Oil holds near 12week high, with energy stocks soaring
The price of oil held at over $43 a barrel in overnight trading on Sunday and into this morning’s European open, its highest level since early September. That follows the third straight week of gains for oil prices, as progress towards a widely available Covid-19 vaccine has raised hopes of an improvement in energy demand. The price of oil has also been boosted by expectations that global oil cartel Opec and its allies will agree to delay plans to increase their output by two million barrels a day from January, according to Bloomberg. Last week, US-listed Chevron and Exxon gained 2.4% and 3.3% respectively, taking their gains over the past month to 18.2% and 8.1%. London listed BP and Royal Dutch Shell gained 3.2% and 7.3% last week respectively, with their gains over the past month standing at 18.9% and 27.2%.
After substantial gains the prior week, stocks paused last week. The Dow Jones Industrial Average fell back 0.7%, versus a 4.1% gain the previous week, while the FTSE 100 was up 0.6% versus 6.9% the week before.
Retail sales, initial jobless claim data shows slowing momentum
Of the three major US stock indices, only the Nasdaq Composite turned in a positive last week with a 0.2% gain. Small-cap stocks turned in another week of outperformance, with the Russell 2000 index up 2%. Since late September, the small-cap index, has rallied by more than 20%.
Aside from more vaccine progress news, investors had initial jobless claims and retail sales data to digest. Retail sales figures were mixed. While they showed an increase of 0.3% from September to October, momentum has still slowed down. Similarly, last week’s initial jobless claims data was worse than expected, with an increase of 31,000 to 742,000. In a Friday note, analysts at Edward Jones said that the data “in our view, confirms that this economic recovery is likely to be choppy before ultimately returning to pre-pandemic levels.”
S&P 500: -0.7% Friday, 10.1% YTD (-0.8% last week)
Dow Jones Industrial Average: -0.8% Friday, 2.5% YTD (-0.7% last week)
Nasdaq Composite: -0.4% Friday, 32.1% YTD ( 0.2% last week)
Double-digit week for Taylor Wimpey, Imperial Brands, BAE
London-listed stocks continued to make progress last week, although the gains posted by the FTSE 100 and FTSE 250 were of a smaller magnitude versus the previous week. The FTSE 100 added 0.6% over the course of the week, while the FTSE 250 gained 1.2%. However, several names in the FTSE 100 delivered double-digit gains last week. Housebuilder Taylor Wimpey gained 12.3%, tobacco giant Imperial Brands added 10.4%, and BAE Systems was up 10.6%. Taylor Wimpey’s share price has surged by 40% over the past month. At the other end of the spectrum, Sage Group suffered a tough week, falling 12.9%. The news came as the accounting software firm said that it will increase its spending on cloud computing in order to capture more of the small business market. In the FTSE 250, Micro Focus International and Just Group helped take the index higher, with gains of 24.2% and 26.3% respectively.
FTSE 100: 0.3% Friday, -15.8% YTD ( 0.6% last week)
FTSE 250: 0% Friday, -10.9% YTD ( 1.2% last week)
What to watch
Agilent Technologies: Laboratory instrument firm Agilent is up 30% year-to-date, including a 12.8% gain over the past three months. The firm delivers its latest set of quarterly earnings on Monday, after delivering significant earnings beats in the previous two quarters. Earlier in November, the firm announced that it has had a new method for regulating and detecting dioxins (a group of pollutant chemicals that find their way into the food chain) approved by the US Environmental Protection Agency. Wall Street analysts are currently split between a buy and hold rating on the stock.
Warner Music Group: Warner Music Group only listed on the Nasdaq exchange this year, with an initial public offering priced at $25 a share. Since then, the firm’s share price has risen to $29.32. The company is one of the largest recording firms in the business and has artists including Ed Sheeran and Beyonce in its stable. WMG will hold its quarterly earnings call on Monday. Currently, analysts lean towards a hold rating on the stock and are anticipating an earnings per share figure of $0.04.
The winners and losers since Pfizer’s vaccine announcement
It has only been two weeks since Pfizer first announced its 90% plus effective Covid-19 vaccine trial result on November 9th, but the winners and losers stock-wise since then provide some indication of how markets might behave as vaccine approval and distribution begins to gain momentum.
Until Pfizer made its announcement, the commodities, financials and energy sectors had suffered this year, with losses of 34%, 17% and 50% respectively according to financial advice firm Edward Jones. From November 9th to November 18th, those three sectors gained 6%, 10%, and 22%. At the other end of the spectrum, the technology and consumer discretionary sectors had gained 34% and 29% respectively in the year up to Pfizer’s announcement. From November 9th to 18th, the sectors both fell back by 1%.
Crypto corner: Bitcoin less volatile than one in five S&P 500 stocks
Bitcoin, although having a reputation for volatility, is less susceptible to wild valuation swings than over 100 S&P 500 stocks, according to investment manager VanEck. They compared bitcoin’s performance to S&P 500 stocks over the past 90 days and found it less volatile than the stocks of 112 companies. Expanding that to year-to-date and VanEck found it was less volatile than 145 stocks, placing it firmly in the middle of the pack of investments.
Bitcoin is routinely criticized as being too volatile for investing with many fund managers and other large institutions steering clear as a result. Commenting on a blog post on the company’s website VanEck said: “While bitcoin continues to be a volatile asset, it may surprise researchers and investors as to what other major assets have been more volatile than bitcoin.
“Much of the volatility over the past few years can be attributed to sensitivity to small total market size, regulatory hurdles and generally limited penetration in mainstream stock and capital markets.”
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