Market Mondays #21

TikTok, Brexit (again) and Tech Sells Off...

Last week in the financial markets

· President Donald Trump said there would be no extension to the Sept. 15 deadline for ByteDance Ltd. to sell the U.S. operations of its TikTok video sharing app

· The EU gave Boris Johnson’s government three weeks to drop its Internal Market legislation which would allow ministers to override parts of the withdrawal agreement. There are no signs the U.K. will agree to this demand

· A sell-off in tech stocks led to the worst trading period for the Nasdaq since mid-March, at the start of the covid-19 crisis. Over a few days the share prices of Amazon, Alphabet, Facebook and Microsoft fell by more than 10% from recent highs; Apple’s dropped by 16%

· Slack’s quarterly earnings disappointed investors

· The price of Brent crude slipped below $40 a barrel for the first time since June, after it emerged that Saudi Arabia had reduced its oil rates for Asia and America (The Economist)

· LVMH’S $17bn takeover of Tiffany appears to be off

· When it was revealed that Tesla is not going to be added to the S&P, its shares plunged by more than 21% on Monday but recovered some of those losses by the end of the week. Overall, Tesla closed the week down around 11%

· CaixaBank and Bankia, two banks in Spain, confirmed they were talking about merging, which would create the country’s biggest lender

· Astra Zeneca announced that its phase 3 trial was paused due to safety concerns, but resumed on Saturday (FT)

· The ECB kept its monetary policy on hold

Driving forces for the week ahead

Software listings head for biggest week for IPOs since Uber

This week IPOs are set to raise $6.8bn, with half of the proceeds coming from three California tech listings, according to Refinitiv, a data provider. With Snowflake, a cloud software business raising $2.2 bn which will be the largest ever US software offering, eclipsing VMware.

“Many companies are fast-forwarding their IPO plans given the strength of the market and relative valuations,” said Jim Cooney, head of equity capital markets for the Americas at Bank of America

What we are currently seeing valuations being driven by enormous innovation but also by financial factors such as interest rates around zero and QE from the Fed according to Cooney. 

Since March, the stock market rally has added nearly 50 per cent and the recent rise of SPACs has also been seen as a sign of the heating up of the market. 

Matthew Kennedy, senior IPO market strategist at Renaissance, said the newest listings were “trying to take advantage of the sky-high tech multiples they can get in public markets as well as timing this before the election in November”, an event that can increase market volatility.

What else we’re reading

· Why big tech stocks can weather the storm

· Sweden’s Cashless Future Reveals a Whole World of Hidden Risks

· How has trade survived Covid-19?

· Which is the best market model?

· SoftBank set to sell UK’s Arm Holdings to Nvidia for $40bn

This week’s key events and data releases

Monday: Eurozone July Industrial Production

Tuesday: US August Industrial Production, U.K. Unemployment Claimant Count Change (August)

Wednesday: UK August CPI, US Retail Sales (August), U.S. Federal Reserve Interest Rate Decision and Federal Open Markets Committee Statement (FOMC), Japanese Parliament Votes to Install a New Prime Minister

Thursday: Japan Policy Rate, Eurozone August CPI, UK BoE Policy Rate, Friday: U.K. Retail Sales (August)

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