• Alana Walton and Mateusz Deszcz

Market Roundup

Updated: Mar 22

Company Spotlight

There is a chance that as a Finsights reader, you trade or invest your money with the online stockbroker eToro, a direct competitor to the social trading application Robinhood. If that is the case, you might have received an email about the company planning its IPO this year. However, the process of becoming public will not be that simple.


eToro is a trading platform that allows customers to invest in equities, crypto assets, currencies, indices and commodities. The platform is recognisable for its social trading feature, allowing the users to copy another trader’s portfolio. This essentially creates a market for amateur asset managers.


It is anticipated that the Israeli firm will be listed on the NASDAQ in Q1 2021 via Special Purpose Acquisition Vehicle (SPAC), namely FinTech Acquisition Corp V. The process will take the shape of a reversed merger IPO or, in other words, a reverse takeover (RTO). This happens when an active private company (eToro) is merged with a shell corporation (a SPAC). This allows for a huge benefit to the firm’s owners who are looking to raise capital without diluting their ownership.


Would there be a better moment for raising additional capital, if not in the times of the indices peaking at historic highs?

DAX

Last week the strongest EU economy’s index gained a solid 3.5% in a two-day movement. Europe seems to have been left behind with the vaccination race. Injections per capita in Europe stand at an average of 13.3 doses. The United Kingdom or the USA, which used to stand in the fire of criticism at the beginning of the pandemic, are doing much better with vaccine distribution efforts. These two countries have managed to give a first dose to almost every second person as of March 18th.

S&P500


Last week's index began on a high note, extending gains to a fifth consecutive session, rising 0.6% on Monday. It reached record levels of 3,968.94 as investors priced in expectations of the US Federal Reserve, making no significant policy change. The Fed rate-setting federal open market committee (FOMC) meeting was the main focus for investors last week. The streak ended on Tuesday, with the S&P500 closing down 0.2%, with the energy and industrials sectors weighing down on the index. Last Wednesday saw gains of 0.3%, as stocks rose in response to the Fed maintaining its current policy, with interest rates forecast to remain at close to zero, as expected. However, they also announced upgraded US growth forecasts, with predictions of 4.2% growth jumping to 6.5%. This was due to the $1.9tn stimulus package approval and faster than anticipated vaccine rollout. Following this, the index fell 0.3% last Thursday as investors sold off technology stocks in favour of stocks that fare better when the economy is improving. This included financials and industrials, which added 2.8% and 0.9% to the index, respectively, despite sharp losses in tech outweighing this. The week ended on a downbeat note, closing down 0.1% on Friday after a choppy session. Technology stocks recovered from the previous day’s losses, whilst financials were down 1.2%. This was due to the Fed’s silence on extending capital relief for banks. Overall, there was a loss of 0.8% for the week.


FTSE100


The FTSE100 began the week down 0.2%, despite making gains for much of the session. The index was mostly dragged down by mining and oil and gas sectors as commodity prices fell, as well as concerns over the AstraZeneca vaccine. Last Tuesday, it made gains of 0.8% as AstraZeneca lifted the index, making gains of 3.7%, as worries over the safety of the vaccine waned. Wednesday saw losses of 0.6%, with investors cautious ahead of the Fed meeting later on that day, reducing their risk. On Thursday, stocks were lifted slightly, with the FTSE100 up 0.3% as the Bank of England gave a positive assessment of the UK economy, sharing that the picture had improved since its February meeting. It held interest rates at 0.1%, pledging to keep interest rates on hold even if inflation exceeded its 2% target. It also made no changes to the quantitative easing programme. Gilt yields remained at their highest since June 2019, leading to losses in technology companies, including Ocado, which sported losses of 4.9%. Finally, the week ended on a sour note, with the index down 0.9%. This was due to investor pessimism surrounding negative coronavirus news, including vaccine supply delays leading to Britain having a slower than expected vaccine rollout in the coming weeks. Moreover, high bond yields and inflation fears continued to be a focus for investors, weighing down on the index. The FTSE100 overall fell 0.8% last week.


Asia


Asian markets were mixed at the beginning of last week, with Hong Kong’s Hang Seng closing up 0.3%, Japan’s Nikkei225 up 0.2% and China’s CSI300 closing down 2.2% on Monday. Chinese stocks suffered as investors became increasingly worried at the prospect of the government tightening fiscal and monetary policy in response to the risk of “bubbles” in the Chinese real estate sector and in international markets. Moreover, investor confidence waned in view of the continuing crackdown on technology companies in China. Last Tuesday saw Asian markets making gains across the board, with the CSI300 up 0.9%, the Hang Seng up 0.7% and the Nikkei225 up 0.5%. Chinese and Hong Kong shares fell last Wednesday, with the Hang Seng down 0.6% following the US sanctioning 24 officials due to Beijing undermining Hong Kong’s democratic freedoms. Thursday saw the Nikkei close up 1%, and the Hang Seng up 1.2% following the Fed FOMC meeting. The week finished on a low, with the CSI300 down 2.6%, the Hang Seng down 1.4% and the Nikkei225 down 1.4%. This was due to the sharp drop in oil prices weighing down energy stocks and a spike in treasury yields, leading to tech losses. Moreover, Chinese stocks were weighed down by a rough beginning to the US-China talks. These were the first high-level talks between the two nations of Biden’s presidency. Tensions were high as officials lashed out at each other over multiple highly contentious issues. The Nikkei225 also suffered, falling 1.4%, as the Bank of Japan reviewed its policy, reversing its pledge to provide aggressive monetary stimulus. The central bank had previously committed to buying an average of 6 trillion yen in equities annually.

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