Stocks start week higher as investors eye route to stimulus

After a dismal five-days last week, stocks started the week of the US presidential election higher, and markets have continued their momentum into this morning’s European session. The prospect of a definitive winner is the preferred market outcome and the positive sentiment may be driven by polls suggesting a convincing Biden win. However, if there is a closer race or even an ensuing legal dispute over the result then this could weigh on markets.

Stocks start week higher as investors eye route to stimulus

The energy and materials sectors led the S&P 500 on Monday, which finished up 1.2% with all 11 sectors in the green. Elsewhere, European stocks were also firmer, with the FTSE 100 gaining 1.4% and the German Dax 2% higher. Both are also up over 1.1% this morning.

In company news, PayPal — one of the biggest beneficiaries of the pandemic induced e-commerce surge — delivered third-quarter earnings on Monday that beat analyst estimates. However, the company’s share price slumped by 6% in after-hours trading after management declined to provide guidance for 2021.

America heads to the polls today (although substantial mail-in voting has already taken place), in what could be a testing period for the American democratic process. Most commentators expect heightened volatility for markets for some time, particularly if Trump is beaten by Biden as polls suggest he will be.

Dow jumps 1.6%, Twitter CEO keeps his job

Of the three major US stock indices, the Dow Jones Industrial Average enjoyed the best day, gaining 1.6%. Conglomerate Honeywell International, pharmacy retailer Walgreens Boots and chemicals firm Dow Inc led the index, with all three climbing by more than 5%. In the S&P 500, home improvements supplier Loews, medical device firm Align Technology and clothing retailer Gap were among the biggest winners, with all three gaining between 7% and 8%.

At the bottom of the S&P was Twitter, which slumped by 4.6%, taking its one-month loss to 16.6%. On Monday evening, after the market close, it was reported that Twitter CEO Jack Dorsey is keeping his job following a study of the firm’s leadership pushed for by activist investor Elliott Management.

S&P 500: 1.2% Monday, 2.5% YTD

Dow Jones Industrial Average: 1.6% Monday, -5.7% YTD

Nasdaq Composite: 0.4% Monday, 22.1% YTD

Ocado rallies as it increases profit forecast

Yesterday was a mixed day for UK shares, with the FTSE 100 1.4% higher and the FTSE 250 down by 0.2%. There was no knee-jerk reaction to the new lockdown in England announced over the weekend, but that may in part be explained by the international nature of many UK companies. FTSE 100 firms derive around 70% of their revenues from overseas, with the more domestically focused FTSE 250 still obtaining around 50%. Online grocery firm Ocado Group, Rolls Royce, Royal Dutch Shell and BP led the FTSE 100, gaining 8%, 7.4%, 5.1% and 4.4% respectively. Ocado’s rally was fuelled by the company increasing its full-year profit forecast, with CEO Tim Steiner sharing that the company continues to trade at “peak volumes every day” with average order sizes increasing ahead of the new lockdown hitting.

FTSE 100: 1.4% Monday, -25% YTD

FTSE 250: -0.2% Monday, -21.5% YTD

What to watch

Humana: Health insurer Humana has gained 11.5% in 2020 and is up by 38% over the past 12 months. The firm delivers its third-quarter earnings update today. When the company delivered its Q2 results in August, management told investors that the benefit of its customers deferring medical care due to the pandemic was partially offset by Covid-19 testing and treatment costs. For health insurers, the more policyholders use medical care and claim, the greater the costs they incur. Currently, 18 Wall Street analysts rate Humana stock as a buy, and eight as a hold.

Ferrari: Italian luxury sportscar firm Ferrari floated on the New York Stock Exchange back in 2015; since then, its share price has more than tripled. The company’s share price is up by 10.6% in 2020 so far, as demand for the firm’s vehicles typically runs well ahead of its production capacity, and its brand affords it the ability to sustain hefty margins. On the firm’s Q2 earnings call in August, CEO Louis Camilleri noted that the disruptions caused by the Covid-19 pandemic “engulfed us at a critical time in the delicate industrialization phase of the new models that we presented this year.” On Tuesday, Ferrari will deliver its Q3 earnings update.

Wayfair: Online furniture and home goods retailer Wayfair’s share price has surged in 2020, gaining more than 180% and pushing its market cap past the $20bn mark. Wayfair has been a beneficiary of consumers and companies buying up furniture to facilitate home working, along with consumers turning to home improvement projects while stuck in the house during the pandemic. Investor expectations are sky high going into the company’s Q3 earnings report today, investors will be watching for how successful the firm has been at converting its millions of new customers into repeat shoppers. Analysts are expecting an earnings per share figure of $0.82 for the quarter.

Crypto corner: Mastercard boss says company’s cryptoasset patents will payoff long-term

Mastercard’s range of cryptocurrency patents will give it an edge once central bank digital currencies (CBDC) are launched, the company’s president Michael Miebach has said.

The payments provider has a number of fintech patents in place which allow it to transact with cryptoassets effectively, Miebach told analysts, meaning if and when central banks launch their own coins, the company will be able to facilitate their use across markets.

Miebach reportedly said Mastercard’s cryptocurrency intellectual property “puts us in a good position” for when central banks launch their own cryptoassets, during the firm’s Q3 earnings call.

“The link into an acceptance network is critical” for a CBDC, he said. “So we hold some patents in [the crypto] space that link these transactions right back into our network where it can be used. And this is how we can bring value, and it brings value to us.”

All data, figures & charts are valid as of 03/11/2020. All trading carries risk. Only risk capital you can afford to lose

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