Live Markets: Deliveroo: waiting for profit delivery

Neptune Digital Assets

08/03/2021 15:31

* Major stock indexes green, Dow leads
    * Materials biggest gainer among S&P sectors; energy sole
loser
    * Euro STOXX 600 index up ~2%
    * Dollar rises; gold, crude dip
    * U.S. 10-Year Treasury yield ~1.59%

    March 8 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    
    
    DELIVEROO: WAITING FOR PROFIT DELIVERY (1020 EST/1520 GMT)
    For all the interest generated by the incoming London
Deliveroo IPO and its expected $7 billion price tag, there's 
also a fair amount of doubts on how soon the company can start
delivering profits to would-be shareholders. 
    "Lockdowns kept people at home for months at a time and
online grocery slots were hard to come by, so demand for
takeaways shot up. A cynic might ask, if Deliveroo couldn't
deliver a profit against that backdrop, when will it?", asks   
Russ Mould at AJ Bell. 
    Deliveroo was still operating at an underlying loss of 223.7
million pounds ($308.93 million) in 2020, down from 317.3
million pounds in 2019. 
    While many investors won't be turned off by a lack of
profits, HSBC analysts point out that the disappointing
quarterly results of U.S. peer Doordash in February signal that
the end of lockdowns might prove to be somewhat challenging
times. 
    "Delivery focused players could experience a much more
severe normalisation in demand", HSBC analysts commented. 
    The delivery company will face a double whammy with some
consumers switching to eating in and restaurants being more
reluctant to accept costly delivery fees. 
    "If we do see lockdown restrictions start to get eased as we
head into the summer months, how many restaurants will be happy
to pay up to 30% commission if they are able to start opening
their doors again as the weather starts to get warmer", asked
Michael Hewson at CMC Markets. 
    Also, competition is harsh, with UberEats and Just Eat
Takeaway fighting for market dominance so spending money to make
money seems very on the agenda. 
    See: 
    Deliveroo kicks off landmark London IPO after bumper 2020 
 urn:newsml:reuters.com:*:nL1N2L60CJ
    DoorDash sees orders slowing on vaccine rollouts; shares
tumble  urn:newsml:reuters.com:*:nL4N2KV5D0
   
    (Julien Ponthus) 
    *****
    
    
    
    
    WALL STREET OSCILLATES INTO A NEW WEEK (1003 EST/1503 GMT)
    Wall Street gyrated into the new week as Washington's
passage of a $1.9 Trillion fiscal aid package and rising
Treasury yields sent indexes see-sawing.
    A tech selloff led by Apple Inc  AAPL.O  and Microsoft Corp
 MSFT.O  is weighing on the Nasdaq  .IXIC , while Walt Disney Co
 DIS.N  and Boeing Co  BA.N  are providing the most lift to the
blue chip Dow  .DJI .
    Indeed, tech  .SPLRCT  is the biggest laggard among S&P
sectors, while industrials  .SPLRCI  are up the most. 
    Rising Treasury yields, combined with fiscal stimulus, has
given rise to inflation jitters, which Treasury Secretary Janet
Yellen tried to assuage, noting that with true unemployment near
10%, there's still plenty of slack in the economy.  urn:newsml:reuters.com:*:nW1N2HO042
    In addition to stimulus and rising yields, market
participants are still digesting the Labor Department's
blockbuster February employment report release on Friday, which
blew past analyst estimates and suggested a stronger U.S.
economic recovery was afoot.
    Here's your opening snapshot:
    (Stephen Culp)
    *****
    
    BUBBLE STOCKS: MORE PAIN FROM RISING YIELDS (0925 EST/1425
GMT)
    Classical statistical analysis says that rising interest
rates mean lower equity valuations.
    But we know that relationship can go either way. So, we can
probably use some more in-depth analysis.
    Saxo Bank analysts seem pretty sure that increasing
borrowing costs will hurt speculative stocks badly.
    They compared the 10-day rolling mean return of S&P 500
versus a bubble stocks basket on different levels of U.S.
10-year yield since 4 August 2020, when long-term U.S. interest
rates bottomed out. 
    Saxo's bubble stock basket includes aggressively-valued
shares in companies with negative earnings expectations over the
next 12 months.
    In the chart below we see how the return dynamics of the S&P
500 and our bubble stocks changed quite dramatically.
    If “the U.S. 10-year yield marches towards 2% in a fast
fashion, it could cause havoc in the speculative parts of the
technology sector,” Saxo analysts said.
    The equity risk premium - an excess return that investing in
the stock market provides over a risk-free rate – over the past
ten years has been stable, at an average of 5.6%.
    But aggressively valued stocks have "implied equity risk
premiums in the range -2% to +1%," Saxo notes.
    This means that the entire segment is very sensitive to
rising interest rates unlike the overall equity market.
    
    (Stefano Rebaudo)
    *****

 
    S&P 500: ON THE BACK FOOT (0900 EST/1400 GMT)
    The S&P 500  .SPX  has been hit hard from its mid-February
peak  urn:newsml:reuters.com:*:nL1N2KE19G, falling as much as 5.8% in just two weeks.
That said, with CME e-mini S&P 500 futures  EScv1  well off
their overnight lows, the benchmark index appears poised for a
relatively flat open.
    Of note, since early 2018 to early 2021, the S&P 500 has now
seen six instances of making new highs and then ultimately
suffering a sell-off of more than 5%. On average, the index
extended just 5.5% above its prior high, over a 27 week period.
    
    
    In the prior five declines of more than 5%, between late
2018 and early 2020, the average was 16.1% over about 6 weeks.
That puts the current near-6% slide over 2 weeks well below the
average.
     Meanwhile, weekly momentum measures are breaking down.
After reaching an all-time high in mid-February, the MACD has
rolled over and given a bearish cross. Indeed, until momentum
readings stabilize, the SPX can remain vulnerable to a much
deeper decline.  urn:newsml:reuters.com:*:nL2N2L31BY  urn:newsml:reuters.com:*:nL2N2L21D6
    This, especially if the MACD were to violate its zero-line
as it did in late 2018 and early 2020. 
        
    (Terence Gabriel)
    *****
    
    FOR MONDAY'S LIVE MARKETS' POSTS TO 0900 EST/1400 GMT -
CLICK HERE -  urn:newsml:reuters.com:*:nL1N2L60TJ
    
    
    
    
    
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX03082021    https://tmsnrt.rs/2N1aKAS
bubble    https://tmsnrt.rs/3sROcSm
Opening snapshot    https://tmsnrt.rs/3sZhcaH
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)