European markets have opened fairly flat this morning as the rally ran out of steam amid increased fears of a second wave of infections, particularly in China and some US states. On Wednesday the S&P 500 initially made gains but fell back in afternoon trading, following spikes in coronavirus case numbers in some states that have been rapidly rolling back lockdown measures. Additionally, in a second day of testimony before lawmakers in Washington, Federal Reserve chairman Jerome Powell warned that the recent gains made by the economy could be put at risk if stimulus such as support for shut-down businesses and workers who have lost jobs is rolled back too rapidly by Congress. He noted that 25 million workers remain without employment and that “it would be a concern if Congress were to pull back from the support it’s providing too quickly”. Lawmakers will face the challenge over the summer of how to address temporary relief measures that were set to expire. Powell said that the trillions of dollars has helped to fuel a jump in consumer spending recently, and that continued support would be required for the economy to get through “this critical phase.” Another showdown between Republicans and Democrats is coming, with the former likely to argue that keeping measures such as enhanced unemployment benefits will put people off returning to work.
Hertz suspends stock sale, Nasdaq in the green
Of the three major US indices, only the Nasdaq Composite was in the green on Wednesday, as technology stocks – which make up around half the index – continue to outperform the broader market. The S&P 500 was down 0.4%, while the Dow Jones Industrial Average closed the day 0.7% lower. Seven stocks in the Dow posted positive days, but none broke through the 1% daily gain threshold, while stocks including Exxon Mobil, Chevron and Boeing all fell by more than 2.5%. The oil giants took a hit as oil prices fell due to a pickup in coronavirus cases, reigniting fears of weak demand for fuel.
In corporate news, car rental company Hertz, which has seen its share price tank by more than 85% since the start of the year and is now in bankruptcy protection, has halted a planned share sale. The company had planned to sell $500m in shares that it warned could be rendered worthless by bankruptcy proceedings. Jay Clayton, chairman of the SEC, told CNBC earlier on Wednesday that the financial watchdog had problems with the share sale, and had informed Hertz it had comments to make.
S&P 500: -0.4% Wednesday, -3.6% YTD
Dow Jones Industrial Average: -0.7% Wednesday -8.5% YTD
Nasdaq Composite: +0.2% Wednesday, +10.5% YTD
UK inflation sinks to four-year low
London markets closed before the American Covid-19 case news drove US-listed shares into the red; the FTSE 100 gained 0.2% on Wednesday, with the FTSE 250 up 0.7%. In economic news, the UK inflation rate slowed to 0.5% in May, its lowest level since mid 2016. One major drag was fuel prices, which declined by 16.7% during the month, although food prices rose as supermarkets were allowed to remain open. The Bank of England’s target rate for the Consumer Price Index – the main measure of inflation – is 2%.
Elsewhere, house building giant Taylor Wimpey announced its plans to raise £500m to spend on land, which it believes has been devalued by the pandemic and instead, created opportunity. According to the FT, over the past few months the company has bought a dozen sites for more than £100m, but intends to spend much more. In the FTSE 100, energy firm SSE was by far Wednesday’s biggest winner. The company added 9.1% to its share price, after beating consensus earnings figures and announcing it plans to continue backing its dividend, which currently yields around 7%.
FTSE 100: +0.2% Wednesday, -17.1% YTD
FTSE 250: +0.7% Wednesday, -19.7% YTD
What to watch
Kroger: Kroger is one of America’s largest retailers, operating thousands of supermarkets and department stories, and is also one of America’s biggest employers. The company, which reports earnings on Thursday, has seen its share price gain 13.2% year-to-date. Since the pandemic began, the company has hired more than 100,000 workers, in order to handle demand for staple items while needing to meet additional safety requirements. Investors have high hopes for its Thursday report, and will be waiting for a substantial earnings beat. Currently. 10 analysts rate the stock as a buy, one as an overweight, 13 as a hold, and one as a sell.
UK retail sales: Following May’s record jump in retail sales figures in the US more than doubling expectations, investors will be eyeing May’s retail sales data report in the UK on Friday. Versus April, retail sales are expected to have gained 5.7%, with a 17.1% deficit versus May 2019’s figure. In April, UK retail sales fell by 18.1% versus March, the biggest dropoff since records began in 1988.
Crypto corner: Number of Bitcoin ‘whales’ increasing
The number of so -called ‘Bitcoin whales’ has increased by 2% in the short time since the cryptoasset’s halving event, despite the fiat price of a Bitcoin mostly treading water in that time. A Bitcoin whale is a holder of 1,000 coins or more of the cryptoasset.
According to data from blockchain analytics firm Glassnode, the number of whales has increased from 1,811 on 1 May to 1,840 as of Tuesday – a level not seen since November 2017. A whale’s holding of 1,000 Bitcoin would be worth $9,411,930 on today’s valuation of the cryptoasset.
Glassnode says its measure of investor participation – the whale metric – is more useful than typical measures, which look at the number of addresses on the network as a proxy for investor participation. According to Glassnode, this is inaccurate as some Bitcoin users will have multiple addresses to access the network.
All data, figures & charts are valid as of 18/06/2020. All trading carries risk. Only risk capital you can afford to lose.
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