30 June 2020

Growing List of Brands Join Facebook Ad Boycott

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News shaping
the markets today

     

What’s happening: Facebook saw around $60 billion of its market value being wiped off as several blue-chip companies joined the advertising boycott.

What happened: Corporate behemoths including Microsoft, Unilever, Pepsi, Coca Cola, Verizon, Ford and Starbucks have joined more than 200 companies in the ad boycott of Facebook and its subsidiary Instagram.

The ad boycott is part the #StopHateForProfit campaign and results from the social media giant’s failure to deal with hate speech and misinformation.

Why it matters: The #StopHateForProfit campaign, started in mid-June by a group of civil rights organisations including the ADL (Anti-Defamation League), the NAACP (National Association for the Advancement of Colored People) and Sleeping Giants, gained steam last week, urging companies to suspend advertising on Facebook, Instagram and Twitter through July.

While most brands said they were boycotting all social media ads for 30 days, starting July 1, companies like Unilever and Clorox announced plans to suspend ads till December.

This comes as a significant blow to Facebook, which generates the lion’s share of its revenues from advertising. In 2019, the social media company recorded almost $70 billion in global advertising revenue. Unilever alone has spent almost $12 billion on Facebook ads so far this year, according to figures published by Pathmatics,

Facebook CEO Mark Zuckerberg said in a statement that he plans to change its policies to identify and ban advertisements that promote hate speech or incite violence. Despite this, Facebook’s stock plummeted 8.3% on Friday and continued its downturn on Monday morning, wiping off almost $60 billion from the company’s market value.

Analysts from Bank of America and BMO Capital Markets pointed out that Facebook has significant experience dealing with crisis situations and, while the current exodus is concerning, the social media giant has more than 8 million advertisers. Both BofA and BMO have positive ratings for Facebook.

What to watch: Facebook has to do a good job balancing political pressures and its negotiations with civil rights organisations. Markets expect the company to reach a solution to limit the damage to its latest-quarter results. Any news of other blue-chip companies joining the campaign may exert pressure on Facebook’s shares today, while several investors see this as a good entry point into a high-quality stock.

The Markets Today

     

British stocks will be in focus today, as investors await a basket of economic reports scheduled for release later in the day.

Context: UK stocks closed higher on Monday, after reversing earlier losses during the day, backed by the rally in global equity markets.

Details: After dropping around 0.6% earlier in the session, London’s FTSE 100 index closed higher by 1.1% on Monday, while the mid-cap index gained 0.7%.

Shares of Energean Oil & Gas climbed over 20% after the company lowered its 2020 capital expenditure outlook from $840 million to a range between $760 million and $780 million.

The pound posted losses versus the US dollar and euro yesterday, with Brexit-related concerns exerting pressure on the British currency.

British stocks have made a strong comeback over the past three months, after crashing in March. Markets in London are now on course to delivering one of the best quarterly performances since the global financial crisis.

The pace of the rally has slowed, however, this month, with economic activity in the country’s private sector tumbling during the latest quarter. The FTSE 100 is still down around 20% from its peak level of January.

Wall Street stocks posted strong gains on Monday with investors hoping for an additional stimulus package from the Federal Reserve to support the pace of economic recovery.

What to watch: Investors await a basket of economic reports from the UK, including gross domestic product, current account, business investment and housing prices.

The UK’s GDP is expected to contract by 1.6% in the first quarter, while the current account deficit is likely to increase to £15.4 billion. Analysts expect business investment to increase 0.7% in the first quarter and the Nationwide House Price Index to rise 1% in June.

Markets will also continue to monitor the coronavirus numbers, with total cases around the world surging past 10.2 million.

Other Markets: US indices trading closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 2.32%, 1.47% and 1.20%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Switzerland’s retail sales, France’s inflation rate, household consumption of goods and industrial producer prices, Spain’s GDP annual growth rate, business confidence and current account, Eurozone’s consumer price inflation, Italy’s inflation rate and producer prices, UAE’s loan growth and inflation rate, Saudi Arabia’s GDP annual growth rate, Canada’s GDP as well as the US Redbook index, S&P CoreLogic Case-Shiller home price index, Chicago PMI, API crude oil stocks and Federal Reserve Chairman Jerome Powell testimony.

 

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