FTSE 100 tumbles back as UK opening pauses
London-listed shares tumbled last week, with the FTSE 100 sinking by 3.7%, taking its year-to-date loss back past 20%. The postponement of further easing of lockdown restrictions in England was one factor affecting sentiment, as was the news that the Eurozone economy shrank at its fastest rate on record in the second quarter of 2020. A chunk of the FTSE 100’s losses came on Friday, when the index fell 1.5%, dragged lower by 5% plus losses from firms such as International Consolidated Airlines Group (IAG), BT and Rolls Royce. IAG took a hit after announcing it had made a multi-billion pound loss in the first half of 2020 due to the pandemic. One bright spot on Friday came in the form of FTSE 250 constituent Pets at Home Group, which posted a 21.5% share price jump after delivering an earnings report that came in well ahead of expectations. Revenue for the quarter ending July 16 was down just 1% versus the same period last year, with pet care supply sales soaring thanks to doting pet owners stuck at home during the lockdown.
- FTSE 100: -1.5% Friday, -21.8% YTD (-3.7% last week)
- FTSE 250: -0.5% Friday, -22.6% YTD (-1.9% last week)
What to watch
Global Payments: Financial technology firm Global Payments, an S&P 500 constituent, offers payment services to merchants, a business that has taken a major hit as lockdowns prevented consumers from spending as normal. However, the company’s share price is close to flat year-to-date, as investors look to its presence in e-commerce payment processing, and increasing numbers of software partners, as mitigating factors. The company reports its Q2 earnings on Monday, with Wall Street analysts overwhelmingly rating the stock as a buy.
The Clorox Company: Cleaning product manufacturer Clorox is not a stock that got the blood racing pre-pandemic, having spent the past decade ticking steadily higher. But the company has been thrust into the spotlight by the pandemic, with its share price soaring 54% year-to-date as demand for its products has skyrocketed. In addition to consumer demand, the pandemic has presented other commercial opportunities, such as the company’s partnership with United Airlines to develop the airline’s new cleaning protocols. Coping with demand, the stickiness of newly won customers and the potential for more corporate partnerships are all likely topics of discussion on the firm’s Monday earnings call. Currently, Wall Street analysts favour a hold rating on the stock.
BP: Oil titan BP delivers its earnings report on Tuesday, six weeks after announcing that it wrote down up to $17.5bn in the value of its assets following a cut to its long-term oil and gas price forecasts. The company’s share price is down by close to 50%, which has pushed its dividend yield into double digits. Its commitment to that dividend and the sustainability of the payment will likely be a key feature of the firm’s Tuesday morning (BST) earnings call. BP’s business has many different pieces, some of which are hurt by lower oil prices and some of which benefit, although all segments are likely to have suffered from a drop-off in demand due to the pandemic.
Here comes the dealmaking
One inevitable effect of any industry that goes through turmoil is an increased volume of mergers, acquisitions and spin-offs, as firms try to get themselves into the right shape to survive into the future. In the US, the oil, retail and travel industries are three of the hardest hit by the pandemic, and investors should be keeping a close eye on the deals that companies they own or have an eye on are getting involved in. A well timed opportunistic purchase from a position of financial strength can be the making of a business, but there will also be firms that bite off more than they can chew, or make rash decisions to acquire assets that they will never be able to successfully integrate. One huge deal came out of the energy sector over the weekend, with Marathon Petroleum agreeing to sell its petrol stations to the owners of the 7-Eleven convenience store chain for $21bn.
Crypto corner: Three arrested for Twitter Bitcoin hack, including Brit from Bognor Regis
US officials have arrested three men in connection with the recent Twitter Bitcoin hack, including a 19-year-old from Bognor Regis in the UK, a 22-year-old from Orlando, Florida and a 17-year-old from Tampa, Florida. The charges include organised fraud and fraudulent use of personal information.
The trio allegedly hacked into Twitter’s “god-mode,” where developers can access any account they need, and began spamming a Bitcoin-related scam link to the followers of the accounts. Those hacked included Elon Musk, Warren Buffett and Barack Obama. Speculation among security analysts is that it is unlikely that Twitter’s systems were “hacked,” rather that the criminals stole login information from an employee in order to gain access.
The attack took place over several hours but the scammers supposedly only netted around $120,000-worth of Bitcoin. Despite this, one of the alleged criminals has his own wealth of around $3 million-worth of Bitcoin already, according to Decrypt.
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