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Stimulus hopes help stocks, Tesla revs up bitcoin

Stock markets are showing modest gains this afternoon as dealers are hopeful the Biden administration will sign off on the $1.9 trillion relief package as a way of stimulating the US economy. 

Europe

At the back end of last week it was revealed that Democratic politicians set in motion a plan to implement the proposed $1.9 trillion spending plan without support from Republicans. In the last couple of weeks there was back and forth between Democrats and Republicans in relation to the scale of the stimulus package but the decision was made to press ahead and try to get it approved without backing from the opposition. Janet Yellen, the US treasury secretary, predicts the $1.9 trillion spending programme will bring about full employment by the end of 2022. The Gamestop mania was at the centre of attention in the past 10 days, but the fear associated with the short squeezes has dissipated.                   

It was confirmed that Boohoo has acquired Dorothy Perkins, Wallis and Burton from the failed Arcadia Group for £25.2 million – it was announced last month the two firms were in talks. Boohoo is only snapping up the e-commerce and intellectual property rights of the brands, so now it will have over 15 brands on its platform. Last week it was confirmed that ASOS acquired Topshop, Topman and Miss Selfridge from Arcadia. The demise of Arcadia and the rise of online fashion houses symbolises the brutal impact the lockdowns have had on high street retailers – the old guard is giving way to the relatively new upstarts. Boohoo, ASOS and Ocado shares are in the red today on the back of an article in the Sunday Times that the government is considering a tax raid on retailers that saw profits soar as a result of the health crisis.

Experian shares are in the red over concerns the credit-checking company was a victim of a cyber-attack. As a response to chatter that its business in Brazil suffered a data breach, the company is carrying out a forensic investigation – there is no evidence positive or negative that data has been obtained illegally. 

Dialog Semiconductor has agreed to be acquired by Renesas Electronics for €4.9 billion. Chips have been in high demand lately as they are used in electronic items like computers and smart phones, which have become extra popular amid the lockdowns. The proposed takeover might attract the attention of the regulator seeing as it is looking at Nvidia’s planned takeover of ARM Holdings from Softbank.      

The AstraZeneca-Oxford vaccine is ineffective against the South African variant of Covid-19. The pharma giant responded by announcing it will develop different drugs to tackle the different strains. At the end of January, the European Medicines Agency (EMA) signed off on the AstraZeneca drug but President Macron called into question its effectiveness in patients that are above 60 years of age, the French leader claimed that further studies are needed before it will be distributed to older patients. A group of European countries, including Spain, Austria and Germany are also only recommending the vaccine only for people under 65 years of age. Astra will post its full year results on Thursday.  

Rolls-Royce will close its jet engine factories in the summer for two weeks on account of the greatly weakened civil aviation business. Last month, the engineering titan cautioned that cash outflow in 2021 will be £2 billion, while equity analysts were predicting an outflow of £1-£1.5 billion. In addition to that, the aircraft engine flying hours forecast was cut to 55% of 2019’s level, down from the 70% guidance. The decision to halt operations over the summer seems like a cash saving exercise.                  

US

The S&P 500 has traded above 3900 for the first time and the Dow Jones has also set a record high. The mood is still bullish thanks to expectations that the Biden-led government will unleash a $1.9 trillion spending scheme. Last Friday’s US non-farm payrolls report was underwhelming, so that should put pressure on law makers to authorise the relief package. 

Hasbro, the board games and toys manufacturer, posted its fourth quarter result today. EPS was $1.27, beating the $1.14 forecast. Revenue in the three month period was $1.72 billion, topping the $1.69 billion consensus estimate. The group has experienced an uptick in demand as in-house entertainment has become more popular in light of the lockdowns. Hasbro announced a 68 cents dividend and it confirmed it is on a strong footing for 2021.             

Tesla Motors shares ticked up 2% as the group has made a $1.5 billion investment in Bitcoin. In addition to that, the electric vehicle manufacturer plans to accept the cryptocurrency as payment for its products. Tesla is known to be an innovative and forward-thinking group and seeing as bitcoin is becoming more mainstream, the move adds to Tesla’s image that it is at the forefront of modernisation.     

FX

Bitcoin traded above $44,000 for the first time ever after it was announced that Tesla has invested $1.5 billion in the asset and that it will accept the cryptocurrency as payment. In October, it was announced that PayPal will facilitate bitcoin payments. As more and more companies accept the cryptocurrency, demand for it is likely to be high.

EUR/USD and GBP/USD are showing small losses today as the US dollar index recouped some of the large losses it incurred on Friday following the disappointing US non-farm payrolls report. US government bond yields are firmer due to hopes the $1.9 trillion stimulus will speed up the economic recovery, which in turn is helping the US dollar.                    

Commodities

Brent crude oil is trading above $60 – a one year high – as the overall optimism circulating through the markets has helped the energy. Supply concerns were doing the rounds as OPEC+ kept its output on hold. The EIA announced that US oil inventories fell to an 11 month low. Oil has been lifted by the $1.9 trillion stimulus hopes from the US.    

Gold is higher today even though the dollar is a little firmer. Lately a positive move in the dollar has dented the metal, on Thursday the US dollar index jumped to a two month high, which sent gold to a two month low, but the commodity has been recovering since.


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