Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for July 09, 2020.
On Wednesday, United Airlines said that it is sending layoff notices to 36,000 employees, which is nearly half of its US staff. That may not be the final figure, but United is keeping its options open while ensuring it complies with laws requiring 60 days’ notice ahead of mass redundancies. Per Associated Press, United officials are hoping the final number will be lower, with some staff offered early retirement packages instead of being laid off. The job cuts could include more than 10,000 flight attendants and 2,250 pilots. United’s action is not unique, but it is the most extreme of any major US carrier so far. Delta issued layoff notices to more than 2,500 pilots last week, with several more reportedly eligible for an early retirement option. In May, American Airlines said that it plans to cut management and support staff headcount by around a third.
Although US passenger numbers have recovered somewhat in recent weeks, they remain far below typical levels. In May, 7.2 million passengers passed through Transport Security Administration checkpoints, versus 74.5 million in May 2019. In June this year, that jumped to 14.5 million versus 76.6 million, and in the first week of July 4.7 million travellers were logged versus 17.2 million in the first week of July 2019. All three of Delta, United and American are down more than 50% year-to-date in terms of share price, with United the hardest hit at negative 63.1%.
Twitter jumps on job advert speculation
All three major US stock indices came out on top after a volatile trading session on Wednesday. The S&P 500 opened higher, gaining close to 1% versus Tuesday’s close by the mid-morning. It sank back to a loss before midday, then climbed back to a gain towards the close. The information technology and consumer discretionary sectors helped the market higher. Twitter was one of the biggest winners, jumping 7.3% after posting a job advert that said it is launching a subscription platform under the codename Gryphon. There were few details in the advert, which was edited to become even more vague after being reported on. Investors were buoyed as diversifying its sources of income beyond digital advertising, would be a major step forward for the company. During the pandemic, digital advertising-dependent tech firms have struggled, as companies have pulled back on their ad spending. Twitter stock is now up 10.5% year-to-date.
The Nasdaq Composite was once again the biggest winner on Wednesday, gaining 1.4%, helped higher by companies including Biogen, Nvidia and Amazon. In earnings news, Bed Bath & Beyond announced it is closing 200 stores permanently, after the pandemic cost it close to 50% of its revenues.
- S&P 500: +0.8% Wednesday, -1.9% YTD
- Dow Jones Industrial Average: +0.7% Wednesday, -8.7% YTD
- Nasdaq Composite: +1.4% Wednesday, +16.9% YTD
UK stocks close lower after Chancellor Sunak’s emergency budget
Chancellor Rishi Sunak’s emergency budget, delivered on Wednesday, was met with a muted response by investors perhaps due to the fact that much of the news was already out there and priced into the market already. The FTSE 100 fell 0.6%, after plans including, a new job retention bonus as the furlough scheme winds down, funding for a job creation scheme, a temporary stamp duty cut, a VAT cut for the hospitality sector, and discounts on eating out for consumers were announced. Sunak’s plan is more targeted on the hardest hit sectors of the economy than government interventions in other countries; in the US, the entire population was handed a $1,200 per person stimulus payment to use at their own discretion.
The FTSE 100 was led lower by names including, advertising giant WPP, International Consolidated Airlines Group, and HSBC. WPP fell 5.4%, the day after announcing that three advertising businesses it owns are merging, with management buying a 49.99% stake and WPP remaining the majority shareholder. In the FTSE 250, which sank 1% on Wednesday, FirstGroup was by far the biggest faller. The coach operator’s stock sank by more than 20% after it used a warning about its ability to continue operating; the company also said it has enough resources to continue running for at least 12 months.
- FTSE 100: -0.6% Wednesday, -18.4% YTD
- FTSE 250: -1% Wednesday, -21.5% YTD