By Geoffrey Smith
Investing.com -- The year is closing with two banner IPOs from AirBnB and DoorDash. However, it’s also hitting sterling as the U.K. faces up to a new chapter in trading with the EU. Stocks and commodities are running out of steam after last week’s Everything Rally and China’s exports surge as the world scrambles for PPE equipment and consumer electronics. Here’s what you need to know in financial markets on Monday, December 7th.
1. AirBnB, DoorDash set for strong IPOs
The confidence in U.S. stock markets fostered by the development of vaccines to treat Covid-19 was in evidence over the weekend, as AirBnB raised the marketing range for its IPO, which is due to close this week.
Reports said AirBnB’s bankers had raised the range to $56-$60 a share from $44-$50, a 23% increase in the mid-point. The top end of the new range would value the online rentals company at $42 billion, a strong statement about how the market views a travel market which is expected by industry insiders to sustain long-term damage from the pandemic.
There’s also a big payday in sight for the owners of food delivery company DoorDash, a company whose growth has – in contrast to AirBnB – been accelerated by the pandemic. The Wall Street Journal reported that its underwriters aim to price its IPO on Wednesday above the top of the new $90-$95 bookbuilding range, a range that had already been raised from $75-$85 a share.
2. Sterling slides on Brexit worries
Sterling and U.K. stocks fell, dragging down the euro in their wake, as negotiations over trading relations between the EU and U.K. after the end of the post-Brexit transition phase at the end of the year moved into their endgame.
A summit of EU leaders on Thursday represents the last realistic chance to have an agreement sealed and ratified by the end of the year.
The predictable brinkmanship around the talks led last week to a French threat to veto any deal if it made too many concessions to the U.K. on the economically marginal but politically sensitive area of fishing rights. Of more economic significance are the differences between the two over what level of state aid will be allowed on both sides in future, and how disputes over that and other trade issues should be resolved.
By 6:30 AM ET (1130 GMT), the pound was down 1.3% against the dollar at $1.3264, having topped $1.35 for the first time in 2 1/2 years last week. The euro was down 0.1% against the dollar at $1.2109
3. Stocks set to open lower as rally runs out of steam pre-Fed meeting
U.S. stocks in general are, however, indicated to open lower, as the momentum from last week’s ‘Everything Rally’ subsides.
By 6:30 AM ET, Dow Jones Futures were down 120 points or 0.4%, while S&P 500 Futures were down by the same amount and NASDAQ Futures were down 0.1%.
Markets will be eyeing what progress can be made in talks on the $908 billion fiscal stimulus package proposed by a bilateral group of Congressmen. Weak labor market data for last month have increased the pressure to get something passed in the very near term.
Trading is likely to be modest in the absence of market-moving data or earnings.
4. China's exports surge as U.S. prepares more sanctions
China’s economy goes from strength to strength – at least according to the one metric most likely to irritate outgoing President Donald Trump. China’s exports leaped 21% on the year in November, a sharp rise from an 11% gain in October. Imports, meanwhile, rose by a weaker-than-expected 4.5%, consistent with reports of reduced buying of energy after the country’s refiners binged on crude oil in the summer when it was still trading at distressed prices.
The surge in exports was due in large measure to sales of Personal Protective Equipment for the world’s healthcare sectors, and in electronic goods, many of which are related to the surge in working from home due to the pandemic. The irony will be lost on no-one in either Washington or Brussels.
Elsewhere, the Trump administration reportedly prepared to sanction at least a dozen Chinese officials in response to the ejection of pro-democracy legislators from the Hong Kong assembly. The move contrasts with reports last week that a deal was being prepared to allow the former chief financial officer of Huawei to return home instead of being extradited from Canada to face trial in the U.S.
5. Commodities hit resistance after sharp rally
The rally in commodities has also paused for breath, with U.S. crude oil prices dropping 0.8% to $45.87 a barrel, copper futures dropping 0.8% to $3.4962 a pound and soybean futures dropping 0.8% to $1,152 a ton.
Brent crude in particular appears to have hit a solid wall of resistance around $50 a barrel, after questions over global supply were largely answered by last week’s OPEC+ meeting. New forecasts for global demand aren’t due until next week, with the monthly reports of OPEC and the International Energy Agency.