👀 Ones to watch: Undervalued stocks to buy before they report Q3 earningsSee Undervalued Stocks

Stocks Rise, Powell Warning, SoftBank, Pound And Gold

Published 18/05/2020, 08:50
GBP/USD
-
US500
-
DJI
-
DTEGn
-
GBP/EUR
-
CL
-
BABA
-
UBER
-

Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu season is anything to go by, sunny skies reduce the odds of an imminent second wave.

Indices

Stock markets look optimistic as we start the new week. As lockdown easing progresses, investors continue to value companies as if the global economy has already hit its low point.

Shares in Asia started the week on the front foot. European shares are opening higher. Commodity market gains are helping Big Oil and the miners.

Futures points to a firmer open on Wall Street. The S&P 500 is set to open over 1% higher. Poor results and even worse guidance from big US retailers this week are clearly not affecting investor confidence. With the likes of JC Penney filing for bankruptcy this weekend, investors are well prepped for bad news from retailers.

SoftBank

Shares of SoftBank are higher after the tech investment group reported a record $13 billion annual loss. Plans to buyback $4.3 billion shares and sell down some of its highest profile stakes to cover the losses are softening the blow. It was reported Softbank might sell some of its T-mobile stake to Deutsche Telekom (DE:DTEGn). We'd expect the group will pare some of its position in Alibaba (NYSE:BABA) too after Jack Ma stepped down from the board.

Thinking further out, investing in start-ups is high risk and you need the big winners to cover the rest that go sour. WeWork was supposed to be the latest big winner after Uber (NYSE:UBER) and Alibaba, but it wasn't. That means the only choice is to sell stakes until the next big winner, but that means lower returns and investors will start to walk, especially in a bad economy.

Forex

The British pound is turning lower against several major currencies. There was a thinking for a while that Brexit risk pales in comparison to the downturn brought about by the coronavirus. But now as medium-term economic forecasts darken, the prognosis is relatively worse for the UK than elsewhere because of Brexit.

Commodities

Gold has a hit a fresh 7-year high on Monday ($1763 per oz at time of writing). The Fed Chairman's warning is suggests taking an investment strategy that's defensive against weak growth and more monetary stimulus and gold covers both.

Front month for WTI crude oil has risen above $30 per barrel. It's a far cry from the negative prices of a month ago that everyone understood wasn't anything close to a proper valuation. The surprise drop in US crude stockpiles last week means storage is no longer the central issue. Opening calls Dow Jones to open 206 points higher at 23,891 S&P 500 to open 24 points higher at 2887

Chart: GBP/USD & GBP/EUR (2-months)

GBP/USD And GBP/EUR Chart

The British pound has broken down from its horizontal trading range versus several major currencies, including the US dollar and euro.

Original Post

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.