Economic digest 21.05.21
Financial news
EuroNews
European stocks held steady on Friday as Swiss luxury goods maker Richemont jumped after its results, but a slide in London-listed shares and worries about inflation dampened early enthusiasm.
The pan-European STOXX 600 index was flat, with British stocks falling about half a percent despite a much bigger than expected jump in retail sales.
Cartier maker Richemont rose 4.6% to a record high as its net profit rose by a third in 2020/21, helped by a strong performance of its jewellery brands and a proposal to double its dividend.
IHS Markit’s survey showed euro zone business growth accelerated at its fastest pace in over three years in May, helped by a strong resurgence in the bloc’s dominant service industry as economies reopened.
The survey also showed supply bottlenecks in manufacturing led to production problems at a growing number of factories in Germany, pushing up factory input prices at a rate never seen before in the survey’s history.
Such bottlenecks will certainly continue to be the main speed limiters on growth over the next few months as economies increasingly reopen, Deutsche Bank (DE:DBKGn) strategist Jim Reid wrote in a morning note.
Global equities have struggled to make headway after hitting record highs earlier this month as investors’ fears that higher inflation could prompt central banks to pare back pandemic-era support quicker than expected.
The European Central Bank chief Christine Lagarde is set to speak at a press conference following a Eurogroup meeting later in the day.
German luxury carmaker BMW inched up 0.4% after it said it would have to set aside 1 billion euros ($1.2 billion), less than initially feared, for expected European antitrust fines for alleged collusion with rivals.
Lufthansa AG (DE:LHAG) fell 6.2% as the Thiele family, the second-largest shareholder in the German airlines, sold more than half of its stake.
Italian banks were mixed, with Bper Banca and Banco BPM inching up, while Unicredit (MI:CRDI) and Banca Monte dei Paschi di Siena slipped after a report that Italy was discussing with the European Union new rules that would ease deals between more than two banks.
Unicredit also said it contested a decision by EU antitrust regulators to fine the Italian bank and others 371 million euros ($452 million) for taking part in a European government bonds trading cartel.
The situation in the United States
Global stocks steadied on Friday after a volatile week, taking the lead on stronger Wall Street as U.S. data eased concerns about inflation, while the dollar edged closer to a three-month low due to a rate cut on an early Federal Reserve rate hike.
Concerns about inflation spooked markets after the recent data, and the Fed’s minutes on Wednesday suggest a possible policy shift to reduce bond purchases.
But on Thursday, the Federal Reserve Bank of Philadelphia said its PMI fell to 31.5 in May from 50.2 in April, casting doubt on the speed of further growth in the U.S. economy.
Other data on Thursday showed that the number of unemployed in the United States increased sharply in early May, which may dampen expectations of an acceleration in employment growth this month, even though the number of Americans filing new claims for unemployment benefits fell below 500,000 last week.
It’s all about inflation and rising interest rates, said Giles Coghlan, chief currency analyst at HYCM.
The fear in the market is played out by these surges — it’s as if someone is on the edge.
The MSCI Global Stock Index rose 0.1% and was expecting a 0.4% gain for the week after jumping 1.8% in the Nasdaq Composite and 0.6% in the Dow Jones Industrial Average on Thursday.
Futures pointed to a further 0.25% gain for the S&P 500 after opening up more than 1% on Thursday.
The dollar index, which measures the greenback against six major peers, held steady at 90.195, near recent three-month lows after its steepest drop in about two weeks on Thursday, as bets on an early U.S. rate hike eased.
The euro fell 0.11% to $ 1.2212.
Rating the vegan debut
Oatly Group AB, a vegan food and beverage maker, surged 18% in its debut after pricing its initial public offering at a high level to raise more than $ 1.4 billion.
The stock closed Thursday in New York trading at $ 20.20, giving the company a market value of about $ 12 billion. On Wednesday, the company and its investors sold more than 84 million U.S. depositary shares at the top of a market range of $ 15 to $ 17 each.
In July, the Swedish company received $ 200 million in new capital from investors led by Blackstone Group (NYSE: BX) Inc. The group also included celebrities such as Oprah Winfrey and Jay-Z, as well as Starbucks Corp (NASDAQ: SBUX). In this round, the company was valued at about $ 2 billion.
Both Jay-Z, through his company Roc Nation, and Schultz were also involved in the IPO, according to people familiar with the matter, who asked not to be named when discussing private information. A representative for Oatly declined to comment. Roc Nation and Schultz did not immediately respond to requests for comment.
The IPO highlights that plant-based products have become popular as environmental and health concerns encourage consumers to seek alternatives to traditional meat and dairy products. Investors were looking for ways to replicate the success of Beyond Meat (NASDAQ: BYND) Inc. on the public market, whose shares have risen more than 300% since its public offering in May 2019.
The biggest hurdle for Oatly may be its own popularity. Since the introduction of Oatly to the US market in 2017, finding Oatly in coffee shops and supermarkets has become something of a treasure hunt for shoppers.
IPO price
The logistics arm of Chinese e-commerce giant JD.com is set to price its Hong Kong initial public offering at 40.36 Hong Kong dollars, near the bottom of the range, a person with knowledge of the matter told CNBC.
JD Logistics previously said its IPO on the Hong Kong Stock Exchange would be priced between 39.36 Hong Kong dollars and 43.36 Hong Kong dollars.
The company will issue 609.2 million shares. At 40.36 Hong Kong dollars each, the company would raise 24.6 billion Hong Kong dollars ($3.2 billion).
The pricing is subject to confirmation, said the person, who did not wish to be identified as they were not authorized to speak publicly.
JD.com, a rival to Alibaba in China, has been busy in the capital markets. JD.com, which is listed in the U.S., carried out a $3.87 billion secondary listing in Hong Kong last June. The company then listed its health-care unit in Hong Kong in December.
However, JD withdrew its planned listing of its financial technology arm, JD Technology, from the Nasdaq-style STAR market in Shanghai last month.
JD has been investing in its logistics as a way to differentiate in China’s cut-throat e-commerce market. The company has been focusing on same-day and next-day deliveries and investing in automated logistics warehouses.
In 2020, JD Logistics raked in revenue of 73.4 billion yuan ($11.4 billion), a 47% year-on-year rise. However, the company reported a 4 billion yuan loss in 2020, more than the 2.2 billion loss the year before.
Furthermore, in 2020, more than 50% of JD Logistics’ revenue came from JD Group and other affiliated companies — a risk the company flagged in its IPO prospectus.
A significant portion of our revenue was associated with JD Group during the Track Record Period and we expect a significant portion of our revenue to continue to be associated with JD Group in the foreseeable future, it said.
We may have different development prospects or conflicts of interest with JD Group and, because of JD Group’s controlling ownership interest in our Company, may not be able to resolve such conflicts on favorable terms for us.
Bitcoin’s Struggle
Bitcoin (BTC) is still ‘halfway’ through the current bull market and the price dip that happens earlier this week turned out to be a ‘win’ for the hodlers, based on a study by on-chain analyst Willy Woo.
In his latest market updates that are publicly accessible, the famous statistician highlighted many factors that suggest bitcoin is not yet bearish.
Bitcoin recovered massively from its lows of $30,000 on May 19, preserving its gains after the steepest recovery in its history. Woo wrote:
Are we in a bull market? Long-range macro indicators like the NVT ratio are very healthy, that remain unchanged. So yes, this is not a mania top which all BTC bull markets end in, price is BELOW fundamentals, not above it. We are still halfway.
The normal end of a bitcoin bull run is a mania top and it has not appeared so far. Thus, fundamentals are unchanged in their outlook. The network value to transaction (NVT) ratio is a popular metric that aims at determining profitability among the hodlers. Based on reports from earlier this week, even before the latest dip, NVT was showing a buying opportunity at price levels near $42,000.
NVT price that Woo describes as “organic” valuation of Bitcoin still hovers around $55,000. This valuation together with stock-to-flow-based projections of $60,000 says that Bitcoin is significantly undervalued.
The biggest crypto might already have the tools it requires to recover its lost ground, due to a major shakeout of leveraged traders and the now silent effects of Musk tweeting negative comments. The latest dip might have been what Bitcoin needed. Woo added:
Newish whales dumped out, retail bought a chunk of the dip, coins getting more distributed, I’ll take that as a win.
Interestingly, the steep plunge to $30,000 eventually resulted in Bitcoin funding rates turning negative all over to record lows that might bring fuel for a major short squeeze. Messari analyst Mira Christanto commented on the latest BTC funding rate data:
That cleanse set up Bitcoin for $100k. Funding rates largely reset. The shakeout before the breakout.
Ethereum Record
Ethereum was trading at $ 2,906. 69 at 20: 43 (00:43 GMT) on Friday, up 30.32% on the day. It was the biggest one-day percentage gain ever.
The upward movement pushed the market capitalization of Ethereum to $ 330.82 billion, or 18.22% of the total capitalization of the cryptocurrency market. At its highest level, the market capitalization of Ethereum was $ 479.29 billion.
Ethereum was trading in the range of $ 2,766. 02 to $ 2,907.72 for the previous day.
Over the past seven days, Ethereum has lost 24.4% in price. The trading volume of Ethereum for the day before writing amounted to $ 66.98 billion, or 24.26% of the total volume of all cryptocurrencies. Over the past 7 days, it has been trading in the range of 1922.2527 to 4129.9937 dollars.
At the current price, Ethereum is still down 33.43% from the all-time high of $ 4,366. 10 set on May 12.
Elon Musk’s favorite
Many started to hate on Elon Musk as people blamed him for the recent Bitcoin market crash. The dips happened as Musk announced that Tesla will not be accepting Bitcoins due to environmental reasons.
Last week, Bitcoin prices suffered due to a sell-off sparked by the Tesla billionaire. According to coin information websites, Bitcoin price has lost more than 20% over the last seven days, dragging down the entire crypto market.
Despite the hate and accusations of market manipulation, Musk tweeted another cryptic message in support of his favorite cryptocurrency — DOGE.
In the Tweet, Musk mentioned, “How much is that Doge in the window?” Aside from this, we can clearly see a dollar on top of a book. Lastly, the thing that stands out the most is the words “Cyber Viking.”
Many speculate that this means DOGE will go up to 1 USD. Others think that Musk may be hinting that he may use Dogecoin on a CyberViking satellite. While all of these seem plausible, nothing is confirmed yet.
Musk’s Dogecoin tweets have always been associated with surges in DOGE price. People started to dub this as The Elon Musk Effect. However, these are always speculations that can never be ascertained. On the other hand, Elon Musk’s impact on the crypto markets is enormous and undeniable.
