UK stocks flat as stronger pound balances out sentiment boost from EU aid deal
The FTSE 100 was flat on Tuesday, after EU leaders agreed a 1.8 trillion euro aid and budget deal to help support member states, following days of negotiating. A jump in the value of the pound versus the US dollar tempered the index’s gains; when the pound is stronger, the value of FTSE 100 company earnings – some 70% of which are made overseas – effectively gets reduced. Brokerage Hargreaves Lansdown was the biggest winner of the day in the FTSE 100, closing it out 10.1% higher. It was followed by Rolls Royce, which jumped 7.9%, and BP – which rose 4.3% on the back of the oil price spike.
At the bottom of the index was gambling firm GVC, falling double digits after it was reported that HMRC has widened an investigation into the Ladbrokes owner over its former Turkish online gambling operation. That news followed GVC announcing that its chief executive, Kenny Alexander, is leaving after 13 years. In the FTSE 250 – up 0.7% on Tuesday – travel, energy and hospitality names led the way. Train and bus booking firm Trainline was up 11.1%, airline TUI climbed 6.1% and pub chain JD Wetherspoon added 6.1%
- FTSE 100: +0.1% Tuesday, -16.9% YTD
- FTSE 250: +0.7% Tuesday, -20% YTD
What to watch
Microsoft: $1.6trn market cap technology giant Microsoft reports its latest set of quarterly results on Wednesday, after a 2020 that has seen its share price gain 32.4%. A primary driver of that gain, and one of the main focuses of its Wednesday earnings report, is the company’s Azure cloud business. The division is a likely beneficiary of firms pouring resources into their cloud operations as they adapt to a world where virtual working is expected to become a more permanent feature. Microsoft has not been completely immune from the impact of the pandemic; this week LinkedIn, which it owns, announced it will be cutting 6% of its workforce as companies that use the platform to source talent have slowed down hiring activity. Currently, 30 analysts rate the stock as a buy or overweight, and three as a hold, with no sells.
Tesla: One of the highlights of this quarter’s earnings season will be Tesla’s report. If the company can report a profitable second quarter, it will be one step closer to inclusion in the S&P 500 index, which would lead to a swathe of passive funds buying the company’s stock automatically. The S&P 500 requires four consecutive profitable quarters before a company can join, but its inclusion will not be automatic if it hits that milestone. In Q1 the firm reported better than expected vehicle deliveries, and investors will be watching closely to see if it has handled Q2 similarly, following a 275% run-up in the stock year-to-date. The firm remains one of the most divisive companies in terms of analysts’ viewpoints. Price targets on the stock range from $295 to $2,322, with an even spread between buy, hold and sell ratings.
Unilever: Consumer goods firm Unilever, which is listed on the London Stock Exchange, is almost exactly flat year-to-date share price wise. The company sits behind brands like Ben & Jerry’s ice cream and PG Tips tea, and is a regular feature in many equity income portfolios given its 3% plus dividend yield and steady long-term performance. In 2020, the firm’s peak to trough fall was far less severe than the broader market, which it is now more than 15% ahead of year-to-date. Unilever reports its latest quarterly earnings on Thursday, where investors will be watching for insight into consumer demand now that lockdowns are easing in many markets.
Crypto corner: One million bitcoins belonging to mysterious founder identified
1.1 million bitcoins, equivalent in value to more than $10.9 billion at current prices, has been identified as mined and owned by elusive bitcoin founder, Satoshi Nakamoto, by crypto analyst Whale Alert.
The analyst found that over 22,000 of the first 50,000 bitcoin blocks were mined by the mysterious founder. Whale Alert says the founder mined constantly in the early days of the cryptoasset to protect the network from a 51% ownership takeover – where one individual or organisation buys a majority of a cryptoasset, effectively taking control of it.
Whale Alert identified Satoshi’s bitcoins by studying a unique pattern associated with the creator’s mining technique, a so-called “extra nonce technique”. The reliability of such a technique for identifying miners has been called into question by other analysts, however.
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