Markets slip on China sanctions

Markets are red across the board this morning as virus case numbers creep up once again and the US prepares sanctions on Chinese officials involved in disqualifying opposition lawmakers in Hong Kong. This seems like a parting blow to China from the Trump administration. The FTSE is the only major index bucking the trend, gaining 0.3% as Sterling sinks 1.5% against the dollar and investors become nervy as the Brexit deadline looms (more below).

On Friday, non farm payrolls data showed that the US economy added 245,000 jobs in November versus the 400,000+ that economists had been anticipating. The unemployment rate edged down from 6.9% to 6.7%, although according to The WSJ that is in part because some of those who have lost jobs have stopped looking for work entirely – taking them out of the US labour force. The jobs report provides more evidence that the US economic recovery has slowed as Covid-19 cases have once again surged to record levels. Stock markets actually reacted positively on Friday, with investors acting on the basis that worrying employment figures could prompt lawmakers into agreeing a new round of fiscal stimulus sooner rather than later. In a Friday note, analysts at investment firm Edward Jones noted that since 1945 the unemployment rate has improved below 7% on seven occasions; one year later, on average the unemployment rate was 5.8%.

Nasdaq Composite closes in on +40% mark in 2020

All three major US stock indices delivered gains last week, with the Nasdaq Composite’s 2.1% rally, taking it to within spitting distance of a 40% year-to-date gain. Since 1972, the index has passed the 40% mark in a calendar year four times. By comparison, the S&P 500 is up 14.5% year-to-date, and the Dow Jones Industrial Average is up 5.9%. That reflects the dominance of tech names in the Nasdaq index and the dramatic outperformance of tech stocks in 2020. Last week the S&P 500’s information technology sector posted another solid week, with a 2.8% gain, although the downtrodden energy sector was the week’s big winner at +4.5%.

Energy stocks delivered gains on the back of OPEC and Russian oil producers agreeing a muted production increase, that was well below the level some of the nations involved had been pushing for. That news pushed up oil prices and showed some confidence in a recovery in oil demand from the global cartel. The S&P 500’s financials, health care, and communication services sectors also delivered 1% plus gains last week.

S&P 500: +0.9% Friday, +14.5% YTD (+1.7% last week)

Dow Jones Industrial Average: +0.8% Friday, +5.9% YTD (+1% last week)

Nasdaq Composite: +0.7% Friday, +38.9% YTD (+2.1% last week)

Rolls Royce, miners propel FTSE 100 higher

London-listed stocks continued to surge last week, with the FTSE 100’s 2.9% gain putting the index up by more than 17% since a recent low at the end of October. Year-to-date, the index is now down 13.2%, while the FTSE 250’s 3.7% gain last week puts it down just 7.8% in 2020. Rolls Royce led the way last week, with a 21% gain, taking its rally over the past month to +87.3%. Miners were among the week’s biggest winners, with Antofagasta, Glencore, Anglo American, BHP Group and Rio Tinto all posting double-digit gains. In the FTSE 250, mining and commodity trading firm Ferrexpo led the way last week with a 25% gain. Over the past month the stock is up 30.8%, and year-to-date it has gained 64.6%.

FTSE 100: +0.9% Friday, -13.2% YTD (+2.9% last week)

FTSE 250: +0.3% Friday, -7.8% YTD (+3.7% last week)

What to watch

Coupa Software: California-based tech firm Coupa Software offers business spending management services, which provide companies with visibility into and control over their operations. The firm’s share price has soared in 2020, more than doubling. Coupa’s cloud-based products fit well into the current mass work-from-home environment. Companies facing economic difficulties who want to get a better handle on their expenses also provide another pool of potentially heightened demand. Coupa delivers its latest set of quarterly earnings on Monday, following multiple successive quarters of earnings beats. Currently, 13 Wall Street analysts rate the stock as a buy or overweight, 10 as a hold, and three as a sell.

Smartsheet: Software firm Smartsheet offers collaboration tools for businesses, and has added 37% to its share price in 2020. The company’s market cap now stands at $7.4bn. Smartsheet delivers its third-quarter earnings on Monday, with analysts expecting a loss per share of $0.21 for the quarter. Currently, 11 analysts rate the stock as a buy and five as a hold. Investors will be watching for details of new product rollouts and investments into its existing product set. Analysts at Zacks Equity Research noted that in September the firm received a new authorization for use by government departments, which expands its potential usage by government agencies.

Brexit deadline rapidly approaching

European Union and United Kingdom officials are back at the Brexit negotiating table this week, with an end of year deadline to make a deal before the transition period ends fast approaching. Over the weekend, officials said that the parties remain at odds over three key issues, with a deal unlikely unless those points are ironed out. The outcome of the negotiations doesn’t just have ramifications for the UK’s trade relationship with the EU. US House Speaker Nancy Pelosi has made it clear there is no chance of a US-UK trade deal if a hard border between Ireland and Northern Ireland cannot be prevented. UK shares have been buoyant in recent weeks, but the risks of a Brexit deal not being reached will be brought sharply back into focus as the end of the year approaches.

Crypto corner: Bitcoin miners rake in 48% revenue increase in November

Bitcoin miners took big increases in revenue from the cryptoasset as it steamed upwards in December.

Miners made some $522 million from bitcoin transactions in November – a 48% increase on October as bitcoin’s bull run took hold, according to CoinDesk. Although the cryptoasset’s run went on to reach an all-time-high, revenue made by miners only matched levels last seen in September 2019.

Revenue on the bitcoin blockchain is defined on the assumption that a miner creates a new bitcoin then sells it immediately. When it comes to fees – miners were in fact making slightly less from fees as a proportion of their total revenue than in October. Network fees brought in $54.9 million in November, around 11% of revenue – down from 12.2% of revenue in October. Bitcoin transaction fees steadily declined in November, coming down from two-year highs. Average fees dropped from around $13 to $3.

All data, figures & charts are valid as of 07/12/2020.

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