Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for December 10, 2019.
Global markets are down across the board this morning as investors err on the side of caution ahead of the December 15th deadline for the next round of US imposed tariffs, which is fast approaching. Germany’s DAX is trading 1.3% lower and the futures market points towards a softer open to the tune of around half a percent in US indices.
The UK benchmark FTSE100 is down 1.1% for the same reasons and although not a FTSE100 constituent, the big mover this morning is fashion retailer Ted Baker. Its shares are trading down 14%, having been down over 30% in earlier trading. The company issued a fourth profit warning, suspended its dividend and CEO Lindsey Page stepped down in what has been a catastrophic year for the company. The shares have lost more than 80% of their value from 2019 highs.
Elsewhere, Tesco’s share price soared on Monday after it said that it is considering selling its 2,000-store Asian business. The firm operates in Thailand and Malaysia under the Lotus brand and employs more than 60,000 people in the region. Lotus is a significant contributor to profits and earlier this year the firm highlighted growth plans, including store openings. Tesco said that it was reviewing its business in Asia, including a potential sale, after receiving “inbound interest”. Clive Black, an analyst at Shore Capital, said that the profitable unit is one of the jewels in Tesco’s crown and that any bid would need to be at a “knockout price”. He said: “It could go for a very high price and it’s also the case that Tesco doesn’t need to sell.” Despite the potential to lose a profit center, investors welcomed the news and Tesco’s share price closed 4.6% higher. Tesco shares are now up more than 30% year-to-date.
T. Mobile sinks as court case begins
The major US stock indices all fell between 0.3% and 0.4% on Monday, with share price losses posted by big names such as Apple and Goldman Sachs a drag. Apple, the world’s largest listed company, fell by 1.4% this was again due to tensions over the impending US-China tariff deadline. T. Mobile was another big loser on the day, with its share price dropping by 2.4% as the trial over its merger with rival Sprint kicked off. The deal was approved by US officials earlier in the year, but 14 states have decided to continue with a lawsuit initiated in June to attempt to stop the deal. Sprint and T. Mobile operate two of the biggest mobile phone networks in the US, and the deal is being challenged on anti-competitive grounds. At the top end of the market, embattled retailers Nordstrom and Kohl’s saw share price pops of 3.6% and 3.3% respectively. Nordstrom in particular has enjoyed a 50% plus share price rally over the past few months but is still down double digits year-to-date.
- S&P 500: -0.32% Monday, +25.1% YTD
- Dow Jones Industrial Average: -0.38% Monday, +19.64% YTD
- Nasdaq Composite: -0.4% Monday, +29.94% YTD
Tullow Oil craters again
Tesco was a bright spot in a flat day for UK markets. Only four stocks in the FTSE 100 moved more than 2% in either direction, as investors wait with bated breath for this week’s general election and the US-China tariff deadline. If the Conservative party does secure a majority in the election, a further rally in the value of the pound is widely expected. One major mover was FTSE 250 firm Tullow Oil, which lost more than 70% of its value after shocking investors with a production forecast cut, scrapping its dividend and announcing the departure of both its CEO and head of exploration.
The news is the latest disaster to beset Tullow, which between 2012 and the end of 2015 lost more than 90% of its market value. Its 44p share price today compares to a peak of close to £15. The company focuses predominantly on oil exploration and production in frontier markets and last month warned that oil discoveries it had found in Guyana might be difficult to commercialise.
- FTSE 100: -0.08% Monday, +7.52% YTD
- FTSE 250: -0.05% Monday, +19.54% YTD
Stocks to watch
AutoZone: Aftermarket car parts retailer Autozone, has more than 6,000 stores and a $28bn market cap. Its shares have soared close to 40% this year so far and it has beaten earnings expectations in each of the last four quarters. Zacks Equity Research highlights store expansion initiatives and supply chain development to provide faster delivery as some of the factors that may have helped the firm in its most recent quarter. It reports earnings on Tuesday morning. Operating expense increases due to technology investment and opening new distribution centers will be factors to watch on the negative side. Currently, 11 Wall Street analysts rate the stock as a buy or overweight, 10 as a hold, and two as an underweight or sell.
GameStop: This video game retailer is headquartered in Texas but operates more than 1,000 stores abroad too, including in Europe, Australia, New Zealand and more. The firm’s share price has taken a beating over the past five years, losing around 90% of its value as the company found itself on the receiving end of many of the trends that have led to the downfall of HMV in the UK. However, since August its share price has nearly doubled and, in September, Michael Burry – of’ Big Short’ fame – revealed that he is bullish on the stock, arguing that the company’s balance sheet is in better shape than is recognized by the share price. Wall Street disagrees; the average 12-month analyst price target its $5.25 versus its current $6.33, although the number of analysts covering the firm is small and the range is from $2.50 to $8. GameStop is reporting Q3 earnings after market close on Tuesday.
Superdry: UK fashion firm Superdry’s share price plummeted by 80% over the course of 2018 and has effectively been going sideways since then. The company was the subject of a huge boardroom battle, after a failed revamp collapsed sales and profits. Co-founder Julian Dunkerton, the firm’s biggest shareholder, fought his way back into the company in April, causing the entire board to resign in protest. Now, Superdry is in turnaround mode and investors will be watching closely for signs of progress when the company reports earnings this week.
The three major cryptoassets are all trading lower than they were 24 months ago, with Bitcoin falling 1.78% to $7,356.83, Ethereum falling 1.72% to $147.12 and XRP sliding 2.57% to $0.22.
Meanwhile, Swiss startup Amun has won approval from Swedish regulators to start offering crypto-based financial products to retail investors in the European Union.
[The approval] gives us wide access to sell directly and market directly to basically all retail in Europe,” Amun CEO Hany Rashwan said to CoinDesk.
SEC approves $15 billion asset manager’s bitcoin futures fund
Stone Ridge will invest in solely cash-settled futures and has got the green light from the SEC to do so. It will only be available to institutional investors at a price of $10 per share. There will also be limitations on how frequently shares can be sold back to the fund with the company looking to attract long-term investors with a high risk tolerance.
All data, figures & charts are valid as of 10/12/2019. All trading carries risk. Only risk capital you can afford to lose.
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