Market Update – April 1st

Market News Today – Stocks have moved broadly higher as investors continue to focus on the recovery. Hence stocks closed Q1 mostly firmer, with a new record high on the USA500, rising 0.46% to 13,246. The USA100 climbed 1.54% to 13,246 as big tech recovered some poise and helped the index post a 0.4% gain on the month. While for the first three months of the year, the USA30 was up 7.76% as reflation/reopening trades gathered steam. Risk appetite has been supported by vaccines, and now by expectations of more stimulus with President Biden announcing another $2.25 tln infrastructure deal.

Tightened restrictions resulting from virus flareups in some parts of the world were overlooked for now, but have the potential to limit the rise in markets that have already come a very long way. Yields have also risen sharply and the Bloomberg Barclays index tracking US government bonds, reported the worst quarterly performance since 1980. 

In Europe, Eurozone bond markets closed higher and stocks struggled, with dovish comments from ECB’s Lagarde helping to underpin peripheral markets. The central bank head stressed once again that monetary policy will remain very accommodative for some time to come, which helped to counterbalance the uptick in inflation.

In FX markets, after hitting fresh near 5-month highs overnight, the USDIndex lost some ground through in NY and Asia trade falling to 92.99 lows, but USDIndex  is back on 93.30 area again this morning. Profit taking appeared to be a motive, despite mostly better data. The USDJPY was little changed at 110.71, with both gaining against most other currencies. AUD meanwhile was the main underperformer. The EUR  and GBP are firmed holding to weeks low territory. The USOIL is at $59.61.

Today – For today, the focus will be on confidence numbers again, with the final round of manufacturing PMIs, which are likely to confirm a further acceleration in the pace of expansion. Attention is on US Friday’s jobs report.

Biggest (FX) Mover @ (07:30 GMT) AUDCAD (-0.71%) The asset drifted to 0.7530 breaking 3-month support level whick looks to also be a neckline of a head and shoulder formation. Fast MAs aligned lower, with RSI turning higher in the OS area, however MACD histogram & signal line are negatively configured. H1 ATR 0.00125, Daily ATR 0.00696.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Dollar Down, But Holds Near Multi-Month High Over U.S. Recovery Hopes

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Dollar holds near multi-month high on U.S. growth bets

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U.S. dollar to remain strong for at least another month: Reuters poll

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Euro Retreats From Session Highs Against Dollar as France Widens Lockdown

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Bitcoin returns to recent highs

Recently, Visa, one of the world’s largest credit card payment companies, announced that it will upgrade its cryptocurrency service to allow users to settle transactions with USD Coin (USDC) on its payment network. USDC is regarded as an encrypted stable currency, and 1USDC is equivalent to 1 US Dollar. In order to save the cost and complexity of converting digital currencies in cryptocurrency wallets into traditional currencies for settlement, Visa stated that it had cooperated with its partner Crypto.com and digital asset bank Anchorage earlier to send USDC to Visa through the Ethereum address of Anchorage. In this regard, Visa Executive Vice President and Chief Product Officer Jack Forestell said, “This is equivalent to an important milestone set by the need for financial technology to manage businesses with stablecoins or cryptocurrencies” and “safely promote the use of all Payments in different currencies”.

In addition, the global payment giant Paypal officially announced yesterday that US users can pay with Bitcoin, Ethereum, Bitcoin Cash and Litecoin to millions of online merchants around the world through its digital wallet. In addition, users can also sell cryptocurrencies through the platform. It should be noted that the platform still requires the  cryptocurrencies to be converted before  settlement. If the user converts the encrypted currency to US Dollars as the settlement method, then this will not be included in the additional fee; if the user converts the encrypted currency to non-US currency as the settlement method, then this will be settled according to the standard exchange rate.

In addition, the Chicago Mercantile Exchange (CME) also stated yesterday that if regulatory approval is passed, the exchange is expected to start adding a bitcoin derivative to the financial market in May this year, Micro Bitcoin futures. According to CME’s contract specifications, the contract value of each Micro Bitcoin is only 0.1 Bitcoin, which is much lower than the contract value of Standard Bitcoin, which is 5 Bitcoin. In this regard, CME stated that Micro Bitcoin not only retains the functions and advantages of Standard Bitcoin, but also “supports investors to hedge against the price risk of spot Bitcoin” and “investment methods are more efficient and cost-effective”.

Technical Analysis:

Judging from the daily chart, Bitcoin against the US Dollar is in an ascending channel; the upper Bollinger Band, the historical high of 60,721 the 100% Fibonacci extension level of 61,910 is the key resistance area. From the indicator point of view, the MACD double line seems to be forming a golden cross and the red kinetic energy column (histogram) is gradually shrinking; the relative strength index (RSI) and stochastics  are both near the overbought area. Calculated in accordance with the Fibonacci extension, should the key  resistance  on the recent success of the asset be broken, then the next resistance position is seen at 70,945 (Extended Fibonacci level 127.2%) and 82,435 (161.8% Fibonacci extended horizontal). Overall, the market is optimistic about the future trend of Bitcoin. There are those who by Fibonacci number (Fibonacci Sequence) calculation expect Bitcoin to reach 70,000; on the other hand, some analysts pointed out earlier this year that Bitcoin could reach the 100,000 level  this year.

Judging from the 4-hour chart, the current asset price has left the upper Bollinger Band, and the indicators show signs of slight easing of bullish momentum. In the short term, the middle Bollinger Band below the asset price is still critical. If the price of the asset falls below the middle Bollinger Band, it may mean that it will face a short-term technical adjustment. The lower support is 54,250 (the bottom line of the ascending channel, the lower Bollinger Band and the long-term moving average, ) and 49,230 (61.8% Fibonacci extension level).

Click here to access our Economic Calendar

Larince Zhang

Market Analyst – HF Educational Office

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Is bitcoin going mainstream, and should you buy in?

• SEE MORE A beginner’s guide to bitcoin: how to buy bitcoin
• SEE MORE Why you should own bitcoin and gold as inflation returns

Last week, US Federal Reserve chair Jerome Powell made his views on bitcoin clear: it’s “an asset for speculation”, one that “is essentially a substitute for gold rather than for the dollar”, Powell told the Bank for International Settlements’ digital banking conference. Nor is it “a useful store of value” because of its volatility.

Powell’s comments are perhaps unsurprising. You wouldn’t expect the governor of the world’s most important central bank to say: “rush out and buy bitcoin”. Yet his views are not necessarily shared by Wall Street, with the likes of BNY Mellon and Goldman Sachs taking bigger steps into the area of cryptocurrencies in general.

It’s little wonder that institutions are becoming more interested. Bitcoin has now been around since 2008; in that time it has survived several boom and bust phases, and in each boom phase, people have potentially made a lot of money.

Today, despite all the scepticism, it remains trading close to its recent all-time high of $61,644, thanks to a search both for inflation hedges (given the scale of public debt and money being printed by central banks) and, for returns in a low-interest rate environment coupled with frothy equity and bond markets, points out Anthony Hardy, research analyst at Franklin Equity Group.

So are cryptocurrencies becoming mainstream – and should you invest?

Banks are turning bullish on crypto

Mainstream adoption of cryptocurrencies is growing fast. Since the start of the year, several big banks have embraced crypto. Goldman Sachs, for example, reintroduced plans to launch a cryptocurrency desk for futures trading.

It’s not alone. Just a few months after America’s oldest bank – Bank of New York Mellon – announced it will roll out a new digital custody unit later this year, Morgan Stanley became the first bank to give its wealth management clients access to three cryptocurrency funds, according to CNBC.

Meanwhile, in a 108-page report published in February (which came in for some criticism), Citigroup gave bitcoin a big endorsement, saying that it “may be optimally positioned to become the preferred currency for global trade”.

It is not just the banks who are increasingly endorsing crypto. Tesla’s Elon Musk started accepting bitcoin as payment for cars earlier this month, just a few weeks after Tesla shifted $1.5bn into bitcoin.

The crypto rally has also captured the attention of individual investors who view bitcoin as a potentially better hedge against inflation than traditional hedges such as gold, primarily because bitcoin has a fixed long-run supply of 21 million coins, compared to central banks’ ability to print as much fiat currency as they like.

The US recently approved a $1.9trn stimulus plan which market participants think may be seen as the tipping point for inflation to stage a comeback (and now Joe Biden’s administration is pushing for a further $3trn spending plan). And with the Fed signalling that it won’t raise rates until 2024 at the earliest, inflation is very much at the fore of investors’ minds.

Why bitcoin may not be the best hedge against inflation

But are people really buying bitcoin because they think it’s a good hedge against inflation? Bank of America doesn’t seem to think so. “Bitcoin has… become related to risk assets, it is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payment mechanism”, Bank of America’s commodity and derivatives strategist Francisco Blanch, said in a recent note, according to CNBC.

Economist Nouriel Roubini – renowned for his bearish views and a long-time critic of digital currencies – agrees. “If people were really worried about inflation they would diversify in a wide range of assets that are historical good hedges against inflation. That's not happening”, he says.

Another point is that, while bitcoin does have a fixed supply in much the same way other assets viewed as inflation hedges such as gold, it’s still possible to launch competing cryptocurrencies which can expand the market, argues Daniel Kern, chief investment officer at TFC Financial Management.

Should you invest in cryptocurrencies?

Discussions about cryptocurrencies can be quite polarised. True believers get very defensive, while ardent crypto critics act as though the whole thing is on the verge of collapse. We take more of a middle view.

Ignoring crypto seems unwise. It’s clear that digital currencies and the blockchain are of great interest to governments and central banks. And bitcoin has now managed to survive enough booms and busts to convince us that it’s not a flash in the pan. So investors should pay attention to the space and educate themselves on it.

In a recent issue of MoneyWeek magazine, Charlie Morris made the case for holding both bitcoin and gold as hedges against different stages of inflation – he believes they complement rather than compete with one another.

Equally, if you’re not an early adopter or particularly tech-minded, we wouldn’t worry too much. If crypto becomes significant enough to be considered an asset class in its own right (rather than an evolution of currencies, say), then institutional adoption will eventually lead to investment vehicles that are more easily accessible to private investors.

If you’re interested to learn more about bitcoin generally, then you can currently get a free beginner’s guide to bitcoin when you subscribe to MoneyWeek. Get the report, plus your first six issues, absolutely free here.

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This Time OPEC can Disappoint Fragile oil Market

China economic data released on Wednesday underpinned risk mood in the markets. Activity in key manufacturing sector rose in March compared to the previous month. Export orders accelerated growth, which gave confidence to investors who hold the bet on global expansion as leading nature of this indicator suggests markets can expect growth in exports, real wages and import activity of trading partners in the coming month. The official PMI rose from 50.6 to 51.9, beating the forecast.US markets closed in the red, SPX has been trying to break above 3980 points for two weeks, so far unsuccessfully. It is hoped that breakout will follow the announcement of Biden's infrastructure plan, since depending on the direction of government spending, Biden's economic plan could provide a significant increase in the revenue of US companies.The dollar also rallied in anticipation of Biden’s speech, but as we discussed earlier, the dollar’s chances of growth are rising as the pace of recovery in advanced economies becomes patchier, with the US economy breaking out in the lead thanks to successful vaccinations and a faster pace of lifting restrictions that stifle activity.A strong ADP report will boost the odds of positive labor statistics on Friday and will likely allow the dollar to accelerate gains against opponents as the topic of US recovery leadership has been driving the dollar's corrective rally this week.The data on inflation in the Eurozone turned out to be mixed and in general fell short of the forecast. The broad consumer inflation index accelerated to 1.1% in March, but the main contribution was made by the rise in energy prices (+ 4.3%). Core inflation, which more accurately reflects the trend in consumer spending, slowed down from 1.1% to 0.9%. It is becoming harder for the ECB to argue that the inflation story is going according to plan, so there is a risk that it will intensify the rhetoric about the PEPP asset purchase program. This can only make the euro worse.OPEC is scheduled to meet on Thursday, but the report from a preliminary Joint Technical Committee meeting showed that the organization is worried about recovery in demand as the infection rates rise, leading to tightening lockdowns and reduced consumer mobility. The forecast for demand growth in 2021 was revised down from 5.9 million to 5.6 million bpd. According to OPEC, oil reserves, despite relative unloading, still remain above the average level of 2015-2019. There is a risk that OPEC will extend production restrictions in May, which keeps prices from falling further.Stock data from the API indicates a continued negative trend. Stocks rose by 3.91 million barrels last week, once again falling short of expectations. However, gasoline stocks fell immediately by 6 million barrels, which indicates a fairly strong demand in the United States and is a very positive moment of the report.Technically, oil has dropped below a key trend line and is currently trading in a tight range. A potential disappointment at the OPEC meeting could send prices lower from the horizontal resistance level at $62 a barrel:Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Midweek Market Podcast – March 31

The Market Week – Quarter End and beyond

HotForex · Midweek Market Podcast – March 31

 

The Market Week – Quarter End and beyond   

The focus of attention once again this week is on the Bond market, as the US 10-year treasury yield spiked to 1.76% and the USD continued its significant moves into Quarter end. The enormous $1.9 trillion fiscal stimulus bill could be followed by a blow-out $2.25 trillion Infrastructure Bill; President Biden will outline the details, starting today.

This week sentiment was spooked as a huge Margin Call on Bill Hwang’s Archegos Capital caused potential losses of $6 bn for the investment banking sector with Nomura and Credit Suisse most exposed. Archegos had reported assets of $10 bn but highly leveraged positions of around $50 bn when the selling began last week.

Unemployment remains stubbornly high globally but this week signs of a turnaround may be on the cards. Last week’s unemployment claims beat expectations at 684,000, and the pandemic low of 712,000 from November.  This month’s key Non-Farm payroll consensus is 650,000 new jobs for March with a huge range in estimates from 115,000 to 1.1 million.  

The vaccine rollouts continue to gain traction globally, however, the situation in the EU, with rising infections, extended lockdowns in much of the continent and a low vaccination rate, coupled with the persistent concerns over the AstraZeneca vaccine, weigh on the EUR.

This week FX volatility picked up as the USD moved higher into month and quarter end.  The USDIndex rallied to new five-month highs at 93.45. EURUSD continued to weaken and remained under 1.1800 to post five-month lows at 1.1704. USDJPY clocked a one-year high 4 cents shy of 111.00 as the Japanese financial year ended. Cable moved up from under 1.3700 to peak at 1.3845 before settling in the high 1.3700s.  

Global stock markets turned more volatile, amid the Archegos fire sale and as the rotation from high growth technology stocks to financials, energies and industrials continued. The USA30 & USA500 posted new all-time highs. High valuations and an expected rise in inflation could weigh on further gains.

The Gold price moved lower again this week to once again test and break the key $1685 level and remains biased lower with the stronger USD and higher yields while Bitcoin also had another volatile week but has breached immediate resistance at $58,000 and  eyes  a new all-time high over $60,000.

USOil prices recovered from last week’s $57.25 low as the Ever Given was finally refloated and ahead of this week’s OPEC+ meeting with talk of Russia happy to maintain production caps during April and even May. $60.00 a barrel remains key.

The yield on the US 10-Year Treasury Note now holds well above the psychological 1.500 level, as it tested above 1.7500 to new 14-month highs this week at 1.7600. The potential $1.9tn fiscal and $2.25tn infrastructure stimulus packages, the rapid uptake of the vaccines and opening of the economy added to the spectre of rising inflation are combining to keep yields the main focus of the markets.

Click here to access the HotForex Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Why is gold having such a miserable time and when will it turn around?

• SEE MORE Why you should own bitcoin and gold as inflation returns

Oh, for those sunny days in August when gold’s rise seemed inexorable. New highs came every day and two thousand bucks per ounce was a thing gold bugs looked down on, not up to. Here we are in March (always a bad month for gold) and we can’t get above $1,700.

The sun may be shining, but – no doubt to the surprise of ancient cults who felt one was the teardrops of the other – gold is in an inexorable downtrend.

What’s the reason – rising bond yields, the rising US dollar, the fact that bitcoin has stolen gold’s thunder? Does it even matter why? It’s going down – that’s all you need to know. “When does it start going up again?” is the question..

Hopes for a strong economic recovery are hurting gold – for now

April is usually a good month for gold. We are currently re-testing the lows of early March. Maybe they hold and we get a little bit of a rally over the next month. It’s not like gold isn’t oversold.

Then again, May is not usually a good month; June is the month that those in the know tend to make their annual gold purchases. Is that when gold makes its final low? That’s my guess.

You know my theory: gold is an analogue asset in a digital world. Digital is where all the growth is. Digital is where all the innovation is. The digital economy has left the physical economy for dead.

But there has been something of a turn of late. The Great Rotation, they are calling it. Clever money is abandoning growth (digital) in favour of value (physical). Maybe some of that clever money will see extraordinary value in gold. It’s not like the value isn’t there.

When you buy gold, you don’t get a yield – it pays no interest – you get storage costs. So if bond yields are rising, money that would otherwise have gone to gold (in the event that yields were flat or falling) goes to bonds instead. There’s even an opportunity cost to holding gold. Ergo rising yields are bad for gold.

For whatever reason – perhaps because it takes ten years to take a mine from discovery through to production – gold and ten-year bond yields tend to correlate in a way that is much more apparent than with shorter-term interest rates.

As we know the ten-year yield is rising, and thus gold pukes. However, there is a silver lining, forgive the pun, to all this. Rising yields suggest that somebody somewhere sees a strong economy ahead.

Despite the continued negativity in the press around Covid-19, and the reluctance of our glorious leaders to let you do anything that is tantamount to leading a normal life, markets do seem to be anticipating that the pandemic is entering its final stages.

Perhaps it’s the vaccine roll-out, perhaps its exhaustion – but the “Back to Work, Back to Normal” trade is on. Try booking a table in a restaurant if you don’t believe me. There is a lot of pent-up demand for getting out of the house – whether it’s going to the pub, going to a restaurant or going on holiday. These are all “physical economy” things. As we have mentioned, household savings in the UK and North America are at record highs. There’s a lot of dough waiting to be spent on real life.

Rising yields confirm the theory. Rising yields indicate an expectation of economic strength. A strong economy gives rise to inflation. Gold is the de facto hedge against inflation. In the long term then, these rising yields are good for gold. You wouldn’t know looking at the price at the moment, but the stage is being set for a gold price rally later in the year – but we are not there yet. That’s my theory.

A lot of that newly-printed money is sitting in the hands of real people, waiting to go into the real economy. Covid has hit globalisation – we are going to benefit less from China’s cheap labour costs, and pay higher local rates. So it is going to get that much harder to mask the inflation.

The US dollar is getting stronger

We have addressed the physical/digital issue. We have addressed the rising yields issue. Now we turn our head to the third and final piece of the jigsaw: the US dollar.

A rising US dollar is not good for gold. Well, yes and no. It’s another one of those, “short-term bad but not necessarily long-term bad” issues. There have been plenty of occasions in the past when the two have risen together, though on the whole, yes, a falling dollar is better for gold than one that’s rising.

The dollar was awful in 2020, with the dollar index (a measure of the dollar against a basket of other major currencies) falling from 104 at the peak of the Covid crisis to 89 around the turn of the year. There is a lot of long-term support in that 88-89 area and, many times in the past, it has proved a turning point. As technical analysts might say, there is a lot of price memory there.

The US dollar is now in an uptrend. How long does this remain the case? Currently at 93, it’s looking hot, so much so that we might get a little bit of a pull back (giving us our April rally in gold). But looking at a longer-term horizon I think it goes higher. There is resistance in the 94-95 area. If it gets above that and goes towards 100 it will get very painful for the gold bugs.

I’m not quite sure what to make of the dollar, I must say. No doubt it will all look obvious in retrospect – it always does. But for now all I can really say is “uptrend”. I guess that’s all one needs to know: it’s going up.

But I think there is something to my roadmap for gold. A rally from oversold levels in April, declines in May, followed by longer-term lows in June. But when, or should I say if, the inflation cat is out of the bag, gold will have its day again.

Bottom line: it’s a bear market. You get tradable rallies in a bear market, but a bear market is a bear market. They can go on for longer than you think. They can “make no sense”. But they don’t go on forever.

Not yet, then. But soon, my pretties.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

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Not been driving much? Here's how to save money on costly car insurance

Car insurers continue “to punish loyal customers with price hikes despite a massive drop in the number of road accidents” in lockdown, says Will Kirkman in The Daily Telegraph. Four in ten customers who stuck with the same provider saw their annual bills rise by an average of £49 a year in the last three months of 2020, says comparison site Confused. 

The so-called “loyalty penalty” is expected to be banned from July but until then insurers can raise your premiums when you renew. So, what can you do to cut your bills? Shop around when it is time to renew. “We know from our research that insurers are still putting up renewal prices for some drivers,” Louise O’Shea from Confused told The Telegraph. “Even if the increase is small, please don’t settle for this as there will be an insurer out there willing to offer a better price.”

When you are looking for a new car-insurance policy make sure you think carefully about the details you give for your driving habits. We have all driven a lot less over the last 12 months, and it is unlikely your mileage will hit the same level in 2021 as in 2019. So think about cutting your estimated annual mileage. Just don’t get carried away: underestimate it and you could face problems if you make a claim.

Car insurance charged by the mile 

If you aren’t driving far, consider switching to a policy that charges you per mile. RAC is offering this type of policy to those who estimate their annual mileage at under 6,000 miles a year. You pay an activation fee of £50, then a mileage premium of at least 4p a mile, plus a premium for when your car is parked, starting at £14 a month. This policy won’t track how you drive, only how far. You stick a tag in your windscreen and pair it with an app on your phone. 

“Someone who paid a £50 set-up fee, plus a £16 a month parked premium and was charged 8p a mile for their RAC Pay by Mile insurance policy would end up with a bill of £522 for the year if they covered 3,500 miles,” says David Byers in The Times. That is below the average premium of £603, says Compare the Market. 

But assess your mileage as accurately as you can before you sign up: someone covering 6,000 miles a year on the same payments as above would rack up an annual premium of £722 – well above the average. RAC is only the second insurer to offer pay-as-you-drive coverage; By Miles is the other. You may also be able to ask your insurer for a partial refund if you haven’t gone as far as you estimated when you signed up. Direct Line offers Mileage MoneyBack of 2% of your premium for every 1,000 miles you didn’t drive. Aviva and Sheilas’ Wheels also offer refunds. You have nothing to lose by asking your insurer if they will give you some of your money back.

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Make sure you max out your pension contributions this year

With the end of the tax year on 5 April fast approaching, have you made maximum use of your private-pension contribution allowance? Given the generous tax reliefs available, it makes sense for most people to save as much as they can afford.

Contributions to private pensions attract tax relief at your highest marginal rate of income tax. So, if you’re a basic-rate taxpayer, contributing £1,000 to a pension costs you £800. If you pay the higher rate, the cost of the same contribution falls to £600; this falls to £550 if you’re an additional-rate payer.

Remember the pensions annual limit 

However, the amount you may contribute each tax year is limited by your annual allowance. If you exceed this threshold you will have to pay a tax charge. For most people, the annual allowance is worth £40,000 or 100% of their annual earnings, whichever is the lower of these two figures. However, even very low and non-earners get an annual allowance, worth £3,600 a year.

This allowance covers everything going into your pension, including any contributions from an employer and the value of the tax relief you receive. If you’re earning £40,000 a year and contributing 4% of your salary, you’ll be paying in £1,600 of your own money and then receiving a further £400 in tax relief. If you’re also getting a 5% contribution from your employer, this will be worth another £2,000. Altogether, you will have used up £4,000 of your £40,000 annual allowance.

This is how you calculate your annual allowance usage for all defined-contribution pension schemes, whether they are at work or individual arrangements such as a personal or stakeholder pensions. More complex rules apply to defined-benefit plans such as final-salary pension schemes, but if you’re a member of one of these, your employer should be able to tell you how much of your allowance you have used up over the year. Remember that the annual allowance applies across all your pension plans if you have more than one. So, if you’re contributing to a plan at work but are also paying into a plan of your own independently, you need to add up the total value of all your contributions.

Also note that special rules apply to those with high earnings. Once your income goes above £240,000, your annual allowance begins to taper downwards, by £1 for each £2 of income you earn above this limit. So someone with earnings of £270,000 sees their annual allowance decline to £25,000. The tapering continues until your earnings hit £312,000, by which time your annual allowance is just £4,000.

In practice, most people don’t get anywhere near using their annual allowance each year, but if you do have a potential problem – or you’re determined to wring every last bit of value from your allowance – the carry-forward rules may help. 

These let you carry forward any unused allowance left over from the last three tax years to add to this year’s allowance. The only caveat is that you still can’t contribute more than you earn over the course of the year. You must also have been a member of a private pension scheme in the year from which you are carrying forward any unused allowance.

Look to Isas and VCTs too

Another option for savers at risk of breaching the annual allowance is to look at alternative homes for long-term cash. Individual savings accounts (Isas) and venture-capital trusts (VCTs) are popular options since they offer tax incentives of their own, but even savings and investments with no tax breaks attached can be worth considering.

Finally, note that once you begin withdrawing money from your pension schemes later in life, you are still allowed to continue making contributions to top it up. But in these cases, a special “money purchase annual allowance” of just £4,000 a year usually applies.

from Moneyweek RSS Feed https://moneyweek.com/personal-finance/pensions/602976/make-sure-you-max-out-your-pension-contributions
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Deliveroo has hit the market – but it’s not getting the warmest welcome

• SEE MORE Why the Deliveroo IPO is good for shareholder democracy
• SEE MORE Should you buy Deliveroo shares?
• SEE MORE Court decision on drivers’ rights sends Uber’s share price into reverse

Deliveroo’s much anticipated £7bn London listing – the biggest in a decade – hit the market today as conditional trading started. To say it hasn’t got off to a good start is an understatement. The company listed at 390p – the bottom end of a range that had already been reduced heavily. But in early trading the share price fell by as much as 30%.

When the food delivery company announced that its IPO would take place in London, the decision was heralded as a “true British tech success story,” by chancellor Rishi Sunak. So this is not the sort of “pop” that the company, the exchange, its IPO investors, or Sunak would’ve been hoping for.

It wasn’t an easy ride to get here in the first place. The listing came amid a furore around its governance and working practices, which forced it to slash its valuation to the lower end of the target range, after it had hoped to achieve a market capitalisation as high as £8.8bn for its debut.

So why the lower valuation? One of the more headline-grabbing issues has been the wave of fund managers who have said they would not participate in the IPO due to concerns around Deliveroo’s treatment of workers – and its unusual shareholder structure. M&G, Aberdeen Standard, Legal & General Investment Management, CCLA, Aviva Investors all announced they would shun the IPO all together.

The concerns are two-fold. Firstly, there’s the question of “gig” workers’ rights. This is a controversial area and one where governments and courts are paying closer attention. Second, there’s the fact that co-founder and chief executive, Will Shu, will retain control for the next three years, due to his ownership of shares with far more voting rights than the ordinary shares.

Why fund managers are concerned about the IPO

Concerns around the treatment of its workers comes from the fact most of Deliveroo’s workers are self-employed or “gig-economy” workers. As such, this means they are not eligible for the usual benefits enjoyed by permanent workers, such as minimum wages, sick leave and holidays.

This reliance on gig economy workers to thrive as a business represents a regulatory risk, says Rupert Krefting, head of corporate finance and stewardship at M&G. “Deliveroo's narrow profit margins could be at risk if it is required to change its rider benefits to catch up with peers”, he points out.

Some of the scepticism in the market is down to a recent ruling by the Supreme Court on employees of Uber. In a blow for the firm, the court ruled that its drivers are indeed employees and not independent contractors.

Another key criticism of the IPO is the proposed dual-class structure that will give Shu 20 votes per share, rather than one. That amounts to 57% of voting rights.

But fund managers can be forgiven for making their excuses to duck out of the IPO. The truth is that even disregarding the voting structure and the regulatory risk, it’s not easy to make an attractive case for investing in Deliveroo right now. Here’s why.

Deliveroo’s two-part business model

Deliveroo has two core parts to its business model. The first is the takeaway business, arguably the best-known part. The company connects consumers to participating restaurants with the click of a button on any mobile phone or tablet. Deliveroo gets a cut from both the restaurant and the consumer for delivering meals. The second part is its grocery delivery business – it has partnered up with a number of big supermarkets including Waitrose, Aldi and Morrisons.

With most of the world in lockdown and nobody really being able to dine out, it is obvious why Deliveroo’s revenues and transaction numbers have soared in recent months, while the public’s reluctance to go to supermarkets has also been a boon to its grocery delivery business. Yet, even although transaction numbers rose 64% in 2020 to £4.1bn, the business is still loss-making overall.

The bottom line is that fund managers probably steered clear of the IPO because of Deliveroo’s unappealing business model rather than social and governance concerns. The company’s shares looked expensive even after the cut to its valuation. It looks as though those who avoided it will be patting themselves on the back this morning.

from Moneyweek RSS Feed https://moneyweek.com/investments/stockmarkets/uk-stockmarkets/603028/deliveroo-has-hit-the-market-but-its-not-getting
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EURGBP Slide Deepens As UK Data Improves

GDP Better Than First Thought The latest UK economic data released today offered some further encouragement for GBP bulls. Following the record-breaking economic slump recorded over early 2020, during the height of the pandemic, the UK economy bounced back quicker than expected into the latter end.The data released from the ONS today showed that the UK economy rose by 16.9% and 1.3% respectively, marking an upward revision from the original data given for both quarters. While GDP was still negative on the year as a whole, at -9.8% the total reading was again a little better than the originally recorded -9.9% reading.Trade Deficit Widened Further The economic hit suffered by the UK over the course of the pandemic has been among the worst suffered by countries in the OECD with only Spain and Argentina taking a bigger hit. According to the ONS, the UK also saw its trade deficit widening to £26.3 billion in Q4, almost double the widening seen in Q3.UK Data continuing to Improve This latest batch of data follows the recent trend of UK data improving, offering hope for the continued recovery in the UK. This week, the UK lockdown laws eased again with the PM allowing for groups of six to meet outdoors. This comes ahead of the highly anticipated April 12th date when pubs and restaurants will be allowed to serve customers al-fresco, along with the return of non-essential retail, gyms ad hair and beauty salons among others.Vaccination Momentum Growing The current mood of optimism is being supported by the UK vaccination drive which has seen over 30 million people receiving their first dose of the vaccine. The progress made here has been credited for slashing transmission rates and bringing the number of new infections down as the government continues to move further down the age groups, now vaccinating the under 50s.Lockdown To End On June 21st If the UK is able to continue along the currently scheduled path to re-opening, the UK is due to remove the legal obligation to social distance as of June 21st, marking a full reopening of the economy. With infection rates and the death toll dwindling, the government has reassured the UK that it intends to press ahead with the current milestones and sees no reason for delay. While the current momentum in the vaccination push remains, sentiment is likely to stay bullish for the UK, particularly when compared with the EU which is suffering from a much slower and more disrupted vaccination drive and the outbreak of a third wave of the virus which has seen many countries extending, or returning to, lockdown.Technical Views EURGBPThe sell-off in EURGBP is continuing this week with price probing below the .8544 level. While below here the .8274 level is the next downside target for bears. This is a key long-term level and a break of this region will be a firm, bearish development. To the topside, bulls would need to see a break back above the .8861 region to alleviate near term bearishness.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eurgbp-slide-deepens-as-uk-data-improves"
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