Market Wrap

Market Wrap: AstraZeneca's board revolt, and Musk backtracks on BTC

Annie Charalambous, Monday, 17 May 2021

ETX Capital Market Wrap

Inflation? What inflation? Social media influencing the markets, and trading is the new borrowing.

This week began in London with the Mayoral race having been settled, and by the time the markets opened on Monday morning, it was a case of 'meet the new boss, same as the old boss'.

Any potential effect on the capital markets as a result of the most hotly contested Mayoral race in recent London history soon became a non-topic, as there were plenty of other interesting challenges this week.

Tech stocks have been a continual moot point throughout the week. By the middle of the week, it appeared that many traders and investors had almost turned their backs on tech stocks, as the main indices rose to extremely high levels, and are still doing so now, but not as a result of much interest in big tech.

The largely ignored reality that the Dow Jones index had its highest ever day since establishment on Monday this week at a time during which tech stocks are being given a very bearish short shrift is really telling, as is the 7,000-point continuation of the FTSE100, whilst Alphawave, the microprocessor manufacturer that listed on the London Stock Exchange last week experienced a massive 20% dive in its stock.

Adding further momentum to this, the rebirth of the ETF has emerged in America, whilst the fickle world of trading turned its back on big tech stock which was the only fly in the ointment of otherwise stellar performance on the tech-heavy NASDAQ, along with the Dow Jones and S&P down whilst listed funds rocketed.

During the middle of the week, AstraZeneca's AGM made the company's decision to award its CEO with a £18 million remuneration package, which angered shareholders to the point that they staged a revolt with 40% voting against it even though the motion was passed by the board. This in itself did not cause volatility, but speculators at the time considered the potential power shareholders may have over the markets if such a large company angered its investors so much that they resort to a sell-off, or if the board caves in and redacts the CEO's pay increase and he leaves.

One analyst in London said that the company could be "counting the cost in millions" should their CEO seek pastures new. At present, the pay rise remains approved, and the stock is quite steady, but it did lead to other shareholder revolts, even within small companies, as reported by us this week.

Social media has been a source of income for many full-time 'influencers' over recent years; however, it has made its foray into influencing the capital markets sector ever since the Meme stock debacle in January this year when a Reddit subgroup discussion caused GameStop shares to become extremely volatile, leading to many venues and brokerages being unable to operate their platforms.

This week's example of how one sentence on a public forum can create incredible waves came in the form of Tesla founder and eccentric scientist Elon Musk, now the world's richest man, who is known for his disruptive capabilities.

Mr Musk stated that Tesla will no longer be accepting Bitcoin as payment for vehicles, and criticized the method by which Bitcoin is mined as being environmentally unfriendly due to the power-hungry nature of creating Bitcoins, and that the firm is looking to only accept digital currency that uses less than 1% of the energy required to mine Bitcoins. Result? Huge drop in the value of Bitcoin.

Of course, that is not sovereign currency, therefore appears less relevant, but the point here is the ability to influence entire markets via one sentence on Twitter.

Completing the week was the clamour and speculation about inflation. Britain is, according to mainstream media, set to enter the largest recession since the financial crisis of 2008. This did not make a dent in market activity, however.

The Pound is still absolutely strong at 1.40, equal to the value at which it began the week, and the FTSE 100 crept even higher than its 7000 level and finished the week at 7005, demonstrating that today's traders are analytical and are more interested in tangible facts rather than whimsical projections.
 

Mark your Economic Calendar

  • On Monday at 12:30 PM GMT, Canada will reveal its foreign securities purchases, which are estimated to be around 10.54 billion Canadian dollars, and at 20:00 PM, the US will reveal its foreign buying and T-bonds, which is at a deficit of $65.5 billion.
  • On Tuesday at 1:30 AM, the Reserve Bank of Australia will release its meeting minutes, and Britain will announce its Unemployment Rate at 6:00am, which is expected to be 4.5%.
  • On Wednesday, new car registrations will be released by the British authorities at 6:00 AM for the month of April. An astonishing 453% increase is anticipated over March, so if you were wondering where all the 21 plate cars were in March, you're likely to see more of them now! This figure bolsters the general view that the UK economy is experiencing a spending boom. Compare this to mainland Europe – France, Germany and Italy will announce their car registrations at 6:00 AM on Wednesday too, and whilst up in March, they're nowhere near the unbelievable number of new cars registered in England in April. Bearing in mind that most new cars are leased or financed, that demonstrates the lenders and finance companies' will to provide interest-laden lease products. At 11:30 AM, the United States is set to release Crude Oil Inventories, which are likely to be down by 0.427 million barrels. Oil has been a very volatile commodity over the past few months.
  • Thursday will be a relatively steady day, with Australia set to release its Unemployment figures as a particular set of data that stands out. In April, it became 15,000 higher than in March, and the full employment figure is down by 20,800 which is quite sizeable.
  • Friday will show the results of the much-talked about Retail Sales bonanza that the UK is experiencing following the reopening of its shops after lockdown. For April, the figures for retail sales are expected to be 5.4%, which is a huge amount of difference from the 1.5% in March.

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