Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for September 25, 2020.
Amazon unveiled a host of new products yesterday, including a notable bid to capture a slice of the video game market. The firm is launching a new cloud video game service called Luna, that works similarly to a TV streaming service such as Netflix. Instead of gamers having to download and install games, they will be able to instantly play them after selection. Amazon will charge $5.99 a month for the service and will also sell a $49.99 controller that can connect to a variety of devices. Instead of expensive gaming hardware, consumers will just need a strong internet connection and a compatible device for the game to stream on. It is early days for the service, but Amazon already owns dominant video game live streaming platform Twitch, which may help it take on Microsoft, Nvidia and Google who are also vying to dominate the nascent cloud gaming market. Amazon stock had a muted reaction to the product announcements, which also included new Echo speakers and a flying home security camera.
Elsewhere, following a late recovery on Wall Street, shares in Asia enjoyed a mix session. The Nikkei, which continues to trade close to its year high, gained 0.5%, while Hong Kong’s Hang Seng – which has had a far tougher year – dropped 0.5%.
Gold, one of the most popular trades in recent months, sold off earlier this week thanks to a resurgent US dollar which directly impacts the value of gold and other precious metals like silver. However, yesterday it climbed off lows to trade back up at $1,868, although it remains around 5% down on the week.
All three major US stock indices eked out a positive day after a volatile session yesterday. The next round of Covid-19 economic stimulus once again hit headlines, after reports that Democrats are putting together a new $2.4trn bill that cuts roughly a trillion dollars from the cost of a previous proposal. Democrats are hoping that the compromise will enable negotiations with the White House to progress after they disintegrated last month. The Federal Reserve has made it clear that it will take lawmakers, not just the central bank, to support the US economy through the continuing pandemic. They did say, however, that there was the possibility that some $380 billion in unused aid could potentially be utilised to prop up the economy.
The S&P 500, which added 0.3% on Thursday, was led by Olive Garden parent Darden Restaurants, biotech firm Illumina and Goldman Sachs, which added 8.1%, 4.9% and 4.8% respectively. Goldman’s gain came after UBS upgraded its rating on the stock from neutral to buy. Towards the back of the index was professional services giant Accenture, which sank 7% after quarterly profit and revenue figures fell short of analyst expectations.
S&P 500: +0.3% Thursday, +0.5% YTD
Dow Jones Industrial Average: +0.2% Thursday, -6% YTD
Nasdaq Composite: +0.4% Thursday, +18.9% YTD
Chancellor’s new job scheme fails to reassure investors
London-listed stocks slumped yesterday as Chancellor Rishi Sunak announced a new support scheme to help firms employ people on shorter hours, he cautioned that “I cannot save every business, I cannot save every job”. He argued that it would be wrong to artificially keep people in jobs that only technically exist because of the furlough scheme that will run out at the end of next month.
The FTSE 100 fell back by 1.3%, while the FTSE 250 closed the day out 1.1% lower. Rolls Royce and engineering firm Smiths Group were the biggest losers in the FTSE 100, falling by more than 7%. Several investment firms also suffered substantial losses, with M&G, Schroders and Standard Life Aberdeen all down by more than 3%, alongside brokerage Hargreaves Lansdown which fell 4.6%.
In the FTSE 250, Cineworld Group suffered the worst day, slumping by close to 15%. That fall came after the firm said that, while it has enough cash to keep running for now, if a second Covid-19 wave causes further prolonged shutdowns in the US and UK, it will need to raise cash early next year – and may breach loan covenants in either case.
FTSE 100: -1.3% Thursday, -22.8% YTD
FTSE 250: -1.1% Thursday, -23.2% YTD
What to watch
President Trump’s Supreme Court nominee: Today is quiet in terms of scheduled company earnings announcements and economic data, and all eyes will instead be on an anticipated Supreme Court nominee pick from President Trump. The President said in a TV interview this week that a pick will likely come on Friday or Saturday, and that his list is down to five people. The announcement is likely to set up a massive fight between the Democrats and Republicans at the same time as the parties try to come to terms on a multi-trillion dollar stimulus package that will be crucial to the US economic recovery.
Crypto corner: Stablecoin assets pass $20bn mark
The total value of stablecoins has surpassed $20 billion for the first time, as investors move to hedge their risks in both cryptoassets and traditional markets.
Coindesk, quoting data from Coin Metrics, show that the total value of assets for all stablecoins breached the $20 billion mark yesterday, just four months after breaking a $10-billion record in May.
Stablecoins are digital tokens, the values of which are pegged to fiat currencies like US dollars.
John Todaro, director of institutional research at cryptocurrency analysis firm TradeBlock, said:
Because some exchanges do not offer fiat pairs, stablecoins are the only available option for traders to move risk-off into fiat-like assets during periods of volatility.
Many investors see stablecoins as an intermediary step before putting money in riskier cryptocurrencies. After purchasing the stablecoins with US dollars, for example, they can move the stablecoins to exchanges and trade for cryptocurrencies such as Bitcoin, Ethereum or others.
All data, figures & charts are valid as of 25/09/2020. All trading carries risk. Only risk capital you can afford to lose.
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