20th July 2021
Good morning So freedom day didn’t quite turn out to be the euphoric national celebration we envisaged a few months back? Boris Johnson is in isolation, from September you’ll need a Covid passport to go clubbing and in England the number of daily cases rose above 50,000 with only Indonesia and Brazil reporting more…On the plus side the weather is good!
- Global stocks sink
- Zoom’s $15bn buy
Yesterday's market moves
FTSE 100 -2.3% 6,844
FTSE 250 -2.3% 21,941
It was a brutal day in the European and US markets driven by a combination of factors (more below) including the unsettling headlines over the spread of Covid.
All sectors traded down but those expected to do well from reopening economies were hit hardest, including travel and leisure companies and retailers.
Whilst Just Eat was the strongest performer in the FTSE 350, up 3.3%. A worrying sign if this means investors are positioning for the next lockdown!
Global stocks sink
What’s going on?
It was a red day in the markets, with the FTSE 100 and 250 both down 2.3%, markets in Asia and the US also followed suit. Covid and inflation fears were the two main causes of investors’ spooks.
Why is this important?
Fears from Freedom Day:
- Investors are far from impressed by 'Freedom Day', with the final removal of Covid restrictions doing more to raise fears of a bigger outbreak than raise hopes around an economic boost.
- The return of lockdown restrictions across Asian-Pacific countries over the weekend in efforts to contain outbreaks of the virus have threatened to delay the ongoing global recovery.
- Delta variant concerns remain rife with rising cases, other variants and potentially lower levels of vaccine efficacy all weighing down on investors.
- The sell-off has been further compounded by lingering inflation fears, albeit with the Bank of England policymaker Jonathan Haskel reiterating that current pricing pressures remained transitory.
Pingdemic supply chain impact:
- Fears that supply and labour shortages could lead to a drop in output and in turn mean longer lasting inflation.
- The pandemic left supply chains vulnerable with companies slashing investment during the crisis, thus the ability to increase production is limited, which investors fear has the effect of pushing up prices even further.
- Already many industries are struggling to cope with high levels of absence as staff are pinged by the test and trace.
No sector was immune from yesterday’s drops and many are expecting the volatility to continue through the summer with the seasonally low trading volumes as investors go on holiday, rising Covid cases, supply bottlenecks and central banks possibly edging closer to tinkering with interest rates.
Zoom’s $15bn buy
Yesterday video conferencing firm Zoom announced it’s bought cloud based call centre operator Five9 for $14.7bn – the biggest acquisition in its history.
Five9's software is used by more than 2,000 clients including Under Armour and Lululemon.
Zoom was undoubtedly one of the biggest winners of the pandemic with millions using its platform to facilitate meetings for work and home schooling.
With people slowly returning to offices and schools there were many questions as to how a company like Zoom would cope.
The Five9 acquisition is all part of Zoom’s strategy to expand its products beyond just videoconferencing. In the past year it’s has added Zoom Room (a conference hosting product) and Zoom Phone (a cloud based phone service).
The company says the acquisition offers both companies significant cross-selling opportunities to each other’s respective customer bases.
In recent times call centres have moved away from humans sitting in huge open plan offices picking up the phone, to chat bots powered by artificial intelligence. Zoom estimates that the market for these hi-tech call centres is $24bn and hopes that its acquisition of Five9 will give it a strong position.
Stat of the day
Fraud increased 33% in the past year with more than £2.3bn lost in the UK to scams
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