Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for May 29, 2020.
European markets have opened lower this morning after President Trump announced that he will hold a press conference today focused on China. The FTSE100 looks like it will miss out on a full week of gains down around 1.3%, once again convincingly clearing the 6200 mark seemed a bridge too far for the UK benchmark. Germany’s Dax faring slightly worse, down 2%. US futures point towards a 0.3% dip on the open.
Tensions have been rising once again between the two global superpowers, after China enacted a new security law in Hong Kong that led the US to declare that the region is no longer autonomous. The US is not the only country concerned, with the UK, Australian and Canadian governments all issuing a joint statement about the new security law. Investors are concerned that an increase in tensions could kick off a trade war at a time when global supply chains are already strained by the pandemic, and the unpredictable nature of Trump’s press conferences leave a wide variety of potential outcomes on the table.
China is not the only target in the President’s sights, as he took aim at social media companies yesterday after Twitter added fact-checking labels to his tweets. In retaliation, Trump signed an executive order opening up the potential for social media companies to be sued for the content on their websites. Twitter stock closed the day 4.5% lower, while Facebook was down 1.6%.
Late sell-off takes stock indices into the red
All three of the major US stock indices ended Thursday in the red, with the Dow Jones Industrial Average hit hardest — closing the day out 0.6% lower. Many of yesterday’s winners, including Goldman Sachs and American Express, fell furthest, with oil giants Chevron and Exxon Mobil also posting negative days.
In the S&P 500, energy was the hardest hit sector overall, losing 2.9% on aggregate, while the 3% gain posted by utility stocks was a bright spot. S&P 500 utility firm PPL gained 2.6%, although remains more than 20% down year-to-date, with a dividend yield of more than 6%.
In earnings news, Salesforce stock fell 4% in extended trading, having closed out the main trading day 2.6% higher, thanks to lower than anticipated guidance provided by management. Similar to other retailers, in its earnings report wholesale giant Costco said that it had benefited from consumers stocking up on essentials, but the surge dropped off in April due to stay at home orders, which hurt sales.
S&P 500: -0.2% Thursday, -6.2% YTD
Dow Jones Industrial Average: -0.6% Thursday, -11% YTD
Nasdaq Composite: -0.5% Thursday, +4.4% YTD
FTSE 100 finishes higher while UK car production vanishes
London markets closed out the day before the announcement of President Trump’s conference on China, and so did not go through the late day sell-off experienced in the US.
The FTSE 100 ended 1.2% higher, while the FTSE 250 gained 1.1%, with the performance of the two indices continuing to converge to bridge the huge gap between the returns delivered by large and smaller UK companies in 2020. The FTSE 100 was led higher by 5% plus gains from names including investment firm M&G, fashion house Burberry Group, miner Evraz and homebuilder Barratt Developments. In the FTSE 250, entertainment names Cineworld Group and Marston’s enjoyed major gains, finishing the day 21.4% and 16.5% higher respectively after it was reported that restaurants and pubs could be reopening sooner than originally anticipated.
There was grim news at the underlying level, after a trade body for the car manufacturing industry reported that British output fell 99.7% in April versus the same month last year. The report said less than 200 cars rolled off production lines last month as factories shut down or focused on making protective equipment for health workers.
FTSE 100: +1.2% Thursday, -17.6% YTD
FTSE 250: +1.1% Thursday, -20.8% YTD
What to watch
Canopy Growth: Canopy Growth is a cannabis company with a $7bn market cap that has put investors through the wringer as part of the rapid rise and subsequent bubble bursting that cannabis stocks have experienced. Its stock soared by more than 2,000% between 2016 and late 2018, hitting a share price of more than $50. The shares sank back to around $25 in late 2018, recovered to their previous highs, and then collapsed once more down below the $20 mark. Currently, the loss-making company’s stock is trading at just over $20. Despite all that, the company’s earnings report today is one to watch for an update on the broader development of the legal cannabis industry, given that the company is among the largest in the sector. Currently, nine analysts rate the stock as a buy and 11 as a hold.
Consumer data: In the US, April consumer spending data will be reported today, after last month’s report showed a drop off of 7.5% in March, along with a 2% drop in personal income. April’s consumer spending figures are likely to be more dire than last month, given that lockdowns did not come into effect in most parts of the US until the middle of March. Economists are forecasting a drop of 13% in April, and a similar drop in personal income. The US economy is heavily consumer dependent, and while worse than expected figures have the potential to move the market, share prices in recent weeks have been heavily tied to general sentiment around economic reopening, rather than individual data points on how dire the situation is at present.
Crypto corner: Samsung partners with Gemini to make Bitcoin trading easier
Samsung has made it easier for users of its smartphones to buy and trade cryptoassets.
Yesterday, the smartphone company announced a partnership with cryptocurrency exchange Gemini, with Samsung’s Blockchain Wallet now integrating with the Gemini mobile app, allowing users to buy and sell cryptocurrencies. Users will also be able to view their Gemini account balances in the Samsung Blockchain Wallet app, as well as transfer their crypto into cold storage through Gemini’s Custody feature.
Gemini is the first US cryptocurrency exchange to partner with Samsung. “Crypto is not just a technology, it is a movement. We are proud to be working with Samsung to bring crypto’s promise of greater choice, independence, and opportunity to more individuals around the world,” Tyler Winklevoss, CEO of Gemini, reportedly said.
All data, figures & charts are valid as of 29/05/2020. All trading carries risk. Only risk capital you can afford to lose.
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