London-listed stocks close higher before US selloff
The FTSE 100 and FTSE 250 closed the day on a high, closing before the winds shifted in the US later on Monday, with both finishing more than 1% up. A variety of sectors helped the FTSE 100 higher, with brokerage Hargreaves Lansdown, pest control business Rentokil and miner Rio Tinto all closing the day out more than 3% higher.
In the FTSE 250, security company G4S, property developer Hammerson and luxury sports car firm Aston Martin Lagonda were among the leading names, gaining 9.3%, 7.7% and 6% respectively.
The UK’s exit from the European Union was brought into focus yesterday, after the government revealed a huge checklist that companies will need to go through in order to continue trading with the EU, regardless of the outcome of Brexit negotiations.
British chip company Arm Holdings, which was taken off the public market when SoftBank bought it four years ago in a £23 billion deal, also hit headlines on Monday. Per The Wall Street Journal, SoftBank is considering a full or partial sale of the company, which was Britain’s biggest tech firm. The review is reportedly in the early stages, with Goldman Sachs advising.
- FTSE 100: +1.3% Monday, -18.1% YTD
- FTSE 250: +1.2% Monday, -20.6% YTD
What to watch
US banks: Q2 earnings season kicks into gear today in the US, with banking giants JPMorgan, Citigroup and Wells Fargo all on deck. For all three banks, the impacts of an ultra-low interest rate world, cash being set aside for loan losses and the security of dividend payments will all be key focuses of analysts. Increased revenues from a higher volume of trading volume and investment banking transactions could also be a feature, as well as fees collected from implementing the government’s Paycheck Protection Program loan program.
Delta Air Lines: Delta reports Q2 earnings today, after a quarter in which it faced near non-existent demand for air travel. The company’s share price remains down more than 54.1% year-to-date, despite a rally in recent months. With some states beginning to bring back certain lockdown restrictions, investors will be watching for management’s insight into any recovery of demand globally as lockdowns have eased, and if the company can weather another period of widespread restrictions. The company’s policies around keeping travellers safe will also likely be under scrutiny. One set of questions the firm’s leaders won’t have to answer, that many rivals will, is how it is handling orders for the still-grounded 737 MAX airliner. Delta is the only one of the big three US airlines not to have opted for the aircraft. Analysts are expecting a $4.16 loss per share for Q2. Currently nine rate the stock as a buy, three as an overweight and seven as a hold.
Fastenal: Industrial and construction goods distributor Fastenal also reports its latest quarterly earnings today, after a 2020 that has seen its share price gain 17.4% so far. The $25bn market cap firm is expected to have suffered lower demand for its services during Q2 due to construction projects grinding to a halt, and analysts will be probing on how well the company is set up to handle a likely backlog of demand as economies reopen. Wall Street analysts are anticipating an earnings per share figure of $0.37 for the quarter, and overwhelmingly favour a hold rating on the stock.
Crypto corner: Bitcoin mining difficulty hits all-time high
Bitcoin’s mining difficulty has hit an all-time high, shrugging off the effects of the halving in May. The difficulty now stands at 17.3 million, the highest since the cryptoasset’s inception, according to CoinTelegraph. Some analysts predicted that the difficulty would collapse in the wake of the halving in May as miners left in droves, but this fear has proven unfounded.
This difficulty measure accounts for the process of mining new blocks of Bitcoin’s blockchain. The difficulty alters around every 14 days to regulate the flow of new blocks. It ensures new blocks are only ever created every 10 minutes. If more miners are working on the network the difficulty will increase to slow down block productions.
The hash rate dipped in the aftermath of the halving event in May but has since recovered spectacularly. The higher the difficulty, the more expensive it is to mine Bitcoin. Typically this causes some miners to sell out of the operation, which in turns lowers the difficulty as demand falls away again.
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