pay $649m to cover years of unpaid employment taxes, after ruling that the company has misclassified its workers. California has already taken similar steps this year, approving a bill requiring companies to treat contract workers as employees. Steps in this direction pose a major threat to the growth of such firms, many of which are loss-making under the current system – let alone when they are saddled with pension plans, employment taxes, benefits and more.
Crypto corner
Investors are selling cryptoassets en masse, with prices plunging to multi-year lows for some of the core coins. Bitcoin has dived to a six-month low after breaching the $7,000 mark and is currently off 4.6% at around $6,800. The world’s most popular crypto coin has now effectively halved from its peak in June this year.
The latest move down has been triggered by derivatives trading, with $100m of positions liquidated overnight. Worse could be on the cards for the currency if it sees an expected “death cross” – a sentiment indicator where the 50-day moving average price falls below the 200-day moving average to the downside. On both occasions when this has happened previously Bitcoin fell by more than 60%.
Ethereum and Ripple followed suit. Investors would have to go back to November 2017 to buy Ripple at such low prices after it gave up 6.5% overnight to trade at $0.209, while Ethereum is at an 8-month low at $134.8.
Source: Coinspeaker
In terms of developments in the industry, Fidelity Digital Assets (the digital arm of major investment management firm Fidelity) is expected to sign its first exchange by the end of the year.
Currently FDAS is acting as a brokerage, allowing institutional investors to buy and sell Bitcoin, mainly via OTC (over the counter) trading desks.
The move to offer an exchange could give the crypto markets a much needed liquidity boost, with institutional and large individual investors, who are perhaps waiting on the sidelines, the confidence to now trade crypto under the umbrella of a well established name.