Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for December 12, 2019.
The UK finally heads to the polls today after what feels like months of electioneering, but will the country get a resolution to the Brexit impasse?
Having been on track for a majority, the latest poll has the Conservative party set to win with a majority of 28 seats.
However, the outcome is by no means certain. The poll from YouGov, published yesterday, has the Tories on 339 seats overall, but with a wide margin for error built into the model, YouGov itself said it could not rule out a hung Parliament. By tomorrow morning we will have our answer.
Meanwhile, in stocks, state-backed oil goliath, Saudi Aramco, stole the headlines after it achieved the largest IPO of all time on Wednesday. It listed 1.5% of its shares on the Saudi Arabian Tadawul exchange, with trading starting at 32 riyals ($8.53) and rising to 35.2 ($9.38). The 10% rise hit a daily limit imposed by the exchange but gives the company a valuation of $1.88trn, well ahead of fellow trillion-dollar firms, Apple and Microsoft. Aramco raised less than it had initially hoped from the IPO at just over $25bn. That money came mainly from local investors after the Saudi government failed to win over foreign capital allocators. Aside from the valuation, potential hurdles included the limited rights of foreign shareholders investing in the firm, security risks and Saudi Arabia’s human rights record.
Fed stays the course
The major US stock indices finished higher on Wednesday after the Federal Reserve, as was widely anticipated, unanimously voted to hold interest rates following three cuts this year. Fed Chairman, Jerome Powell, said that the central bank’s economic outlook remains favorable, and on aggregate, the individual committee member views indicated that rates will likely be kept on hold for the duration of 2020.
The tech heavy Nasdaq Composite climbed furthest, at 0.44%, helped by semiconductor and computer memory firms Skyworks Solutions, Applied Materials, Micron Technology, Western Digital and Qualcomm, which all gained more than 3%. This was driven by an optimistic outlook for the prospect of 5G technology published by Bank of America analyst Vivek Arya, who upgraded his rating on Skyworks, among other firms. In the S&P 500, fashion retailers including L Brands, Gap and Ralph Lauren all lost more than 2%.
- S&P 500: +0.29% Wednesday, +25.32% YTD
- Dow Jones Industrial Average: +0.11% Wednesday, +19.65% YTD
- Nasdaq Composite: +0.44% Wednesday, +30.42% YTD
FTSE 100 takes a breather ahead of general election
The FTSE 100 index of the UK’s biggest shares was close to flat on Wednesday, as investors await the result of the general election on Thursday. If the polling proves wrong and an election upset rears its head, the outcome for stocks could be complicated. One silver lining would be that a fall in the value of the pound that would almost certainly accompany any uncertain outcome would be a positive for the exporter heavy FTSE 100.
The more domestically oriented mid-cap FTSE 250 index fell by 0.64% on Wednesday, after reports that a Conservative Party majority may be less certain than polling has suggested so far. Between the two indices, FTSE 100 constituent JD Sports Fashion was one of the biggest fallers. Its share price closed down 9.51% after Pentland, which remains the majority owner of JD, sold £177m worth of its shares in the firm.
- FTSE 100: +0.03% Wednesday, +7.25% YTD
- FTSE 250: -0.64% Wednesday, +17.97% YTD
Stocks to watch:
Oracle: Thursday is a big day for earnings in the US, as Oracle is one of four $100bn plus market cap firms to be sharing its latest quarterly update. The software firm’s share price is up 25% year-to-date, in line with the market and substantially ahead of rival Salesforce. Wall Street analysts overwhelming favour a hold on the stock, and in June Macquarie Research analyst Sarah Hindlian downgraded the firm from outperform to neutral. The average 12-month price target is $56.25, just seven cents below the Wednesday closing share price. Per Zacks Equity Research, the company is sitting on a trailing 12-month p/e ratio of 15.
Broadcom: California-based computer chip maker Broadcom is considered to be a barometer for the semiconductor industry, and for the global smartphone market where it serves top players including Apple and Samsung. The company reports earnings on Thursday, after a two-month period where its share price has soared by more than 18% as part of a broader rally among semiconductor stocks. Expectations are for the company to announce a year-over-year decline in earnings per share.
Adobe: Another software giant reporting quarterly earnings on Thursday is Adobe, which has posted share price gains of more than 30% year-to-date. The company has beaten earnings expectations in the past three quarters, and analysts’ 12-month average price tag of $323.72 sits around 7% higher than its Wednesday close. Investors will be watching for growth in demand for its digital media solutions services, and the development of cloud-based services as a revenue driver.
Costco: Costco is one of the best examples of a retailer that has successfully transitioned to the digital era, in part through getting its customers hooked on its in-store shopping experience. The firm reports earnings on Thursday, where one item to watch will be how a later than usual Thanksgiving holiday has affected sales. Wall Street analysts are split between buy and hold ratings on the stock, which has risen 45% year-to-date. The average 12-month price target is $305.38, versus its $295.30 Wednesday closing price, with analysts’ predictions ranging of $232 to $339.
Bearish sentiment continues to persist for crypto assets, with all three major coins falling back to multi-week lows.
This morning, Bitcoin was back at $7,115, having seen its price retreat to its lowest level since late November when it dropped through the $7,000 barrier.
Meanwhile peers Ethereum and Ripple followed suit, dipping to multi-week lows. With prices more than 50% below peak valuations seen earlier this year for both Ethereum and Ripple, and Bitcoin also sharply below year-highs, the negative sentiment which has been in play since late summer continues to weigh on the sector.
Napoleon offers CME linked fund
French asset manager Napoleon has announced the launch of a bitcoin fund for institutional and professional investors. It is linked to the futures listed on the CME. The same company lists a machine-learning based investment strategy on eToro – Napoleon-X.
All data, figures & charts are valid as of 12/12/2019. All trading carries risk. Only risk capital you can afford to lose.
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