Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for August 27, 2020.
Global equities hit a record high yesterday as the recovery seen since the collapse in February continues apace. The FTSE All World index climbed 0.9% to 384.9 points, ahead of a high set in February, as technology giants which have propelled US markets higher now lift the global index to a new peak.
Now attention will turn to Federal Reserve Chair Jerome Powell as he will outline his monetary policy approach at this year’s virtual version of the Jackson Hole Symposium. One of the talking points is likely to be a changing of the inflation measuring metric to an average, so as to allow rates to stay super low for longer by allowing periods where the rate is above the target of 2%.
Meanwhile, at a company level in the US, Salesforce took centre stage off the back of huge revenue and profit gains across business lines. The cloud software firm’s share price surged 26% to an all-time high on Tuesday. Despite the record numbers, Salesforce began to tell some staff they would be losing their jobs on Wednesday, with a source familiar with the matter telling The WSJ that 1,000 of the company’s 54,000 employees will be impacted. Back in March, CEO Marc Benioff publicly pledged to avoid layoffs for 90 days as the pandemic hit and encouraged other company leaders to join him. The earnings figures and layoff news comes less than a week before the company enters the Dow Jones Industrial Average index of 30 blue chip American companies. Salesforce’s stock is now up 67.4% year-to-date and 79.4% over the past 12 months, with its market cap closing in on the $200bn mark.
Netflix jumps 11.6% as pandemic subscribers appear here to stay
The Nasdaq Composite’s year-to-date gain hit 30% on Wednesday, after Netflix, Workday, Facebook and Tesla all closed more than 6% higher. Netflix led the way with an 11.6% gain, after a survey indicated that most of the 26 million new subscribers that the firm has added this year plan to stay. Facebook’s 8.2% pop put its share price above $300 at the market close for the first time, after UBS analyst Eric Sheridan bumped up his price forecast on the company’s shares by more than a third.
Facebook also made headlines for another reason on Wednesday, as it said that privacy changes being made by Apple in its latest operating system could badly hurt its ability to make money from personalised adverts. The change would mean apps will not be able to collect consumers’ advertising identifier information without their permission, which the social media giant is afraid they will say no to. Both the S&P 500 and Dow Jones Industrial Average were in the green on Wednesday, but 2% plus losses from Exxon Mobil and Walgreens Boots held the index back.
S&P 500: +1% Wednesday, +7.7% YTD
Dow Jones Industrial Average: +0.3% Wednesday, -0.7% YTD
Nasdaq Composite: +1.7% Wednesday, +30% YTD
Doorstep lender Provident surges on hopes for unemployment business boost
The FTSE 100 was flat on Wednesday, while the FTSE 250 gained 2%. Provident Financial was by and away the biggest winner in the FTSE 250, adding almost 20%, as the firm hopes to capitalise on surging unemployment to generate new business, per The Telegraph. The company offers loans to consumers who struggle to get loans from banks, numbers of whom are likely to surge due to the huge unemployment figures triggered by the pandemic. Industrial software firm Aveva enjoyed another big day in the FTSE 100, adding 9.7% after jumping 7.3% the day before. THis was driven by an announcement that it is buying up a US rival for $5bn. Names including Diageo, Rolls Royce, National Grid and BP held the index back though, losing between 1.4% and 2% apiece.
FTSE 100: +0.1% Wednesday, -19.9% YTD
FTSE 250: +1% Wednesday, -18.9% YTD
What to watch
Dell Technologies: Dell’s share price has added 20.9% in 2020 so far, and 37.2% over the past 12 months, as the pandemic has played into its hands on various fronts. First of all, consumer demand for PCs and laptops has spiked, as has demand from schools and other groups – where production limitations are likely to be the only thing holding Dell back. Dell also owns an 81% stake in cloud firm VMware, which it is reportedly considering spinning off. Both companies deliver their latest quarterly earnings on Thursday, with analysts expecting a $1.38 earnings per share figure out of Dell and $1.45 for VMware.
Workday: Nasdaq-listed Workday is a software firm that provides tools for financial and human capital management. The $50bn market cap stock delivers its Q2 earnings report today, after adding nearly 30% to its share price year-to-date, including 10.1% on Wednesday this week alone. Workday’s stock jumped after an analyst price target upgrade and Salesforce’s huge earnings result. Currently, 17 Wall Street analysts rate the stock as a buy or overweight, 13 as a hold, and three as a sell.
HP: Similar to Dell, all eyes will be on HP’s laptop and PC sales when it delivers its own quarterly earnings update on Thursday. Expectations are high, as workers in major economies shifted to work-from-home set-ups, with many set to be working remotely for the mid-term or even permanently. HP’s share price is down 10.8% year-to-date, as business solutions such as printer and ink supply for offices, have likely struggled during the pandemic. Currently, analysts favour a hold rating on HP stock, with price targets ranging from $12 to $23 versus its $18.33 close on Wednesday.
Crypto corner: US giant flags crypto product
US investment house Fidelity has laid the groundwork for a Bitcoin-based financial product after filing paperwork for a new fund. Known as the Wise Origin Bitcoin Index Fund, the product falls under the “pooled investment fund” category, according to the firm’s Form D filing. According to CoinTelegraph, Peter Jubber, Fidelity’s president, filed for the Bitcoin (BTC) index product, which has a $100,000 minimum investment.
The firm is no stranger to Bitcoin, having recently published the results of a survey of 800 institutional investors across the US and Europe, which found 36% of respondents were already invested in digital assets, while 60% said digital assets had a place in their portfolio. Fidelity CEO Abigail Johnson publicly also said back in 2017 she had been mining the cryptoasset, which continues to trade above $11,000 a coin at present.
All data, figures & charts are valid as of 27/08/2020. All trading carries risk. Only risk capital you can afford to lose.
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