Economic digest 20.05.21
Financial news
EuroNews
European stock markets traded higher Thursday, rebounding after the previous session’s sharp losses, helped by strong earnings and as a receding pandemic allows the region to reopen its economy
At 3:50 AM ET (08:50 GMT), the DAX in Germany traded 0.5% higher, the CAC 40 in France rose 0.6% and the U.K.’s FTSE 100 climbed 0.4%.
The major European indices fell sharply Wednesday after minutes from the Federal Reserve’s April meeting suggested that the central bank officials were considering tapering its asset purchase programs in upcoming meetings.
However, the tone is more promising Thursday, with investors turning their attention to promising corporate news throughout the European region.
Bouygues (PA:BOUY) stock gained 2% after the French conglomerate raised the full-year guidance for its telecoms division and reported a smaller than expected first-quarter core loss.
Deutsche Telekom (OTC:DTEGY) stock gained 1.5% on raising its medium-term core profit outlook, while Nordic Semiconductor (OL:NOD) soared 11% after being linked to Franco-Italian chipmaker STMicroelectronics (PA:STM).
Staying with the M&A theme, Britain’s competition regulator has cleared a $44 billion merger between broadband company Virgin Media and Telefonica’s (NYSE:TEF) U.K. mobile network O2, after a review lasting months.
On the flip side, Royal Mail (LON:RMG) stock fell 1.6% after it decided not to give a forecast for the current year, with its U.K. parcel volumes down 2% last month. EasyJet (LON:EZJ) stock fell 1.3% after the budget airline posted a first-half loss of 701 million pounds ($990 million). EasyJet also trimmed its flying capacity to 15% of pre-pandemic levels for the current quarter (from 20% previously) but said it hopes to run at 90% capacity in the key summer quarter.
Adding to the positive tone, authorities across Europe are loosening restrictions as infection rates fall and vaccinations rise. The U.K. largely reopened on Monday and reports suggest the government is increasingly confident it can lift remaining restrictions on June 21, as planned. Italy, the original epicenter of the crisis in Europe, will phase out its national curfew in the coming weeks, and tough curbs are gradually easing across Germany.
Yet, while the Covid situation is improving throughout the region, ECB chief Christine Lagarde said on Tuesday it was “essential that monetary and fiscal support are not withdrawn too soon”, suggesting that the region has a lot less immediate risk regarding central bank policy changes than across the pond.
The situation in the United States
The European data slate is pretty empty Thursday, but more clues on the pace of the U.S. labor market recovery will come from the weekly initial jobless claims release.
Oil prices edged higher Thursday, rebounding to a degree after the sharp falls of the previous session when traders digested rising U.S. stockpiles, the prospects of more Iranian crude entering the market as well as worries of the Fed tapering back its ultra-easy monetary policies.
U.S. crude futures traded 0.4% higher at $63.61 a barrel, while the Brent contract rose 0.2% to $66.81. Both contracts fell around 3% on Wednesday, to near three-week lows.
Additionally, gold futures fell 0.4% to $1,874.10/oz, just below the four-month high reached the previous session, while EUR/US traded 0.2% higher at 1.2199.
Asia-Pacific News
Asia-Pacific shares mostly fell on Thursday morning after the US Federal Reserve hinted that the debate on reducing asset purchases has already begun. Investors also looked at trade and employment data from Japan and Australia, respectively.
Japan’s Nikkei 225 was down 0.06% by 22: 28 ET (1: 45 GMT) as April trade data released earlier in the day beat expectations. Exports grew 38% year-on-year, imports grew 12.8% year-on-year, and the trade balance was 255.3 billion yen.
In Australia, the ASX 200 rose 0.88%. The country’s employment data for April was mixed, with the change in employment falling by 36,000 jobs, and the unemployment rate falling to an annual low of 5.5%.
China’s Shanghai Composite fell 0.51%, while the Shenzhen Component rose 0.16% after the People’s Bank of China released its main lending rate earlier in the day.
Hong Kong’s Hang Seng index fell 0.93% and South Korea’s KOSPI fell 0.67% after both markets reopened after the weekend.
The Fed’s hint came after the minutes of the April policy meeting were released on Wednesday, which said that “ a number of participants suggested that if the economy continues to move quickly towards the Fed’s goals, this may be appropriate at some point in the upcoming meetings. to begin discussing a plan to adjust the pace of asset purchases.”
The announcement took some investors by surprise.
It was unexpected to hear talk of a Fed cut … the market thought it might be a couple of months before you actually see this particular issue come into focus, Joyce Chang, JP Morgan’s global research chair, told Bloomberg. However, she added that now is not the time to bet against the current broader fundamentals on the growth outlook.
Reshuffling before an important debut
ByteDance Ltd. founder Zhang Yiming will cede the reins of TikTok’s owner to an old college roommate and lieutenant, stepping back from running the world’s most valuable startup ahead of its highly anticipated market debut.
Zhang will hand off the chief executive officer role at TikTok’s owner to human resources chief Rubo Liang, he announced in an internal memo posted online Thursday. The billionaire entrepreneur remains chairman but plans to relinquish most of his day-to-day duties because they were an increasing burden on his time, a person familiar with the matter said.
Zhang, who will instead focus on longer-term strategy, is retreating from the spotlight just as Beijing intensifies efforts to curb the influence of internet firms and their billionaire founders, from Jack Ma’s Alibaba (NYSE:BABA) Group Holding Ltd. to Tencent Holdings (OTC:TCEHY) Ltd. That antitrust campaign coincides with a series of moves from ByteDance that could shake up the country’s internet landscape.
Liang takes the helm just as ByteDance prepares for a highly anticipated initial public offering in the U.S. or Hong Kong. It’s also orchestrating its next big act — a move into e-commerce that could pit it against Alibaba and Meituan in a $1.7 trillion Chinese arena.
I feel I did not achieve as much as I had hoped to on my previous objectives in the areas of new strategic opportunities, organizational management, and social responsibility, Zhang said in his memo. After several months of thinking about this, I came to the conclusion that transitioning out of the role of CEO, with all of the related day-to-day responsibilities, would enable me to have greater impact on longer-term initiatives.
Zhang’s handoff recalls a similar move by Pinduoduo (NASDAQ:PDD) Inc. founder Colin Huang, who relinquished the helm of his own firm to a deputy two months ago. The pressures of running fast-evolving, hyper-competitive businesses while dealing with mounting regulatory requirements may have exacted a toll on Zhang, who had begun delegating responsibility.
Eco-friendly IPO
Celebrity-backed Swedish oatmeal producer Oatly Group AB prepared to announce the price of its initial public offering on Wednesday amid another day of stock market falls.
The company aims to raise between $ 1.27 billion and $ 1.43 billion by selling approximately 84.4 million shares at a price of $ 15 to $ 17 per share, according to a regulatory filing. On average, Oatly will get a valuation of about $ 10 billion.
Oatly shares are expected to start trading on the Nasdaq Stock Exchange on Thursday under the symbol OTLY. The proceeds from the IPO will go to both the company and the selling shareholders.
Recently, entering the stock market has proved difficult for several companies, as the stock market has declined due to inflation concerns, and investors are increasingly avoiding the types of growth companies that usually go public.
Last week, at least three companies postponed their IPOs due to instability in the stock market. On Wednesday, shares of Squarespace Inc., a web development company, debuted on the New York Stock Exchange at a level well below their latest funding round, before continuing to fall in the afternoon.
Oatly boasts well-known investors including Oprah Winfrey and Natalie Portman, as well as private equity giant Blackstone Group Inc. and leading investor Verlinvest. In July, Oatly announced a deal to sell a 10% stake to the celebrity group and Blackstone for $ 200 million, with the company valued at $ 2 billion.
Bitcoin Rehabilitation
Bitcoin recovered slightly on Thursday from a sharp slide in the previous session to four-month lows, but was weighed down by concerns about tighter regulation in China and concerns about the size of leverage positions in the cryptocurrency world.
Bitcoin, the largest and most popular cryptocurrency, rose 8.75% to $ 40,000 after falling 14% on Wednesday to its lowest level since late January.
The smaller competitor’s ether rose 6.6% to $ 2,600 at 06: 30 GMT, but was trading extremely unstable after falling 28% on Wednesday.
Wednesday’s drop in both digital assets was their biggest daily percentage move in more than a year, as investors rushed to exit deals that, until recently, far outperformed traditional markets such as stocks and bonds.
The latest catalyst was a statement by Chinese financial industry groups on Tuesday banning institutions from offering cryptocurrency registration, trading, clearing and settlement.
But bitcoin has been under pressure for almost a week after a series of tweets from the head of automaker Tesla (NASDAQ: TSLA), Elon Musk, a major proponent of the cryptocurrency, mostly his rejection of Tesla’s acceptance of bitcoin as payment.
While Beijing has previously taken steps to block access to cryptocurrency exchanges within the country, its latest directive was broader.
It prohibits the use of cryptocurrencies for payments and settlements, and prohibits institutions from providing cryptocurrency-related products or exchange services between cryptocurrencies and renminbi or foreign currency.
Crypto Converter
Input Out (IO), the team behind Cardano, is releasing an Ethereum (ETH) converter. The converter will allow users to move ERC20 tokens from the Ethereum network to Cardano (ADA).
In a recent blog post, IOHK outlined why they chose to convert ERC20 over other tokens. The blog specifies that the ERC20 standard is specific to Ethereum. The standard currently supports over 400,000 contracts including Binance coin, Tether, Uniswap, and others.
In addition, ERC20 fuels Ethereum’s Layer 2 platforms, smart contracts, and DApps. In fact, Ethereum pioneered programmable tokens and as such supports the largest blockchain ecosystem. However, as blockchain and crypto adoption grows Ethereum has started struggling with various scaling problems.
To be specific, some of the problems Ethereum is facing are slow transaction speeds, network congestion, and high fees. As a result of these problems and the ever evolving nature of blockchain, there has been a rise in Ethereum alternatives, including Cardano.
In line with this, IO noted,
By enabling the migration of ERC20 tokens to Cardano, we focus on delivering a value proposition that leverages Cardano’s advantages over Ethereum. In particular, Cardano’s higher capacity for transaction processing and lower fees when compared with Ethereum’s high cost and often congested traffic.
Notably, the converter allows users to move the ERC20 tokens by turning them into a special native token on ADA. The new token will have equal value and functionality as ERC20. Also, the conversion works both ways as it can be reversed. To reverse the conversion users simply have to burn the special token on ADA and proceed to use the original token on ETH as usual.
