Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for September 3, 2020.
European markets have opened higher this morning as a Euro sell off helped the export-heavy Dax climb 1.5%, likewise weaker Sterling has seen the FTSE climb 1% with its high concentration of overseas earning constituents. U.S. bourses are trading either side of flat following yesterday’s rally, which saw the S&P make another record high while big tech heavyweights like Apple and Tesla pause for breath after their incredible run. It is not a huge surprise, after a six-fold increase this year in the case of Tesla some investors were due to take profits at some point. Tesla’s fall came after it was reported that its biggest independent shareholder, Edinburgh-based investment firm Baillie Gifford, had cut its stake to take profits. Year-to-date, the FT reported that Baillie Gifford has sold just under half of its Tesla stock as the share price has skyrocketed. The firm’s clients are sitting on Tesla profits “conservatively estimated” at between $17bn and $20bn. Shares were down as much as 15% yesterday before paring much of those losses to close 5.8% down.
U.S. debt to hit 100% of GDP as jobs data disappoints
U.S. government debt has reached its highest level since World War Two and is set to exceed 100% of GDP by next year according to the Congressional Budget Office. This sets the US among a handful of high-debt nations including Greece, Italy and Japan. However, the surge in borrowing has done nothing to dampen investor spirits as US markets reached fresh highs.
The cross-sector rally came despite private sector payroll data that dramatically missed expectations. Payroll service provider ADP’s August report showed that private payrolls increased by 428,000 during the month, indicating the economy is adding jobs but well below the near 1.2 million figure expected by economists. Job creation skewed heavily to service jobs, where 389,000 were added versus the 40,000 for goods producers. The leisure and hospitality sector was one standout, adding 129,000 jobs alone. Oil exploration names dominated the bottom of the S&P 500 yesterday, with Diamondback Energy, Marathon Oil and Apache the worst three performers. The slump followed US oil future prices hitting their lowest level in a month, per Marketwatch.
S&P 500 sets 22nd record close of 2020
The S&P 500 jumped 1.5% yesterday to a record high, with 10 of its 11 sectors in the green. Likewise, the Dow Jones went above 29,000 for the first time since February and the Nasdaq hit a record high, too.
It was utility, materials and real estate stocks that led the way in the S&P 500, with the information technology sector – the main driver of the recent rally – lagging behind. Individual stock wise, business IT firm DXC Technology and Jack Daniels’ parent company Brown-Forman led the S&P 500, with both delivering double digit gains.
S&P 500: +1.5% Wednesday, +10.8% YTD
Dow Jones Industrial Average: +1.6% Wednesday, +2% YTD
Nasdaq Composite: +1% Wednesday, +34.4% YTD
Housebuilders lead UK shares higher
London-listed shares jumped yesterday too, with the FTSE 100 gaining 1.4%, led by a trio of homebuilders and property developers. Barratt Developments sat atop the pile with an 8.7% daily gain, despite it reporting that profits had almost halved. Similar to their US counterparts, UK shares rallied in spite of negative economic news. In the UK, Bank of England governor Andrew Bailey warned that there is a significant chance economic growth will be much weaker than currently projected, and said that a “natural caution” has prevented companies from making a fast comeback from the pandemic.
In the FTSE 250, which added 0.6% yesterday, property names again stood out. Hammerson appeared to jump more than 500%, but that was a technicality caused by a capital reorganisation that involved a one-for-five share consolidation and a rights issue. One factor driving home builders higher was Nationwide’s monthly house price index, which showed prices jumped 2% in August to once again hit an all-time high.
FTSE 100: +1.4% Wednesday, -21.2% YTD
FTSE 250: +0.6% Wednesday, -19.1% YTD
