US voters go to the polls two months today, and with all the divisiveness and uncertainty around a presidential election taking place amid a pandemic and civil unrest, markets are starting to get nervous.
Add into that tech valuations that appear stretched and both the S&P 500 and Nasdaq are falling today, with all the hot names — Alphabet, Amazon, Apple, Microsoft, Tesla and Zoom — down sharply.
We’re also seeing a speculative frenzy in tech stock derivatives, signalling large swings to come after a rally that has already broken records. Expectations for future volatility in the Nasdaq 100 have soared to a 16-year high relative to the rest of the stock market. Before today, the Nasdaq 100 had been up 42 per cent this year compared with 11 per cent for the S&P 500.
Indices of expected volatility are calculated based on options activity and analysts say a “vicious circle” of upward pressure is being created for tech stocks, with sellers of call options hedging their positions by buying the underlying stock.
The tech rally has also created a rush of IPOs in the sector. Brook Masters says more money has already been raised this year on the Nasdaq than for any full year since 2000.
Airbnb’s bid to go public has looked an on-off affair this year as coronavirus devastated its accommodation business before a recovery began. It’s on again now with its confidential filing last month, but its timing could be off if the tech bubble bursts.
Talks have ended for now, but as Mr Ackman said in a letter to investors last week: “Uncertainty is the enemy of the IPO and the friend of a $5bn Spac.”
The Internet of (Five) Things
1. The politics of tech
On that impending election, Facebook announced today it would not accept new political ads in the week before it and would take down posts claiming people would catch coronavirus by voting. In India, Facebook has banned a ruling party politician for alleged hate speech. The Indian government itself has banned 118 additional Chinese apps — including Tencent’s hugely popular battle-royale game PUBG Mobile — after fresh skirmishes along the disputed Himalayan border.
2. Amazon boosting UK workforce by a third
Boosted by lockdown demand, the ecommerce company has already hired an extra 3,000 workers in its UK warehouses, sorting centres and delivery stations this year and said it plans to add a further 7,000 by the end of 2020, bringing it to more than 40,000 permanent staff in Britain.
3. E-scooter rentals set to finally take off in UK
The pandemic has persuaded UK local authorities to focus on alternative modes of transport. Tim Bradshaw reports that thousands of electric scooters are poised to hit British streets in the coming weeks. Freshly legalised rentals from operators such as Lime, Bird, Tier and Voi, as well as new UK-based rivals, mean Europe’s largest untapped market is finally opening up, although some safety campaigners fear a repeat of the chaos seen elsewhere.
4. BBC chief sets out new vision
Tim Davie, the new boss of the UK’s public service broadcaster, has rejected it becoming a subscription service, but said it needed to reduce the range of its output and boost its commercial operations. Meanwhile, Prince Harry and his wife Meghan have signed a multiyear deal to make TV series, films and children’s shows for Netflix.
5. German financial watchdog resists calls to resign
Felix Hufeld, the head of Germany’s financial watchdog, has rejected calls to resign over the scandal at Wirecard, while saying that with hindsight he should have called for prosecutors to open an investigation sooner. The FT’s Dan McCrum describes what it was like to unravel and expose one of the biggest corporate frauds of the modern era.
Forwarded from Sifted — the European start-up week
Swedish vegan milk brand Oatly was facing protests by climate and political activists this week who said the decision to sell a stake in the company to a consortium that includes Blackstone was out of kilter with Oatly’s ethical brand. It was not the first time Oatly has come under fire, getting similar treatment when Chinese state-owned firm China Resources bought a stake in the company in 2016. But the Blackstone criticism has put it on the back foot and points to the wider challenge of how businesses maintain their insurgent brand when moving from a niche start-up to a more established company.
Elsewhere in Europe this week, Sifted meets Ben Francis, the 28-year-old behind the £1bn clothing brand Gymshark, a company which started in a garage in the UK’s Midlands and has now set its sights on taking on Nike and Adidas. Sifted also looks at the “mafia” of employees leaving the big European digital banks like Monzo and Revolut and forming their own companies, while this week applications started to roll in to become the first digital health start-up to be offered free on the German national health service.
Tech tools — Activ5 pocket gym
The £130 Activ5 is a gym that fits in your pocket, although calling it a gym may be an exaggeration. Jonathan Margolis describes it as like a smooth, medium-sized pebble that fits in the palm of your hand and has no controls and seemingly no gym-like characteristics. What it is though is an isometric-based training device that uses the body’s muscle force against itself. The Activ5 measures your movement and force in multiple planes, and it is important to push the pebble against your (pushing-back-with-equal-force) limbs or torso exactly as the instructions indicate. Set correctly, it will calibrate exercises to your ability and track your performance over time.
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