Market Wrap

Market Wrap: Amazon moves the movies, an outlandish oil prediction and Lamborghini's no longer a People's Car

Annie Charalambous, Friday, 28 May 2021

ETX Capital Market Wrap

Why is It that traditional commodities of great importance always pay second fiddle to currencies when it comes to market news? On Tuesday this week, the EUR moved against the USD and there was a big noise all over the mainstream news about how the EUR was at its second highest point since January this year and at its third highest point since 2018.

Yes, sure, that is big news, the Dollar depreciated, and the EUR stayed roughly the same creating some volatility., however the real thing to pay attention to on Tuesday was oil. It has been very volatile for over a year since the negative equity scenario in March last year.

Now, Goldman Sachs has predicted that it may go up to $80 per barrel sometime this year, which is a huge amount higher than it has been for many years, despite the potential slackening of sanctions by the US on Iran, but everything seems to be forgotten when it comes to wanting to buy a well restricted commodity.

If sanctions are lifted and there is more available oil, why would It go up to $80? Added to the counterargument is that the US is one of the largest national proponents of green energy and ESG investing, therefore a move away from fossil fuel use is high on many corporate and personal agendas.

Let’s see if this actually happens.
 

GBPUSD at 1.42… Bank stock about to provide a big shock?

As this week began, the halo effect of the high first quarter revenues announced by large banks was still causing buoyancy as the GBPUSD rose to the highest level for a very long time and rested at 1.42.

What will happen when reality sets in? The City of London Police began looking at fraudulent applications for Bounce Back Loans, which were issued by banks on behalf of the government in order to make businesses comply with lockdown restrictions, and here we are, a year later and the perceived ‘free money’ now needs repaying.

Analysts predict that at least 60% of these loans will be defaulted on, and banks will have a big black hole in their balance sheets due to the burden being passed to an increasingly smaller band of taxpayers.

A year of payment holidays was in many cases not quite enough and many businesses have gone bankrupt since then and now the banks are looking to get their cash back.

The question is, how are they going to do it? There is very little recourse and not much in the way of liquid capital to pay it back, and therefore next quarters revenue figures will likely make for interesting reading.
 

AstraZeneca on 2021 high

AstraZeneca, one of the major global pharmaceutical firms that has been a major feature in global news broadcasts over the past few months and which has reaped huge financial rewards as a result of government policies, on Monday become the subject of investigation by the Competition and Markets Authority (CMA).

The CMA is a British non-ministerial government department which is responsible for strengthening business competition and preventing and reducing anti-competitive activities and is focusing on the proposed £27.5 billion acquisition proposal of Alexion Pharmaceuticals by AstraZeneca.

AstraZeneca, which entered into an agreement with North American company Alexion in December 2020, is confident that the CMA will allow the acquisition to proceed, an opinion that appears to be reflected in today's stock prices as AstraZeneca shares are trading at £81.31 per share today, their highest point since the month in which the Alexion deal was announced.

On December 10, 2020, AstraZeneca shares were trading at £81.29 per share, just a penny below today's value.

Whilst Monday's values were a far cry from the lofty £91.87 reached in June 2020, the stock has been climbing steadily since it hit a low point in March this year and has crept to its high point today after the news relating to AstraZeneca's confidence in obtaining the pending approval from the CMA to proceed to create what would become a very large pharmaceutical empire.
 

Public holidays start the week in US & UK – a new month, new metrics

Bank Holiday Monday takes place in the UK, and it’s a Public Holiday in the US as a short week of new metrics for May are announced across the global markets.
 

Mark your calendars

  • Tuesday: Japanese Industrial Forecast for June down -4/3% over May, Australian Housing Credit set to be 0.5%, Spanish current account balances -1.71 affecting the EUR
  • Wednesday: US total vehicle sales expected to be 18.5 million for May, and French Government Budget Balance expected to be a huge deficit at -60.1 billion Euros
  • Thursday: Services PMI in the UK from May to June, staying at 62.0, and ADP Non-Farm Payroll figures in the US expected to go up from 545,000 in April to 745,000 in May
  • Friday: Greek GDP down 7.9%, EU retail sales up 12%, US Government payroll figures expected to be 48,000 whilst US Manufacturing Payrolls down 18,000 and May non-farm payrolls down from 621,000 to 266,000, a huge difference. Canadian unemployment figures are estimated to show an increase of 207,100

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