Musk Hits Crypto, AT&T/Discovery and China’s Rebound – What’s Moving Markets

Elon Musk rattles cryptocurrencies – and stock futures – with a fresh blast against Bitcoin. AT&T (NYSE:T) and Discovery (NASDAQ:DISCA) are on the verge of merging their media assets. China’s economic rebound loses steam as the year-earlier weirdness passes out of its calculations, and England takes its biggest step back to economic normality – just as a new strain of Covid-19 arrives on its shores. Here’s what you need to know in financial markets on Monday, May 17th.

1. Musk stirs trouble in Cryptoland

Crypto assets sold off sharply across the board after Elon Musk hinted on Twitter that Tesla (NASDAQ:TSLA) may sell some or all of its Bitcoin holdings. A subsequent tweet from Musk saying Bitcoin hasn’t sold its Bitcoin and doesn’t intend to did little to restore the spirits of most digital currencies.

Musk reiterated his newly-developed distaste for Bitcoin’s environmental impact, notably the key role of coal played in the mining process. He also twisted the knife by tweeting that DogeCoin was in a better position to become a mainstream means of payment, saying it would “win hands down” if it adopts the kind of approach to faster processing that Bitcoin’s closed community refused some three years ago.

By 6:30 AM ET (1030 GMT), Bitcoin was down 7.3% at $45,389, having earlier touched a three-month low. However, all other major crypto assets were also down, including Dogecoin, which fell 4.3% to just over 50c.

2. Dreaming of a new streaming giant

AT&T is on the verge of a deal to combine its WarnerMedia unit with Discovery, creating a new streaming giant with a market value of some $150 billion, according to various reports.

WarnerMedia, which houses HBO, CNN and the Warner Brothers movie studio, accounts for nearly half of AT&T’s $230 billion. Discovery’s market cap of $18 billion is largely accounted for by its successful ventures into streaming unscripted cooking and home refurbishment shows. Had it come a couple of months earlier, the deal would have generated a handsome payoff for Bill Hwang’s Archegos Capital, which had placed a big and highly leveraged bet on Discovery.

There were few details about how the deal would be structured, but the deal has the potential to unlock substantial value for AT&T shareholders, who have seen their returns crimped by the huge load generated by the merger of AT&T with TimeWarner in 2016.

On the subject of unlocking value, another stock likely to be in focus later is JD.com (NASDAQ:JD), whose logistics arm said it would aim to raise some $3.4 billion through an IPO in Hong Kong of a 10% stake.

3. Stocks set to open lower, unsettled by Crypto sell-off

U.S. stock markets are set to open the week in cautious mode, against a backdrop of the selloff in crypto that may bode ill for other high-beta assets such as technology stocks.

By 6:30 AM ET, Dow Jones futures were down 100 points, or 0.3%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down in parallel.

Crypto aside, the emergence of a new and more highly transmissible strain of the Covid-19 virus in India has cast fresh doubt on the world economy’s path to reopening. Taiwan closed its borders to foreign arrivals overnight, while Singapore has closed its schools for most students. In the U.K., London mayor Sadiq Khan was quoted as saying that there were over 400 confirmed cases of the new strain in London alone.

4. China’s rebound normalizes, housing boom continues

China’s rebound from Covid-19 is flattening out, data released during the Asian session showed. The year-on-year rate of industrial output growth slowed to 20% from 24.5% in April, in line with expectations, while retail sales growth slowed more sharply, to 17.7% from 34.2%.

The numbers are a foretaste of what western data will look like as the extreme year-earlier bases pass out of headline calculations, although sustained high processing of crude oil by the country’s refineries suggest the short-term dynamic is not losing any meaningful amount of momentum.

China’s housing market also continues to froth, with urban house prices rising by the most in eight months in April.

5. England reopens, just in time for a new Covid-19 strain

The U.K. took its biggest single step yet back to economic normality, with a significant relaxation of restrictions on business and social life in England. The indoor hospitality sector is once again open, albeit subject to capacity limits, while meetings of multiple households are now also possible.

The ban on non-essential international travel has also been lifted, although the small number of countries on the U.K.’s ‘green list’ of destinations suggests the tourism season is set for a weak start. Ryanair (NASDAQ:RYAAY) earlier was unable to give formal guidance for its new fiscal year, after reporting its biggest ever annual loss through March.

The reopening comes at a time when there are signs of the new Indian strain of the Covid-19 virus spreading in the community in the U.K.