Stocks drop as risk appetite fades; GBP gains on rise in wages

Summary:

• European and US indices in the red with some sizable selling seen

• EBay and Nike both receive good news

• DE30: UBS lower after earnings report

• UK wage growth rises to 11-year high

• Dutch authorities recommend licensing crypto exchanges

After being closed yesterday due to a bank holiday, the US stock markets opened for the first time this week significantly lower than where they ended on Friday. The US500 was trading around 2670 on the closing bell at the end of last week, but the market has since dipped below the 2650 level and the cash market began with a sizable gap lower and there’s been further selling seen into the European close.  

One stock making the headlines ahead of the opening bell is eBay, with shares surging higher by as much as 10% in pre-market trade from Friday’s closing level. The catalyst for this rally comes from news that activist hedge fund Elliott Management has amassed a $1.4 billion stake in eBay, which represents over 4% of the firm’s shares.  Shares in eBay opened sharply higher by as much as 10% this afternoon. The stock has been in a downtrend for most of the last 12 months, but the announcement of a sizable stake from an activist hedge fund could spark a turnaround in the market.

Another US stock to keep an eye on this afternoon is Nike, with the sportswear giant making gains after an upgrade from Cowen which now rates the stock as outperform from market perform previously. The reasons behind the bullish rating are that upcoming products this year are seen as boosting the margins. Nike shares have held up relatively well in the broader market rout and the stock remains above its 200 day SMA.

While UBS (UBSG.CH) is not a DAX member we should pay some attention to it today. The Bank reported its earnings for the final quarter of 2018 as the first of major European banks. The report turned out to be a huge disappointment. UBS suffered $13 billion of withdrawals during the fourth quarter of the previous year - $8 billion outflows in the wealth management business and $5 billion in asset management unit. The company said that client activity is still recovering after poor end of 2018. However, UBS said that there is a number of factors that may lead whole 2019 to be similarly downbeat.

There’s been some pleasing news on the labour market front from the UK this morning, with wage growth moving up to its highest level since the 2008 crisis while the unemployment rate unexpectedly fell back to 4.0%. With inflation recently falling back close to the Bank of England’s 2.0% target, this represents a decent increase in real wages for workers which will likely aid consumption going forward. The pound has risen to its highest level of the week and trades back above the $1.29 handle once more. The strong data is all the more pleasing given the ongoing uncertainty surrounding Brexit and just serves to illustrate that despite the continued headwinds the labour market is holding up surprisingly well.

Tuesday’s trading has not brought larger price movements for top cryptocurrencies so far. According to CoinMarketCap, the capitalization of the whole crypto market stands around the $120 billion handle whereas the capitalization of altcoins sits a little below the $57 billion mark. De Nederlandsche Bank, the Dutch central bank, and the Netherlands Authority for the Financial Markets, the Dutch financial authority, published a report concerning recommendations for crypto regulations. The authorities of the Netherlands suggested in the document that crypto service providers should be licensed as “cryptos carry high financial crime risks”. The Dutch authorities said that “criminals can still use cryptos to conceal the origin of their funds” despite the decreasing cryptocurrencies’ popularity. “These risks must be addressed effectively, which can be achieved as a result of the international coordination of countermeasures that AMLD5 provides”, as the report said. As a result, the authorities said that the licence regime could be better than the current registration system.