Daily Market News: European PMI data shows return to growth

Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for June 23, 2020.

European markets have opened higher this morning following some upbeat PMI data. Readings above 50 indicate growth and while the readings for Germany stopped just short, France’s numbers cleared that important level. France’s CAC 40 is up 1.6%, the UK benchmark FTSE 100 is up 0.8% but leading the way is the German Dax up over 2%. Markets have also been helped amid clarity from President Trump that the US-China trade deal is still intact after contradictory statements about it.

On Monday, Apple announced that it plans to move away from using Intel chips in its Mac laptops and computers, as part of a two-year transition to its own in-house designs. Apple already makes the processors for the iPhone and iPad. The news did not come as a big shock to Intel investors and there have been rumblings of the move in recent weeks. The smartphone giant will be using architecture from ARM to build its chips, as it does with the iPad and iPhone, making it more straightforward to develop apps and software that will work on all its devices. Apple stock closed the day 2.6% higher, while Intel held its ground thanks to the two-year timeline for the transition.

In other headlines, President Trump signed an order temporarily banning new immigrants on a raft of visa types, including the H-1B visa for high-skilled workers. The move puts technology companies and other US firms that rely on a supply of foreign talent in a difficult position. The Trump administration’s rationale is that American workers should be prioritised as the economy recovers, but the move has been criticized by several senators from within his own party.

Nasdaq Composite continues to tear higher

After a slow start on Monday morning, all three major US stock indices closed the day well into the green, with the Nasdaq Composite leading the way on a 1.1% gain. The index is now up 12.1% year-to-date, and 25% over the past 12 months. Stocks including PayPal, Netflix and Nvidia helped take the index higher on Monday, gaining 3.6%, 3.2% and 2.9% respectively. In the S&P 500, which closed 0.7% higher, the biggest winners were clothing firm Gap, heating and air conditioning firm Carrier Global and fast casual food chain Chipotle Mexican Grill. Gap stock gained 8.3%, driven by Wells Fargo analyst Ike Boruchow, upgrading his rating on the company from underweight to overweight, a two-step jump. Boruchow also increased his price target from $8 to $19, citing the company’s $1.9bn in real estate holdings and Athleta brand, which he feels are undervalued by investors. Travel names brought up the back of the S&P 500, with American Airlines, Norwegian Cruise Lines and Royal Caribbean Cruises all closing the day around 6% lower, as rising Covid-19 case numbers continue to eat into investors’ optimism.

In US economic data, sales of existing homes in the US crashed to the lowest level since 2012.

  • S&P 500: +0.7% Monday, -3.5% YTD
  • Dow Jones Industrial Average: +0.6% Monday, -8.8% YTD
  • Nasdaq Composite: +1.1% Monday, +12.1% YTD

Bank of England governor: Britain nearly went broke in March

On Monday, Bank of England governor Andrew Bailey said that panic selling of UK government bonds nearly drove the country to insolvency in March, and had the central bank not stepped in “the government would have struggled to fund itself in the short run”. He added that in effect, there was a “pretty near meltdown of some core financial markets”. Both the FTSE 100 and FTSE 250 sank on Monday, with the FTSE 100 closing the day 0.8% lower, taking its year-to-date loss to 17.2%. As in the US, travel and travel-related names were among the worst performers, with International Consolidated Airlines Group the biggest loser in the index with a 4.6% loss. In the FTSE 250, which closed the day down 0.6%, cruise firm Carnival was the biggest loser with a 10.2% loss. The cruise firm has dropped out of the FTSE 100 in recent weeks due to its market cap no longer earning it a place in the index of the UK’s largest companies. Similarly, easyJet, engineering company Meggitt and British Gas owner Centrica have all been demoted too.

  • FTSE 100: -0.8% Monday, -17.2% YTD
  • FTSE 250: -0.6% Monday, -19.7% YTD
forex and crypto market analysis

What to watch

IHS Markit: IHS Markit is a financial information firm headquartered in London, but listed on the Nasdaq exchange. Its share price is close to flat year-to-date, and up 23.1% over the past year, after a huge 61.4% rally during the last three months. The near $30bn market cap company reports its latest set of quarterly earnings on Tuesday. Per Zacks Equity Research, what the company has on its side is a well-diversified global customer base and strong brand recognition, with stable revenues. One thing that investors will be watching for on the analyst call on Tuesday morning New York time is any hint of additional M&A activity, after the company’s purchase of Singapore-based Catena Technologies in May. The huge gulf between the company’s debt and cash level will also likely feature. Currently, 11 analysts rate the stock as a buy, one as an underweight and eight as a hold.

Crest Nicholson: British housebuilder Crest Nicholson reports its half year results on Wednesday. Despite a 32% rally over the past three months, the stock remains more than 40% down in 2020 so far, which has pushed up its dividend yield into double digits. Late last week, the company was approved for a £300m lending facility under the Bank of England’s Covid corporate financing program. The question for investors watching Crest Nicholson earnings will be how big a hit to profits the lockdown, which halted viewings and sales, has been. As part of the lockdown measures, the Government actually ordered a temporary freeze on the housing market back in late March.

Services and manufacturing flash data: On Tuesday, US manufacturing and service sector data will be released, in the form of IHS Markit’s flash manufacturing and services indices, which take stock of how quickly the sectors are expanding or contracting. Flash purchasing manager indices (PMI) for both will be released, where firms share data such as output, new orders and pricing. A figure below 50 indicates contraction, and above 50 expansion. Economist expectations are for a figure of 48 for the manufacturing sector (versus 39.8 in May) and 46.5 for the services sector (versus 37.5 the month before).

Crypto corner: Buy your toothpaste with Bitcoin

Bitcoin ATM company LibertyX has partnered with major US retailers 7Eleven, CVS and RiteAid to let shoppers buy their groceries and toiletries with Bitcoin.

The deal with the well-known US retail brands gives shoppers access to 20,000 locations across the country. While LibertyX is better known for its ATMs, customers of these shops will now be able to download an app to make purchases.

Shoppers will need to use the app to present a barcode for payment at the shops where they will be able to use the world’s biggest cryptoasset to make routine purchases such as snacks and toothpaste.

There is a catch for now however. Customers who use the app to pay will have to stump up a $4.95 retailer service fee and “customer selected miner fee,” although LibertyX says it is waiving these for now.

All data, figures & charts are valid as of 23/06/2020. All trading carries risk. Only risk capital you can afford to lose.  

This is a marketing communication and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without having regard to any particular investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared utilizing publicly-available information.

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