Fear is running through the equity markets again as some trading apps have relaxed restrictions on certain stocks that have experienced colossal volatility recently, like Gamestop.
Europe
There are concerns that we could see frenzied trading again by retail players in selected stocks and that could renew fears that some hedge funds might adopt a cut and run policy, hence why equity markets are lower across the board. It is worth noting that indices are off the lows of the session. The EU has approved the AstraZeneca-Oxford coronavirus drug for use in the bloc, but keep in mind the roll-out of other vaccinations has been slow. In addition to that, supply constraints persist.
Boohoo are dedicated to expanding their empire as the company is in exclusive talks with Arcadia Group to acquire its Dorothy Perkins, Burton and Wallis brands for £25 million. Earlier this week the group snapped up the online and intellectual property assets of Debenhams for £55 million, which went into administration late last year. On Monday, it was reported that ASOS was in talks with Arcadia to purchase the following brands, HIIT, Miss Selfridge, Topshop and Topman. Today’s Boohoo news appears to have hit ASOS shares as it seems that dealers feel they have stolen a march on their rival. Traditional retailers were rocked by the lockdowns, but now e-commerce groups are picking through the wreckage of the pandemic-hit high street.
Paragon Bank shares are a little lower today after the company published a respectable first quarter update this morning. The buy-to-let lending book reached nearly £299 million, down from £375.4 million in the same period year. At the end of the three months, the buy-to-let pipeline is over £966 million, up 18.7% annually. Deposit balances are £8.6 billion, which was a major increase on the £6.6 billion posted last year. The bank’s liquidity position is robust as the CET1 ratio is 15.1%.
Dr Martens’ shares began trading on the London Stock Exchange today. The IPO price was 370p but trading kicked off on the exchange at 424p, a generous increase on the listing price, which indicates healthy demand. The stock has been moving lower in the past few hours but that could be a function of the wider bearish sentiment. The iconic boot brand has weathered the pandemic storm well, as sales in the six months unit September rose by 18% to £318 million. The bulk of its sales are wholesale, which are then sold onto retailers – many of whom sell via online platforms. Even though the boots are synonymous with punks and skinheads from the 1970s, they are still very much in fashion these days. Celebrities like David Beckham and Rihanna have been spotted sporting Dr Martens, which has helped the brand. Global stock markets had a strong finish to 2020 and were driving higher in early 2021, and that was likely to be behind the decision to list the company. It was the first listing on the LSE this year, and it could set the tone for other IPOs, Moonpig is due to list in the near-term.
Just Eat Takeaway has been helped by Barclays as the bank lifted its price target from 11780p to 11990p.
Prudential shares are in the red again after Bank of America cut its price target from 1,700p to 1,550p. The insurance stock has been under pressure recently after it said it is considering an equity raise and it wants to speed up the demerger of its US business.
US
Sentiment is weak as worries circulate that retail investors might frantically target certain stocks like Gamestop or AMC Entertainment – both are showing big gains.
The Chicago PMI reading for January jumped to 63.8, its fastest rate of expansion in almost two years. In December, US personal spending and income were -0.2% and 0.6% respectively. It is a little concerning that spending contracted in the all-important shopping month. Lately, there has been chatter the US’s economic rebound is fading but this Chicago PMI report shows that there are still pockets of strength in the economy.
Novavax shares surged to their highest level since September 2015 following a report that its Covid-19 vaccine is 89.3% effective, according to a trial carried out in the UK.
Visa posted decent numbers last night after the close of trading but the response from dealers has been muted. First quarter revenue cooled to $5.69 billion but it beat the $5.53 billion consensus estimate. EPS was $1.42, which comfortably topped the $1.28 that equity analysts were expecting. The credit card company announced an $8 billion share buyback plan.
Caterpillar revealed a 22% fall in fourth quarter EPS to $2.12, which smashed the $1.45 that analysts were expecting. Revenue came in at $11.2 billion, ahead of expectations. The stock has been in a strong uptrend since May and if the bullish move continues it should retest the $200 area.
FX
The US dollar index was higher this morning as traders were firmly in risk-off mode. In the past few hours the mood lightened a little since, and with that the dollar turned around, so it is now in the red. EUR/USD is showing a small gain on the day. In the fourth quarter of 2020, the French economy contracted by 1.3%, and the German economy posted growth of 0.1%. The readings were both better-than-expected.
Bitcoin was given a lift my Elon Musk the CEO of Tesla, who included “#bitcoin” in his Twitter bio. Last Friday, the cryptocurrency fell to its lowest mark in over two weeks but it has been recovering since. The rebound was given a big lift thanks to Mr Musk. If the bullish run continues it could retest its recent all-time high.
Commodities
Silver and gold are enjoying big gains this afternoon. Silver was mentioned on Reddit in respect to the buying frenzy that engulfed Gamestop, so the metal has seen a lot of volatility this week. Gold is not only being influenced by silver, as the dip in the dollar has helped it too.
WTI and Brent crude oil are in positive territory as we approach the end of the week. As of next month, Saudi Arabia’s 1 million barrels per day production cut will come into effect. It will last for two months. The move was announced earlier this month. Oil is holding up well considering the level of caution that is circulating in the rest of the markets. In the past two weeks, oil has been largely trading sideways. A survey carried out by Reuters showed the majority of participants feel that prices will hover around these levels in the near term before potentially picking up in the latter half of the year when economies start to re-open again.
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