Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for January 21, 2020.
Global markets are all in the red this morning as China reports a fourth death from the deadly new coronavirus. It has also been confirmed that the disease can spread from human to human. This has seen fears surface over travel and trade restrictions, which of course has an economic impact. Asian bourses were down between 1 and 2.5% each, the UK’s FTSE is currently down 1.3% and US futures are indicating a 0.5% dip on the open.
This comes after the International Monetary Fund, although still predicting that global growth will pick up this year versus 2019, has lowered its global economic forecast, citing risks such as the potential re-escalation of US-China trade tensions. Included in the numbers, the IMF is predicting that China’s economic growth will continue decelerating, Japan’s aging workforce will continue to eat into its already slow growth, and that India will experience a sharp slowdown in growth – albeit from a high base.
Is easyJet set to soar after increasing revenue per seat?
easyJet, the low-cost airline, said today it had delivered a strong performance for the quarter ended 31 December, after passenger, seat and load numbers all climbed, and revenue jumped 9.9%.
Benefiting from factors including the demise of Thomas Cook in September, and the launch of its easyJet holidays, the airline will be in sharp focus for investors having delivered a share price gain of more than 50% from August’s lows.
Elsewhere, Dixons Carphone said it had delivered a strong performance in sales in the all-important Christmas trading period, with like-for-like increases in electrical sales and rising international numbers thanks to the impact of currency moves. Nonetheless, overall like-for-likes were flat.
BAE leads FTSE 100 on back of dealmaking
The FTSE 100 and FTSE 250 both dipped yesterday following the IMF’s reduced forecasts, taking the FTSE 250 back into negative territory for the year so far. Defense firm BAE Systems led the FTSE 100 with a 3.7% share price gain, after announcing it will be acquiring Collins Aerospace’s military GPS business and Raytheon’s airborne tactical radio unit. It is spending $1.9bn on the first and $275m on the second. CEO Jerry DeMuro described it as a “unique opportunity to acquire critical radio and GPS capabilities” in order to serve the modernization needs of the US military and its allies. At the bottom of the FTSE 250 was outsourcing firm Capita, which fell by 4.5%, following reports that it is looking to offload business units including events management and translation.
- FTSE 100: -0.3% Monday, +1.5% YTD
- FTSE 250: -0.2% Monday, -0.2% YTD
Stocks to watch
IBM: $122bn market cap IT firm IBM will report Q4 results today. While its shares climbed by around 20% last year, they lagged the S&P 500 and the technology sector. While Microsoft has managed to transform itself to compete with the new breed of tech firms, IBM has found itself lagging behind. Developments in its cloud computing business will be a key feature of its Q4 earnings. Analysts are predicting an earnings per share figure of $4.69, versus $4.87 in the same quarter a year prior, with a hold rating by far the most popular.
United Airlines: United was forced to cancel thousands of flights in the last two months of the year due to the continued grounding of its 14 737 Max planes (it has more than 100 on order). This was in stark contrast to key rival Delta which finds itself unburdened by the problems with Boeing’s 737 Max airliner. The planes make up a small portion of United’s fleet however, and analysts are bullish on the prospects for the airline, with a $111.06 average 12-month price target, versus its $89.70 close on Friday. United’s share price has lagged Delta’s over the past 12 months, climbing by 4.8% versus 28.9%.
Burberry: With China being such a huge market for luxury goods, the coronavirus outbreak has hit Burberry’s share price quite hard over the last couple of sessions, losing 6.6%. However, until then a real turnaround was in full swing posting 29% gains for 2019. CEO Marco Gobbetti has been behind repositioning Burberry as an upmarket brand and delivering growth. That said, the company can’t do anything about the disruption in their big markets, for example with the Hong Kong protests last year and now this new virus in China, the question is can the company still deliver their forecasts under these conditions.
CME Group options double one week after launch
Bitcoin options from CME Group have seen volumes double in the first week since their January 13th launch. Volumes sat at 122 contracts, worth 610 BTC. Futures have also seen their highest numbers of 2020, indicating that the demand for crypto derivatives is increasing as more venues open and institutional interest grows.
DeFi space at record levels
Decentralised finance or DeFi aims to innovate existing financial services frameworks using blockchain technology. Ethereum is currently the hub of DeFi and as of last week the total value locked in DeFi has hit $827 million – a new record high.
As Etheruem moves to proof-of-stake the increasing amounts of ETH being locked in DeFi could have implications on price going forward, particularly if demand for Ethereum increases.
All data, figures & charts are valid as of 21/01/2020. All trading carries risk. Only risk capital you can afford to lose.
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