Gold surged to levels not seen in eight years overnight, surpassing the recent May peak, to trade above $1,770 as people look to spread out their investments across multiple asset classes.
The precious metal has risen by 25% in the last year, to hit levels not seen since 2012 and the height of the Eurozone crisis.
Gold has climbed despite the rapid recovery in stock markets, which has seen them bounce back from March lows to leave them on track for their best quarter in a decade. The S&P 500 climbed back to 3,131 points overnight, leaving it less than 10% below its record high of 3,393 set in February.
In company news, Dell Technologies took centre stage after reportedly looking at options to spin off a huge stake in cloud firm VMWare, in order to deal with the substantial gap between Dell’s own $36bn market cap and the $50bn value of its stake. Essentially, the market is saying that Dell’s core business lines – personal computers and data storage – have no worth at all. In the three months to May 1, Dell posted revenues of $21.9bn, and net income (profit) of $182m. Dell stock, which had gained 1.5% in regular trading hours on Wednesday, jumped 18% in late trading, while VMWare gained close to 10%. Investors are optimistic that separating the companies may lead to the value of both businesses being more fully appreciated.
Elsewhere SoftBank priced a $14.8bn sale of T-Mobile stock on Tuesday, at $103 a share and also reportedly plans to sell its remaining $10bn stake to Deutsche Telekom. That is roughly a 4% discount to its Tuesday closing price. T-Mobile stock is currently at a record high and has gained more than 35% year-to-date. That surge has been driven by better-than-expected profit figures for Q1 and completion of its Sprint acquisition in April.
US shares climb higher despite threat of ‘decoupling’ US and Chinese economies
The major US stock indices continued their rally on Tuesday, with the Nasdaq Composite once again leading the way. The tech-heavy index gained 0.7% helped higher by names, including travel website Expedia, US-listed Chinese internet firm Netease, and Apple, which gained 4.2%, 4% and 2.1% respectively. The gains came despite US treasury secretary Steven Mnuchin, speaking at a virtual event, saying that unless the US can “participate and compete on a fair basis” with China, that the US will work to decouple the economies of the two superpowers. Mnuchin also revealed that he hopes the next coronavirus relief package will be passed in July but noted hundreds of billions of dollars remains unused from March’s bill. In the S&P 500, which closed the day 0.4% higher and is edging ever closer to positive territory year-to-date, the consumer discretionary sector led the way with a 1% gain. The utilities sector was the biggest loser, closing down 1.1%, while information technology stocks climbed 0.7%.
S&P 500: 0.4% Tuesday, -3.1% YTD
Dow Jones Industrial Average: 0.5% Tuesday, -8.4% YTD
Nasdaq Composite: 0.7% Tuesday, 12.9% YTD
UK reopening sends FTSE 100 higher
London-listed stocks jumped on Tuesday, with the FTSE 100 up 1.2%, after Prime Minister Boris Johnson announced that a significant number of pandemic-related restrictions will be lifted in the UK in early July. Cinemas, museums, and galleries will all open, with the social distancing requirement cut in half to one meter. The FTSE 100 was led by mining company Evraz, investment firm Standard Life Aberdeen and online takeaway service Just eat, which gained 8.2%, 6.3% and 4.9% respectively. Other investment related names also enjoyed a positive day; M&G stock was up 4.3%, and the London Stock Exchange Group closed 3.9% higher.
Grocery delivery service Ocado Group found itself towards the back of the pack on Tuesday, sinking 3.5%, after gaining more than 50% this year. Ocado has headed in the opposite direction to the FTSE 100 over the past month, as the impending reopening of the economy likely means more shoppers return to physical stores and less reliance on its services.
FTSE 100: 1.2% Tuesday, -16.2% YTD
FTSE 250: 0.5% Tuesday, -19.3% YTD
What to watch
Winnebago Industries: One of the more intriguing companies reporting earnings this week is Winnebago, which will issue its latest quarterly results on Wednesday. The company’s stock, having initially taken a huge hit in the broader market sell-off due to production line shutdowns, is up 33.8% year-to-date, after a huge 194% rally over the past three months. That surge has been driven by an expected increase in demand for domestic holiday options, which could lead to more sales of the firm’s camper vans. Wall Street analysts are still expecting a significant hit to profits for the quarter being reported; currently six analysts rate the stock as a buy or overweight, three as a hold and one as a sell.
IMF World Economic Outlook: On Wednesday, at 9am New York time, the International Monetary Fund puts out its latest global economic update. The IMF last provided an economic update in April, when it projected that the United States’ GDP will shrink 5.9% in 2020 and grow 4.7% next year. For the UK, the IMF projected a 6.5% drop in GDP in 2020, followed by 4% growth in 2021.
Crypto corner: Last Bitcoin won’t be mined until 2140
The final Bitcoin will not be mined until 2140, 120 years from now, a report has said, with rewards for mining Bitcoin recently cut in half.
According to the International Business Times, 18.4 million Bitcoins have already been mined out of a potential 21 million in existence.
Following the most recent halving, miners now collectively receive 900 Bitcoin per day and earn 30-50 Bitcoin in transaction fees. By 2140, there will be no more reward for mining Bitcoin because there’s no more Bitcoin to mine.
The limited supply has helped to boost the price of Bitcoin in recent years, and it is currently close to the $10,000 mark, trading at $9,612 this morning.
All data, figures & charts are valid as of 24/06/2020. All trading carries risk. Only risk capital you can afford to lose.