Day of the Deal

Good morning everyone,

Trade deal hopes once again dominate headlines and it seems confidence is returning to markets, helped by a flurry of M&A activity yesterday. We can’t discount the other factors at play though, monetary policy is favourable, with rates being cut and the Fed resuming purchase of Treasury Bills. After the recent trade-war induced wobble, is now actually a good time to be back in the market again?

Link: Reuters

In the UK, the FTSE has opened flat this morning with catering firm Compass group propping up the index, offsetting gains from miners off the back of continued optimism for a trade deal. Compass Group cited consumer confidence hurting margins as the reason for the decline and as such gave a cautious outlook for 2020.

Pets at Home is leading the way for mid-caps, up 9.6% after a robust update, this takes the year-to-date gains close to 100%, undoubtedly a gem in the portfolio for any investors who managed to pick some up.

Monday Roundup

In stocks, yesterday we mentioned Louis Vuitton owner LVMH announced that it is buying jeweller Tiffany & Co for $135 a share, valuing the firm at just over $16bn. Tiffany stock closed over 6% higher as a result.

Charles Schwab confirmed it has entered into an agreement to buy TD Ameritrade for $26bn, following news reports late last week. Attention is now turning to the regulatory scrutiny the deal may receive, but Charles Schwab’s share price is riding more than 10% higher than before rumours of a takeover started, while TD Ameritrade has popped 25%. Last but not least, eBay announced that it has agreed to sell ticketing business StubHub to Viagogo entertainment for $4.05bn. This follows an announcement from eBay earlier in the year that is was undertaking an examination of its assets, prompted by activist investors.

Taxi for Uber

The three main US stock indices returned to their record setting recent form on Monday, closing at new highs. Shares hit a new peak following the wave of M&A news and the unveiling of new guidelines around protecting intellectual property by China on Sunday. The technology heavy Nasdaq Composite made the largest move, finishing 1.32% higher, taking its year-to-date gain past 30%. Pharmaceutical research company Incyte and graphics firm Nvidia were two of the biggest winners, with their share prices climbing 5.9% and 4.9% respectively. At the other end of the spectrum, Uber suffered a difficult day, with its share price declining 1.6% after losing its license to operate in London. It isn’t the first time such a verdict has been handed down, and undoubtedly Uber will appeal the decision once again. Transport for London claim Uber has not done enough to ensure there are no unlicensed or uninsured drivers carrying passengers in the capital.

S&P 500: +0.75% Monday, +25% YTD

Dow Jones Industrial Average: +0.68% Monday, +20.32% YTD

Nasdaq Composite: +1.32% Monday, +30.1% YTD

Stocks to watch

HP Inc: HP Inc, not to be confused with enterprise computing spin off Hewlett Packard Enterprise which reported its results on Monday, will report its latest round of earnings on Tuesday. Certain to be the focus of both the update from management and the analyst call will be the ongoing takeover attempt by Xerox. Over the weekend the company reiterated its rejection of Xerox’s $33.5bn offer, saying that it undervalues the firm. It also sowed seeds of doubt about the much smaller Xerox’s ability to raise the required cash. The door is still open to negotiation, however.

Dell Technologies: rival personal computer and technology firm Dell will also report quarterly results on Tuesday. The company has been publicly traded for less than a year, after founder and CEO Michael Dell took the firm private in 2012. Shares in the company have risen 19.7% from their December 2018 IPO, although the current $55.06 share price is some way below the near $70 peak in May. Dell has been growing its share of the PC market, and now sits on a 17.1% slice. Wall Street analysts currently have 12-month share price targets on the stock ranging from $54 to $80, with the average sitting at $64.45.

Link: Zacks Equity Research

Best Buy: Ahead of the busiest shopping day of the year in the US – Black Friday – electronics retailer Best Buy will reveal its latest earnings on Tuesday. The company’s 40% share price gain so far this year is well ahead of the market. Morgan Stanley has warned that the company could report disappointing guidance, as its analysis of consumer electronics brands “point[s] to a sales growth deceleration over the past one to three months”. Investors will be hoping the firm has pulled off a Target; the firm enjoyed a double-digit share price bump last week after exceeding its earnings expectations.

Link: CNBC

Crypto corner:

All three major cryptoassets rebounded sharply yesterday after the brutal falls witnessed in the past week. Bitcoin, which had fallen to a 6-month low below $6,700, surged back above the $7,000 mark this morning.

Meanwhile, both Ethereum and Ripple – which were sitting on far greater losses (and trading at a multi-year low in the case of Ripple) – also climbed out of the doldrums. Following volatile trading which saw hefty price swings, Ethereum was back up at $145 while Ripple was at $0.216, the former up close to 10% compared to its low the day before.

In the case of XRP, despite the rebound, it seems as though it is still struggling to break the prevailing downward trendline, at least in the short term.

Booking.com opens the door to crypto in partnership with Travala

Travala is a service that allows users to pay for hotel stays in 20 major cryptoassets, as well as its own token. Now that it has integrated the destinations of Booking.com to its platform, users now have access to 90,000 destinations they can pay for with crypto

Link: Cointelegraph

Please note: All data, figures & charts are valid as of 26/11/2019. All trading carries risk. Only risk capital you can afford to lose.