Since the Covid-19 pandemic began, and governments began to take fiscal and monetary measures in response, markets have reacted significantly to any updates on potential new rounds of stimulus. Recently in the US, hopes have emerged of a smaller interim deal between Democrat and Republican lawmakers than the multi-trillion-dollar deal Democrats had initially hoped for. On Tuesday, the White House put forward a new $916bn package, which included $600 direct payments to Americans plus state and local government funding. However it offered reduced funding for jobless benefits and the inclusion of liability protections for businesses – which had been a sticking point in previous negotiations, according to the FT.
House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer said in a joint statement that “the President’s proposal must not be allowed to obstruct the bipartisan Congressional talks that are underway.” They added that the proposed cut in unemployment insurance funding is ‘unacceptable’. The situation will be monitored closely by investors on Wednesday, as the passage of an interim deal before Christmas would be a significant relief.
A stimulus impasse is nothing new, however markets have reacted positively this morning following Asia’s record close overnight. Vaccine progress has also helped sentiment with the UK administering their first doses yesterday. The FTSE100 is now above 6600 for the first time since March.
Equifax delivers impressive business update, DoorDash prices IPO above expectations
All three major US stock indices posted solid days on Tuesday, with gains of between 0.3% and 0.5%. Among the S&P 500’s 11 sectors, energy stocks led the way with a 1.6% gain, partly making up the losses sustained on Monday. Overall on Tuesday, six S&P 500 sectors were in the green, and five in the red. Leading the S&P 500 was credit checking agency Equifax, which jumped by 7.8%, following a business update described by JPMorgan analysts as “impressive.” The update also led to an upgraded rating from Barclays. Guidance provided for Q4 2020 and full-year 2021 came in well above analyst expectations, with projected 2021 revenue growth of 6%.
In other news, food delivery service DoorDash upped its planned IPO price. The company had previously set out a $90 to $95 initial price range, but priced its Tuesday public offering at $102 a share, valuing the firm at $39bn. That follows Airbnb revealing a substantially higher price for its Thursday IPO than it had initially teased.
Also of note on Tuesday was the Nasdaq Composite adding 0.5%, which took its year-to-date gain past the 40% mark.
S&P 500: +0.3% Tuesday, +14.6% YTD
Dow Jones Industrial Average: +0.4% Tuesday, +5.7% YTD
Nasdaq Composite: +0.5% Tuesday, +40.2% YTD
UK shares little changed as vaccine is rolled out
UK shares were close to flat on Tuesday, with the FTSE 100 up by 0.1%, as the first Covid-19 vaccines were administered. The UK is the first Western country to deliver a vaccine to its people, and US and European regulators are expected to be on the brink of approval. Given that the approval and vaccine rollout was widely known about already, there was minimal market reaction while this week’s Brexit negotiations remained sharply in focus. On Tuesday the UK government announced it was ditching certain aspects of legislation related to the Irish border, which could have led the UK to break international law. Investors were in wait-and-see mode on Tuesday, with no stocks in the FTSE 100 gaining or falling more than 4%. In the FTSE 250, which fell 0.3%, easyJet and Wizz Air were two of the biggest losers, falling 4.7% and 4.5% respectively.
FTSE 100: +0.1% Tuesday, -13% YTD
FTSE 250: -0.3% Tuesday, -9.2% YTD
What to watch
Campbell Soup: Food and snack firm Campbell has enjoyed heightened demand during Covid-19 related restrictions, as consumers stocked up on food items including the firm’s long-lasting canned goods. Campbell sells more than just soup, with brands such as Pepperidge Farm baked goods and Prego pasta sauces. A key point of focus will be how the firm has capitalized on increased attention it has received, and if demand has kept up now there has been a degree of economic reopening in some areas. Currently, analysts lean towards a hold rating on the stock, which is down 2.4% in 2020 after a 4% fall over the past five trading days.
October job openings: Following Friday’s disappointing jobs figures, which showed a lower-than-expected number of jobs added to the economy in November, job openings figures for October will be revealed on Wednesday. These offer another window into US labour market activity levels. A consensus figure of 6.3 million is expected, versus 6.44 million in September, according to Trading Economics.
Crypto corner: Crypto funds see record inflows as investors depart gold
Crypto-focused funds have seen near-record inflows in recent weeks while investors have simultaneously ditched gold positions, according to market data aggregator CoinShares. The crypto fund sector saw record inflows of $429 million in the past two weeks, with particular attention paid by investors to ethereum as Eth2’s 0 phase took hold. While only worth 14% of net value of major cryptoassets, some 20% of inflows went the ETH.
CoinShares report also notes that gold has seen record outflows, with $9.2 billion in cash leaving the precious metal market in the past four weeks. This compares to $1.2 billion of inflows to bitcoin-related investment products.
Over the course of the year however, gold is still up by $45.7 billion worth of inflows thanks to the coronavirus crisis and associated market selloffs. In total, cryptoassets are up by $4.8 billion year-to-date.
All data, figures & charts are valid as of 09/12/2020.
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