METAmorphosis

Facebook changed its name to Meta. The rebranding underlines Zuckerberg’s ambitions to reshape the world-wide web with the so-called “metaverse”. But, this visionary strategy hides a multitude of problems threatening the tech giant’s future, amid leaked reports about the harmful effects of Facebook’s apps. Can Facebook rise like a phoenix from the ashes?

Investors saluted the rebranding, and Meta's stock had a bullish week. The metaverse, with its enhanced digital reality and digital currencies, the metaverse would bring social interactions to the next level. The metaverse aims to be the next frontier technology for connecting people, thereby revolutionising video conferences, remote work and online commerce.

But Facebook is going through one of its biggest crises, following a series of internal reports leaked by a former employee turned whistleblower. The documents show that the company was aware about the damage done by its application to younger consumers. The rebranding is also an attempt to shift attention from the ongoing concerns towards bigger and better foreseeable things.

Nevertheless, many voices are criticizing Facebook’s strategy and doubting that Zuckerberg’s empire is the right place to deploy and manage the metaverse. Roger McNamee, an early investor who became a vehement critic of Facebook, nailed his colours to the mast, underlining that the metaverse would not be safe with Facebook.

Trading names and changing brands may well be the first step in a series of actions leading to the dismantling of the tech giant into several smaller product-oriented firms.

My goal was never to just create a company. A lot of people misinterpret that, as if I don't care about revenue or profit or any of those things. But what not being just a company means to me is not being just that - building something that actually makes a really big change in the world. Mark Zuckerberg, Facebook Founder

Market overview

Strong labour market recovery,  low volatility, record stock market… Both macroeconomic indicators and market indices aligned on a positive path. The US Department of Labor reported that the American economy added 531,000 jobs in October, delivering a rapid acceleration in job creation since September when 312,000 jobs were created.

The benchmark yield of the US Treasury 10-year Treasury fell to its lowest level since September amid strong US jobs data. The Fed will trigger tapering bond purchase. In practice, the tapering consists of a monthly reduction in asset buying of  15 billion USD from the current 120 billion USD.

Focus:

Tesla

Tesla’s market capitalisation has recently climbed above USD 1 trillion. The 100,000 vehicles deal with the leaving rental-car Hertz fueled Tesla’s third-quarter deliveries and earnings. Thus, Tesla’s share doubled in value since August, becoming one of the hottest items for investors. The aftermath of the investing frenzy is more complex.  To justify its current capitalisation, Tesla should sell a number of vehicles equivalent to the total output of its leading competitors. But, such sales figures are not only unfeasible, but also such a scenario is mathematically impossible. The global vehicle market should observe a massive and sudden shift toward electric vehicles. The recent rally in electricity prices deters consumers' shift to EV, at least in the short term.

Focus:

Merck

The United Kingdom became on Thursday the first country in the world to approve the use of molnupiravir, a COVID-19 antiviral drug produced by the American company Merck & Co Inc. After a short-lived success, Merck’s share plunged on Friday by over 10 percent. The massive vaccination strategy failed to deliver the expected results, as many European countries are seeing the fifth wave of coronavirus infections. Therefore, the leading pharma companies have changed their approach from vaccines to therapeutic drugs. Roche and Pfizer are Merck’ direct competitors for COVID-19 antivirals. While Merck’s pill proved 50% of efficiency for patients with mild to moderate, Pfizer announced on Friday that its candidate drug reduced the risk of hospitalisation or death by 89%. The promising results of the clinical trials triggered a massive dip in Merck’s share price. Seemingly, Pfizer will keep its leading position in the fight against the pandemic.

FX:

British Pound

The inflation rate in Great Britain will hit 5% by 2022, and the market is expecting tighter monetary policies. Nevertheless, the Bank of England decided to postpone the increase in interest rates and kept the benchmarks at a historic low near 0.1%. Subsequently, the British pound lost 1.5% to the dollar, and the recovery prospects are unlikely. The Bank of England’s narrative is that inflation is transitory, but they do not expect an inflation rate below 3% before 2023. Persistent inflation would inevitably lead to currency devaluation, and adjusting the monetary policy is the only alternative to preserve the value of money.

Market outlook

The Dow Jones Index ended the week on a bullish trend, reaching a new all time high above 36,300. The anticipated tapering of bond repurchases should trigger the beginning of the decline.

Bitcoin ended the week above USD 61,000 after a short-lived peak above USD 64,000.

The energy crisis triggered by a bubble in power, gas, and coal prices impacts oil prices. Thus, there are sound reasons to believe that Brent could climb above 90 USD in 2022.

The Gold ounce ended the week on a positive note closing at USD 1,820. Prices could increase further because investors are giving signs of interest amid a long run inflationary context.