Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for June 24, 2020.
Gold surged to levels not seen in eight years overnight, surpassing the recent May peak, to trade above $1,770 as people look to spread out their investments across multiple asset classes.
The precious metal has risen by 25% in the last year, to hit levels not seen since 2012 and the height of the Eurozone crisis.
Gold has climbed despite the rapid recovery in stock markets, which has seen them bounce back from March lows to leave them on track for their best quarter in a decade. The S&P 500 climbed back to 3,131 points overnight, leaving it less than 10% below its record high of 3,393 set in February.
In company news, Dell Technologies took centre stage after reportedly looking at options to spin off a huge stake in cloud firm VMWare, in order to deal with the substantial gap between Dell’s own $36bn market cap and the $50bn value of its stake. Essentially, the market is saying that Dell’s core business lines – personal computers and data storage – have no worth at all. In the three months to May 1, Dell posted revenues of $21.9bn, and net income (profit) of $182m. Dell stock, which had gained 1.5% in regular trading hours on Wednesday, jumped 18% in late trading, while VMWare gained close to 10%. Investors are optimistic that separating the companies may lead to the value of both businesses being more fully appreciated.
Elsewhere SoftBank priced a $14.8bn sale of T-Mobile stock on Tuesday, at $103 a share and also reportedly plans to sell its remaining $10bn stake to Deutsche Telekom. That is roughly a 4% discount to its Tuesday closing price. T-Mobile stock is currently at a record high and has gained more than 35% year-to-date. That surge has been driven by better-than-expected profit figures for Q1 and completion of its Sprint acquisition in April.
US shares climb higher despite threat of ‘decoupling’ US and Chinese economies
The major US stock indices continued their rally on Tuesday, with the Nasdaq Composite once again leading the way. The tech-heavy index gained 0.7% helped higher by names, including travel website Expedia, US-listed Chinese internet firm Netease, and Apple, which gained 4.2%, 4% and 2.1% respectively. The gains came despite US treasury secretary Steven Mnuchin, speaking at a virtual event, saying that unless the US can “participate and compete on a fair basis” with China, that the US will work to decouple the economies of the two superpowers. Mnuchin also revealed that he hopes the next coronavirus relief package will be passed in July but noted hundreds of billions of dollars remains unused from March’s bill. In the S&P 500, which closed the day 0.4% higher and is edging ever closer to positive territory year-to-date, the consumer discretionary sector led the way with a 1% gain. The utilities sector was the biggest loser, closing down 1.1%, while information technology stocks climbed 0.7%.
- S&P 500: +0.4% Tuesday, -3.1% YTD
- Dow Jones Industrial Average: +0.5% Tuesday, -8.4% YTD
- Nasdaq Composite: +0.7% Tuesday, +12.9% YTD
UK reopening sends FTSE 100 higher
London-listed stocks jumped on Tuesday, with the FTSE 100 up 1.2%, after Prime Minister Boris Johnson announced that a significant number of pandemic-related restrictions will be lifted in the UK in early July. Cinemas, museums, and galleries will all open, with the social distancing requirement cut in half to one meter. The FTSE 100 was led by mining company Evraz, investment firm Standard Life Aberdeen and online takeaway service Just eat, which gained 8.2%, 6.3% and 4.9% respectively. Other investment related names also enjoyed a positive day; M&G stock was up 4.3%, and the London Stock Exchange Group closed 3.9% higher.
Grocery delivery service Ocado Group found itself towards the back of the pack on Tuesday, sinking 3.5%, after gaining more than 50% this year. Ocado has headed in the opposite direction to the FTSE 100 over the past month, as the impending reopening of the economy likely means more shoppers return to physical stores and less reliance on its services.
- FTSE 100: +1.2% Tuesday, -16.2% YTD
- FTSE 250: +0.5% Tuesday, -19.3% YTD