Economic digest 17.05.21
Financial news
World news
European stock markets edged lower Monday, as investors weighed concerns over a rise in global inflation as well as disappointing Chinese economic data.
At 3:55 AM ET (08:55 GMT), the DAX in Germany traded 0.1% lower, the CAC 40 in France fell 0.1%, and the U.K.’s FTSE 100 dropped 0.3%.
European stock markets struggled last week after U.S. consumer prices jumped at the fastest rate since 2008, increasing worries that the Federal Reserve could be forced to start tapering its easy monetary policy earlier than guided.
This weak tone has continued Monday after data showed that China’s economy, the second largest in the world, is continuing to grow but the recovery from the Covid-19 pandemic is uneven and still has a long way to go.
Chinese industrial production grew 9.8% year-on-year in April, a healthy increase but lower than March’s 14.1%, and retail sales increased 17.7% in April year-on-year, below March’s 34.2% growth.
In corporate news, Ryanair (LON:RYA) stock rose 0.8% after the budget Irish airline said there were signs the recovery had begun even as it reported a record annual after-tax loss due to Covid-19 restrictions forcing it to scrap over 80% of its flights last year. The airline wasn’t able to give formal guidance for the current year, due to uncertainty over the pace of reopening in Europe.
Stellantis (PA:STLA) stock rose 0.9% after the automaker said it would announce a strategic partnership with iPhone assembler Foxconn on Tuesday, likely involving the building of electric cars and internet-connected vehicles in China.
On the flip side, Bayer (OTC:BAYRY) stock fell 1.8% after a U.S. federal appeals court upheld a $25 million judgment and trial verdict finding the company’s Roundup caused a California resident’s non-Hodgkin lymphoma.
Oil prices edged higher Monday, continuing the recent gains as China and the U.S., the two biggest oil consumers in the world, and most of Western Europe reopen in the wake of successful Covid-19 vaccination programs.
U.S. crude futures traded 0.2% higher at $65.50 a barrel, while the Brent contract rose 0.1% to $68.78. The two contracts jumped nearly 2.5% on Friday and managed to book a small gain last week, marking a third consecutive weekly increase.
Additionally, gold futures rose 0.9% to $1,853.75/oz, while EUR/USD traded 0.1% lower at 1.2137.
The consequences of Brexit
Sterling rose against the dollar for two weeks in a row and strengthened around $ 1.41 on Monday. It was trading unchanged at $ 1.4097 in early London trading. It was 0.06% higher at 86.09 pence per euro.
This was a well-publicised move, but a major resumption of activity in the UK today should continue to be welcomed by UK asset markets and the pound, ING strategists said in a note to clients.
However, there is growing concern about the B. 1.617.2 coronavirus variant, which British scientific consultants say will become dominant in the United Kingdom and be more transmissible than the variant first identified in Kent, England.
Despite threats from the Indian strain, the planned reopening will maintain expectations of a UK economic recovery in the summer and will contribute to the Bank of England’s upbeat assessment of the outlook for UK economic activity.
The pound’s gains this year have been helped by a more aggressive Bank of England, which has begun to reduce asset purchases, as well as a vaccination campaign in the UK.
Analysts also say that the combination of a stronger-than-expected UK economic recovery and confidence that a Scottish independence vote is still a long way off makes the pound relatively attractive.
According to CFTC data on Friday, speculative positioning on the pound increased in the week to last Tuesday.
On guard of the environment
Major oil company BP (NYSE: BP) has lobbied the EU for support for natural gas, a move that reveals differing views among investors and reflects a broader European dispute over the role of fossil fuels in the transition to natural gas.
The European Commission, aiming to achieve zero greenhouse gas emissions by 2050, had planned to exclude gas-fired power plants from a new list of investments that can be marketed as sustainable, but postponed a decision last month due to complaints from some countries and the company.
British BP was among those who lobbied for the plan. In December 2020, in response to the Commission’s public consultation on the issue, it said that the new rules could jeopardize the financing of gas projects and prevent the abandonment of coal, which pollutes the environment.
BP has called for an increase in the emission limits that gas plants must meet so that they can be marked as green, without requiring the immediate installation of carbon capture and storage (CCS) technology, which is still considered too expensive for large-scale use.
When burned in power plants, natural gas emits about half of the CO2 emissions than coal. But the gas infrastructure is also linked to the greenhouse gas methane emissions.
When asked about the lobbying, BP said it strongly supports the EU’s climate goals. He added that natural gas makes it possible to switch from coal.
However, investors responded ambiguously when asked if BP’s commitment to gas contradicts its pledge to support the Paris Agreement. Along with a commitment to bring carbon emissions from its barrels to zero by 2050, the company has promised to align its lobbying activities in support of a zero-carbon policy.
Natasha Landell-Mills, head of asset management at Sarasin and Partners, said BP’s lobbying raises questions about its commitments.
If their capex (capital expenditures) were focused on full decarbonization by 2050, then, naturally, one would expect that lobbying would meet this goal. The fact that it seems to be moving in the other direction suggests a problem, she added.
Others, however, pointed to the question of what compliance with the Paris Agreement means in practice.
It’s not like the standards developer said,’ This is exactly what Paris alignment means, industry by industry, said John Streur, CEO of Calvert Research and Management, a U.S. asset management firm.
Another institutional investor, speaking on condition of anonymity, said he saw no problem with BP’s response and that there was no plan for what an agreement with Paris would mean, adding, however, that now was not the right time to “stick your head out.”
Surge in debuts in India
With the stock market showing resilience despite surging Covid cases and weakening economic fundamentals, around 10 companies have filed IPO prospectus with Sebi in the first half of May to collectively raise nearly Rs 20,000 crore. From early backers of some of these companies eyeing to exit to maturing businesses looking for funds for their next phase of growth and availability of liquidity globally, the reasons are quite a few for this rush, top merchant bankers said.
The companies include Nuvoco Vista — Nirma group’s cement business, low-cost carrier GoAir, Divyani International — the franchisee for Pizza Hut and KFC, and CarTrade — the online auto classifieds firm. In the last week of April, food delivery major Zomato had also filed with Sebi to go public and raise about Rs 8,200 crore.
According to HDFC Bank group head Rakesh Singh, after a long time, markets are closer to fair valuations and are at levels at which entrepreneurs feel they can offload part of their stakes through public offers.
Investors are also getting a good window for reallocation of capital. In several businesses, we also see a cycle playing out, where private equity players and early investors are exiting or part-exiting, while a new set of investors are coming in through these fund-raising processes.
For instance, in Zomato, of the expected Rs 8,200 crore that could be raised through its IPO, its stakeholder InfoEdge is eyeing Rs 750 crore. In Nuvoco Vista, of the Rs 5,000-crore, the promoters are eyeing Rs 3,500 crore, while in Devyani International, private equity investors and its promoters, both are eyeing some funds by paring their stakes.
Entry to the Milan Stock Exchange
Luxury yacht manufacturer The Italian Sea Group said it had secured the support of Giorgio Armani and Belgian pharmaceutical entrepreneur Mark Cook as it prepared to list its shares on the Milan Stock Exchange.
The Italian Sea Group reported that Milan-based fashion group Giorgio Armani SpA and Cook’s family-owned investment company Alychlo NV will invest in the IPO separately.
The company did not disclose the size of the individual investments, but said that Armani and Cook will eventually receive a combined 15% stake in the group after the capital increase carried out as part of the listing on the exchange.
The Group will offer in the IPO recently issued shares worth around 50 million euros, as well as existing shares to be sold to GC Holding SpA, a company controlled by CEO and founder Giovanni Costantino. It says GC Holding will remain the majority shareholder of the yacht manufacturer.
Italian Sea Group will use the proceeds from the listing to focus on building yachts up to 100 meters long, sign partnerships with luxury brands and increase production capacity, including by buying European shipyards.
Are you sure you’re a reliable currency?
American millionaire and CEO of Euro Pacific Capital, Peter Schiff, has shaken the Twitter space with the following tweet:
If a single @elonmusk tweet can have so much influence over the price of #Bitcoin how can anyone seriously consider it to be money? How can Bitcoin be a safe-haven asset if a one-word tweet puts it at risk? It should be clear by now that buying Bitcoin is gambling, not investing.
The action took place after months of Elon Musk’s championing of crypto and Bitcoin. Many believe that since he was the first of major company owners who took interest in the top crypto, he became a direct influencer for its price. As in this case, his backout may be a major factor causing its dip.
Many Twitter users replied to Schiff’s post. Moreover, one user pointed out that the dip in BTC’s value happened because the currency corrects itself regularly in the market. He added that Elon Musk had nothing to do with it.
Still, Bitcoin’s value continues to fall lower. It fell by more than 24% this week, with its value touching $44,295. for the first time since February 2021.
The Fall of Litecoin
Litecoin was trading at $ 279.038 at 23: 15 (03:15 GMT) on Monday, down 10.03% on the day. It was the biggest one-day percentage loss since May 12.
The downward movement led to a decrease in the market capitalization of Litecoin to $ 18.731 billion, or 0.90% of the total market capitalization of the cryptocurrency. At its highest level, Litecoin’s market capitalization was $ 25.609 billion.
Litecoin was trading in the range of $ 279,038 to $ 296,310 for the previous day.
Over the past seven days, Litecoin has lost 31.55% in price. The trading volume of Litecoin for the day before writing amounted to $ 5.440 billion, or 2.61% of the total volume of all cryptocurrencies. Over the past 7 days, it has been trading in the range of $ 279,0380 to $ 393,9380.
At the current price, Litecoin is still 33.56% lower compared to the all-time high of $ 420.00 set on December 12, 2017.
