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Top 3 tech stocks to watch in July 2020

From September 2020, Ocado will end its 20-year partnership with Waitrose and enter a new relationship with Marks & Spencer, after the retailer acquired half of its grocery business in a deal valued at around £750 million.

Ocado shares surge as online sales rise amid lockdown

From September 2020, Ocado will end its 20-year partnership with Waitrose and enter a new relationship with Marks & Spencer, after the retailer acquired half of its grocery business in a deal valued at around £750 million.

Covid-19 has made online demand for groceries skyrocket, with the new joint venture with M&S capable of reaping major rewards for both parties if executed correctly and able pushing Ocado’s stock higher in the fourth quarter of 2020 to become one of the UK’s top tech stocks.

Outside of Ocado’s joint venture deal with M&S and, arguably the key driver of its share price gains in 2020, is its digital grocery platform which it licenses several leading supermarkets from around the world, assisting them with their online sales, storage and distribution. This includes Morrisons in the UK, Groupe Casino in France, ICA in Sweden, Coles in Australia, Kroger in the US, Sobeys in Canada and Aeon in Japan.

Although it is still early days for Ocado’s tech business. The company still generates three times more revenue from its online grocery operation than its tech division, and it’s still loss-making overall. Despite this, Ocado is becoming a vital partner for major retailers looking to automate and digitise their businesses and has plenty of room to grow considering its tech can be used by more industries than just groceries.

The growth potential of its tech platform has helped the company exceed nearly all analysts expectations, with the stock up 60% year-to-date. Ocado closed at £20 per share on Friday.

Avast shares set to soar higher in 2020

After the FTSE 100 reshuffle, Czech-based software company Avast has joined the blue-chip index, with a market cap of £4.7 billion.

Avast is one of the world’s largest cybersecurity firms, with more than 435 million users that rely on the company’s malware, anti-virus, firewall and anti-hacking tool kits to keep their data safe.

Earlier this year, the company unveiled its first quarter results, which showed that the business had actually benefitted from government-imposed lockdowns that have forced people to work from home – allowing the business to leave its full-year guidance unchanged.

Despite this, the stock tumbled 38% at the height of the Covid-19 crisis, but the company’s share price has climbed 68% since hitting a low of 270p per share and could continue to trade higher in 2020 due to its strong growth outlook.

Avast closed at 538p per share on Friday, with the stock up 13% year-to-date.

Spotify shares surge as company hits $50 billion market cap

Spotify has seen its share price double in value over the last three months, with the company on course hitting a $50 billion market cap after unveilling new plans to monetise podcasts and test in-app offers.

Since the beginning of April, where the stock was trading at $121 a share, the music streaming service has seen its share price soar more than 100%.

Since announcing back in May that the comedian Joe Rogan will migrate his popular podcast ‘The Joe Rogan Experience’ to Spotify’s platform from 1 September and become exclusive to the music streaming service later this year its share price has soared.

Another bit of news that is exciting investors is Spotify’s testing of a new interactive ad format for podcasts on its platform.

Instead of listeners having to remember a promo code mentioned within the podcast itself, Spotify’s new in-app feature will display offers that consumers can simply click on to redeem.

‘The average podcast listener has heard a countless number of ads ending with promo codes or show-specific websites, carefully repeated three times so as not to forget it,’ Joel Withrow, senior product manager of Podcast Monetisation at Spotify, said in a statement.

‘In-app offers makes it vastly simpler for listeners to redeem deals whenever they come back to the app, and we can all benefit from one fewer ‘w-w-w-dot’ spelling lesson from our favourite podcast creators.’

Spotify is trading at $271.49 per share at the time of publication.

How to trade tech stocks with IG

Looking to trade Ocado and other tech stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Ocado’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade
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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

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