Markets rally on EU deal and GVC faces tax probe

“Global markets were in risk-on mode on Tuesday after EU leaders struck a deal on a €750 billion recovery package and investors continued to be hopeful about a coronavirus vaccine following recent updates on various drug trials. The DAX jumped by 1.4% to 13,228, putting the European index at its highest level since February,” says Russ Mould, Investment Director at AJ Bell.

“In Asia, the Hang Seng rallied by 2.1% and the Nikkei was up by 0.7%. Meanwhile, the FTSE 100 pushed ahead 0.5% to 6,290 with financials leading the way.

“HSBC, Prudential, Barclays and Lloyds were in demand as investors flocked to more cyclical areas of the market. More defensive stocks were out of fashion including declines in the utilities space.

“Small cap biotech Synairgen gave up some of yesterday’s dramatic gains after clarifying to investors that its coronavirus drug was still in the trial stage, perhaps as an effort to reduce the hype around its product and not let investor expectations get too high."

GVC

“The biggest short-term impact on bookmaker GVC of the expanded HMRC probe announced this morning is the dreaded uncertainty it will create.

“It’s no wonder GVC’s management complain about the lack of clarity from the tax authorities, it is this lack of clarity which will do the damage. Simply put, management don’t know what part of the business it relates to, nor what the details are bar a somewhat ominous reference to the Bribery Act 2010.

“Until the position is made more transparent, investors will be forced to fill in the gaps by speculating about the impact it might have on the business and its prospects.

“The situation has moved from a speck of cloud on the horizon, as GVC faced an initial investigation into payment processing by third parties in its now offloaded Turkish online gambling business, to a big, dark rain cloud hovering over the firm.

“It is the last thing it needed as it looks to execute on the opportunity created by the deregulation of the US market. All GVC can do is continue to co-operate and await the next developments. Some shareholders have already decided they’re not going to stick around to find out what happens next, judging by the share price slump on the news.”

These articles are for information purposes only and are not a personal recommendation or advice.