Stocks pause after rally, City to relax listings rules

“I’m shocked! Shocked to find that gambling is going on in here.” I was looking over some of the recent insights, edicts and proclamations on GameStop, Reddit and RobinHood and felt that market policemen do like to channel their inner Captain Renault sometimes. Anyway, GameStop is still a thing. Not least among the good people of Penarth, Wales. “World’s most avid GameStop traders live in Penarth,” proclaims the Penarth Times, providing a reassuringly British spin on this saga. Shares in GME rallied 18% yesterday to $120. Other Reddit names climbed; Koss rose 13%, AMC added 14% and Dillards climbed almost 12%. 

 

Listings rules are  to be relaxed in order to make the City more competitive again and attract more tech IPOs and SPACs. New York dominates this space, but London wants to use its new-found freedom from the EU to attract more of this sort of business. Changing rules around things like dual class shares, which let founders keep control of companies, and the level of free float required for a premium listing – which companies must secure to be included on the FTSE – will surely appeal. The Hut Group eschewed a premium listing last year so its founder could keep his hand on the tiller. Some might say that relaxing rules amounts to watering down, others will point to New York and say ‘we should be having some of that’. The boom in SPACs across the pond has clearly left London bankers a little green with envy. The City always evolves and thrives. 

 

Trustpilot clearly doesn’t mind the current regime too much: the Denmark-based online reviews platform plans an initial public offering in London this year. The full 25% of shares will be available trading, making it eligible for inclusion on FTSE indices. The IPO is expected to raise $50m for a valuation of $1bn. Revenues rose 25% last year as ecommerce picked up during the pandemic.

 

Shaking up City is just part of the chancellor’s plans for reinvigorate the UK economy (Build! Back! Better!) when he delivers his Budget tomorrow – the alliterative qualities of the word and the slogan adopted all around the world won’t be missed, I’m sure. Budgets are usually fairly orderly affairs for traders. You can rely on something for the property market, good or bad, though lately it’s been tending towards the former. As we saw yesterday, house builders are one corner of the market that always have a reaction. Tory chancellorship 101: if in doubt, juice the property market to keep the young aspiring home buyers  middle class homeowners on board. After that we start talking about cheaper pints and taxes and it’s time for the pub. Gilt markets are less concerned with tinkering on the margins as they are with global bond markets, macro-economic conditions and central bank policy, so I wouldn’t expect a big reaction in the market. 

 

This time though we’re recovering from an unprecedented economic collapse and sky high borrowing. The public finances will need repairing, so the orthodox thinking goes. Proponents of Modern Monetary Theory would argue otherwise…whatever your view, the chancellor is the only one who counts and it seems that despite the pandemic upending many norms, economic orthodoxy is not among them. The chancellor is eyeing tax hikes to repair the finances, though not all at once. Capital gains tax seems set to rise – which will have a real impact on people who own shares. What’s interesting is not that he is pursuing this route, but that there is so little debate about the merits of running higher deficits.  

Stocks pause after bounce

 

Global stocks bounced back with energy yesterday, with the S&P 500 notching its best day in nine months. The broad market rose over 2.3%, whilst the Nasdaq and small cap Russell 2000 both advanced 3%. The FTSE 100 was 1.6% higher. European stocks were flat in early trade on Tuesday as investors pause to think whether yesterday’s rally was worth it. The snapback just looked a little too vigorous to be sustained. Zoom shares rallied 8% after hours following a strong earnings beat. S

 

Bitcoin was firmer above $49k. A report from Citi suggesting Bitcoin could be the currency of choice for trade was rightly trashed by Jemima Kelly. Meanwhile Goldman Sachs is reportedly restarting its crypto desk. It is thought the bank will begin dealing bitcoin futures and non-deliverable forwards for clients next month. BCA research says ‘stay away’ and New York’s top law officer laid down the law: “Cryptocurrencies are high-risk, unstable investments that could result in devastating losses just as quickly as they can provide gains,” Attorney General Letitia James said Monday in an investor alert.