Overview of TOP weekly news 16.9.2020

16 / 09 / 2020
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The largest software IPO

Snowflake has raised the largest initial public offering for Wall Street’s latest huge demand for cloud computing companies.

Snowflake’s stock price exceeded its original target price range of $100 to $110, which alone rose more than a quarter earlier this week. The company’s market value is more than two and a half times the $12.4 billion value achieved in its last fundraising round in February.

According to people familiar with the offer, investors have agreed to buy 28 million shares of Snowflake worth $120 apiece. The company would raise about $3.4 billion for the cloud company. This price would bring the company a market capitalization of more than $33 billion, based on the number of shares outstanding.

Snowflake is coming to market during a busy week for the IPO when several companies are ready to enter the US stock market.

Negative outlook of the head of the ESM

“We are experiencing the worst economic crisis in 100 years. We do not expect (European economies) to return to pre-crisis levels before 2022,” Klaus Regling, head of the European Stability Mechanism (ESM), told the Athens Economic Conference.

The head of the ESM also predicted that budget deficits in the eurozone would reach ten per cent of gross domestic product this year. Next year, it expects a decline to 5% of GDP.

European economies are unlikely to return to pre-COVID-19 levels before 2022. This was stated today by the head of the European Stability Mechanism (ESM) Klaus Regling. The ESM acts as a euro-area rescue fund. According to the European Central Bank’s (ECB) outlook, the euro area GDP forecast will fall by eight per cent this year. Next year, the ECB expects a five per cent increase.

The European Statistical Office Eurostat announced last week that the European Union’s economy fell by a record 11.4 per cent in the second quarter due to coronavirus restrictions compared to the first three months of the year. In euro-paying countries, the economy contracted by 11.8 per cent.

What will pull America out of the crisis?

Economist Tim Taylor, like many other economists, focuses mainly on changing the perception of the inflation target of an average of 2%. This should no longer be considered the upper limit, but the average to which inflation should go in the longer term.

Taylor notes that he has nothing against such a new view, but that he “suspects that this is not a cure for the diseases that the US economy is suffering from.” in 2012.

According to him, even small shifts in long-term annual growth mean significant changes in the amount of product over several years. For example, if the growth rate were to fall by 0.75 percentage points, in ten years it would mean that the US economy would have been $2 trillion smaller than without this decline. Taylor then points out that expectations are also changing significantly on the unemployment side. In 2012, it was common opinion that the unemployment rate would not fall significantly below 6%.

Based on the described changes, Taylor believes that “serious economic policy must be aimed at increasing productivity, and thus the long-term potential of the US economy.”

The owner of Zara surprised the profits

The owner of the Zara retail fashion network, Inditex, returned to a pre-crisis quarterly profit for three months from May to July, despite a 31% drop in sales. The coronavirus crisis has kept consumers away from downtown shopping districts.

In the first half of the year, it reported a net loss of 195 million euros with a decrease in sales of 37%. Inditex reported net income of $253 million in the second quarter, beating Refinitiv’s average SmartEstimate forecast of €96 million, which is compared to newer estimates and higher-rated analysts. In the current quarter, in-store and online sales fell from 11 August to 6 September at constant exchange rates by 11% from the previous year.

Shares of Inditex closed 5% higher on Tuesday after Swedish competitor H&M beat its quarterly earnings forecasts. Shares fell 24% this year.

Investigation of complaints against Nikola

The U.S. New York District Attorney’s Office is interested in a report by Hindenburg Research, which said the electric vehicle manufacturer had distorted its patented technology and called the deal a “complex fraud.”

Nikola called the report “false and misleading” and on Monday issued a detailed rebuttal of the allegations, although she admitted several allegations made in the Hindenburg report. She relied on supply technology in early models and used a vehicle rolling downhill in a marketing video, Nikola said.

After growing more than 40% after announcing its partnership with GM, Nikola depreciated all credited profits and ended up at much lower levels than before growth.

Performance of Nikola Corp.’s shares (Source of the graph: Tradingview)

Watch this week:

Thursday, September 17, 2020

The euro area will publish the development of CPI inflation. Analysts expect a continued year-on-year decline in inflation to 0.2% in August.

The UK will have a BOE meeting scheduled. Analysts expect key interest rates to remain unchanged at 10 basis points.

Friday, September 18, 2020

Canada will announce nuclear retail sales in July. Analysts expect 0.5% month-on-month growth.

Source of the text: Investing, Zerohedge, Financial Times, Reuters, Tradingview

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