The Week Ahead
Read about upcoming market-moving events and plan your trading week
ESTABLISHED 1974313,000+ CLIENTS WORLDWIDE17,000+ MARKETS
Week commencing 11 March
Chris Beauchamp's insight
US consumer price index (CPI) data dominates the week, as investors await the latest set of price figures for the US economy and assess its impact on the Federal Reserve bank's (Fed) moves in coming meetings. UK employment data is also worth watching, along with full-year figures from housebuilder Persimmon. Please note: US Daylight Savings Time begins 10 March, so all US data is one hour earlier for UK traders.
Economic reports
Weekly view
Monday
None
Tuesday
12.30am – Australia NAB business confidence (February): index forecast to fall to -1 from 1. Markets to watch: AUD crosses
7am – UK employment data (January): unemployment rate to hold at 3.8% and average earnings expected to rise 5.8% for the three months to January, in line with December. Markets to watch: GBP crosses
12.30pm – US CPI (February): prices expected to rise 0.3% month on month (MoM) and 3.1% year-over-year (YoY), from 0.4% and 3.1% respectively. Core CPI forecast to rise 0.4% MoM and 3.9% YoY, compared to 0.3% and 3.7%. Markets to watch: US indices, USD crosses
Wednesday
7am – UK GDP (January): growth expected to be 0% in January, compared to 0.1% in December. Markets to watch: GBP crosses
2.30pm – US EIA crude oil inventories (w/e 8 March): Markets to watch: Brent, WTI
Thursday
12.30pm – US initial jobless claims (w/e 9 March), PPI, retail sales (February): claims …. while producer price index (PPI) expected to rise 0.3% MoM, in line with January. Retail sales to rebound 0.3% in February from January’s 0.8% fall. Markets to watch: USD crosses
Friday
12.30pm – US Empire State manufacturing index (March): index forecast to rise to 10 from -2.4. Markets to watch: USD crosses
2pm – US Michigan consumer confidence (March, preliminary): index to rise to 78 from 76.9. Markets to watch: US crosses
Company announcements
Monday
11 March
Tuesday
12 March
Wednesday
13 March
Thursday
14 March
Friday
15 March
Full-year earnings
Persimmon,
Domino's Pizza
Metro Bank,
Balfour Beatty,
Volkswagen
Savills,
Vistry
Half/ Quarterly earnings
Oracle
Adobe
Trading update*
Assoc. British Foods
AO World
Moonpig
Berkeley Group
Dividends
FTSE 100: NatWest, Segro, Anglo American, Haleon, Entain
FTSE 250: Dunelm, Abrdn, Tritax Big Box, Apax Global, Lancashire Holdings
Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
Index adjustments
Monday
11 March
Tuesday
12 March
Wednesday
13 March
Thursday
14 March
Friday
15 March
Monday
18 March
FTSE 100
7.15
Australia 200
0.3
1.5
0.6
0.4
0.3
1.1
Wall Street
2.6
9.6
US 500
0.19
0.21
1.31
0.17
0.07
0.30
Nasdaq
0.35
2.36
3.28
Netherlands 25
EU Stocks 50
0.8
China H-Shares
1.0
Singapore Blue Chip
Hong Kong HS50
2.2
9.2
South Africa 40
196.8
17
71
Italy 40
36.9
Japan 225
0.5
Q4 earnings season is nearly done, and we look at the main trends arising from the reporting period for US stocks.
Source: Bloomberg
Indices Average S&P 500 Price–earnings ratio Valuation Economic growth
Written by: Chris Beauchamp | Chief Market Analyst, London
Publication date: Friday 08 March 2024 04:10
As the fourth quarter (Q4) 2023 earnings season drew to a close, S&P 500 companies delivered a performance that was satisfactory overall but fell short of historical averages in several key metrics. While profit growth remained positive, both the proportion of companies beating estimates and the magnitude of positive surprises lagged behind recent trends.
Slight drop in earnings beats
Overall, 73% of S&P 500 companies reported actual earnings per share (EPS) above analysts' mean estimates for Q4 2023. This percentage trails the 5-year average of 77% and the 10-year average of 74% for companies beating projections.
Tech stocks did well, while real estate struggled
At the sector level, there was a wide dispersion in the percentage of companies surpassing earnings expectations.
The Information Technology sector led the way, with an impressive 88% of companies reporting positive EPS surprises.
On the opposite end, only 55% of companies in the Real Estate sector topped EPS forecasts - the lowest across all sectors.
Size of earning & revenue surprises well below historical average
Not only were there fewer EPS beats, but the aggregate earnings surprise was also subdued compared to historical norms. In aggregate, S&P 500 companies reported earnings 4.1% above estimates - below the 5-year average of 8.5% and the 10-year average of 6.7%.
The revenue side of the equation showed a similar trend, with fewer companies beating top-line estimates and a muted surprise percentage compared to prior periods.
64% of S&P 500 companies reported actual revenues above estimates, short of the 5-year average of 68% (though in line with the 10-year average).
Collectively, companies reported revenues just 1.2% above expectations - lagging both the 5-year average of 2.0% and the 10-year average of 1.3%
Investors reward earnings surprises & forgive earnings misses
Despite the somewhat muted results, companies that managed to exceed earnings estimates were rewarded by investors more generously than historical averages would suggest.
Companies reporting positive EPS surprises saw their stock prices rise 1.4% on average surrounding the earnings release window. This exceeds the 5-year average price increase of 1.0% for companies beating bottom-line estimates. Conversely, negative earnings misses were punished less severely than usual, with those companies averaging a 1.0% stock price decline compared to the 5-year average of 2.3% for EPS misses.
Winners & Losers
While most sectors contributed positively to the overall earnings growth number, there were a few clear outperformers and underperformers in Q4, as seen in the chart below:
Source: FactSet
Big names like Ford, Marriott, Amazon, Marathon Petroleum and Valero Energy drove large positive surprises in consumer, energy and industrials. Healthcare was boosted by companies like Illumina, Moderna and Pfizer.
The financial sector stood out as a weak spot, with names like Citigroup, Truist and Comerica missing estimates due to impacts from FDIC assessments. This sector reported the largest aggregate negative earnings surprise.
Pace of profit growth slows
Despite the below-average metrics, S&P 500 earnings still grew year-over-year (YoY) for the second consecutive quarter. The blended earnings growth rate for Q4 2023 currently stands at 4.0%.
However, this growth rate is noticeably slower than prior quarters.
Analysts expect the deceleration to continue in Q1 2024 with projected earnings growth of just 3.6%, before potentially re-accelerating to 9.2% in Q2 2024 and 11.0% for full-year 2024.
Valuations still higher than average
The somewhat tepid earnings performance comes against the backdrop of relatively elevated stock valuations for the S&P 500. The forward 12-month price-to-earnings (P/E) ratio currently stands at 20.4 - well above both the 5-year average of 19.0 and the 10-year average of 17.7. This lofty valuation implies that investors remain optimistic about future earnings growth materialising.
Outlook for Q1 2024
As companies enter the Q1 2024 reporting period, they will need to clear a higher profitability bar to sustain current stock prices and valuations. While the Q4 earnings season kept the profit growth streak alive, the path ahead appears more challenging amid economic uncertainties.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
It’s an ongoing bullish technical overview despite recent struggles, with retail traders opting to retain a majority sell bias while CoT speculators reduce their majority buy sentiment.
Source: Bloomberg
Indices Federal Reserve Futures contract Inflation Price Nasdaq
Written by: Monte Safieddine | Market analyst, Dubai
Publication date: Thursday 07 March 2024 07:45
Tech outperforms, cautious Fed member speak, and mixed US data
Nearly all sectors finished yesterday's session in the green, with tech in second place, though the two in the red were consumer discretionary and communication, albeit with limited losses. The performance for the tech-heavy index ultimately surpassed both the Dow 30 and the S&P 500 for the session, yet the gains failed to offset the losses suffered on Tuesday, and futures are struggling as of this morning.
There was plenty of attention on the Federal Reserve’s (Fed) Chairman Powell, who stated that rates are "likely at their peak for this tightening cycle", though "the economic outlook is uncertain" and reaching their 2% "inflation objective is not assured". He cautioned against cutting too soon and failed to provide an exact timeline on rate cuts that will "likely be appropriate... at some point this year". After that, Daly emphasized that they are "focused and resolute on getting inflation down", and Kashkari mentioned the possibility of two or even just one rate cut this year.
As for Treasury yields, they finished the session lower on the further end of the curve, though unchanged in real terms, and market pricing (CME's FedWatch) remained unchanged as the majority anticipate a hold-hold-cut scenario for the March-May-June meetings.
Economic data out of the US was mixed, with ADP's non-farm estimate for the month of February slightly missing expectations at 140K (vs. 150K estimates), job openings for January out of JOLTS falling to 8.86 million, not far off forecasts, and wholesale inventories for the same month dropping by 0.3%. The weekly claims, Challenger's job cuts, and unit labor costs are among the data releasing later today before tomorrow's market-moving Non-Farm Payrolls.
Nasdaq technical analysis, overview, strategies, and levels
Price spent most of yesterday’s session above its previous 1st Resistance, easily giving conformist buy-breakouts, the edge before the moves as of writing this morning that took it back beneath the key level. Its technical overview remains a ‘bull average’ in both weekly and daily time frames and means added caution via ‘significant reversal’ for conformists buying off dips when price reaches the 1st (or even 2nd) Support levels.
Source: IG
IG client* and CoT** sentiment for the Nasdaq
The higher close took sentiment amongst retail traders closer to heavy sell territory, rising from 58% yesterday to 64% as of this morning. Any pullback in price would make them beneficiaries, given they generally shorted into price gains. CoT speculators have been majority buy throughout this period, but there’s no denying the recent unwind, taking the long bias amongst them to a slight buy 54% on an increase in short positions, and a simultaneous drop in longs. Another drop in percentage terms like that and they’ll shift to slight sell.
Source: IG
Nasdaq chart with retail and institutional sentiment
Source: IG
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Bitcoin skyrockets to record heights. Unpack the cryptocurrency's monumental surge and its potential to sustain the boom or face a bust.
Economic bubble Ethereum
IG Analyst
Publication date: Tuesday 05 March 2024 07:00
Article written by Juliette Saly (ausbiz)
Bitcoin's boom
In this week’s edition of IG Macro Intelligence, we take a look at the recent surge in bitcoin, and whether it’s set for a BOOM or a BUST.
Bitcoin is back
The world's largest cryptocurrency has reached an all-time high, propelled by strong demand for Bitcoin ETFs.
The token has climbed above US$69,000 for the first time. In Australian dollar terms, bitcoin has also hit a record, exceeding AUD$100,000.
Bitcoin daily chart
Source: IG
Bitcoin's breakthrough in Aussie dollars
Kraken MD Jonathan Miller told ausbiz, the record in Aussie dollar terms is “a truly historic moment for the asset and the crypto industry as a whole.”
Driving the momentum is ongoing bullishness for spot Bitcoin ETFs, which launched in January. These ETFs now own 4% of all bitcoins, and have almost $50 billion in assets according to Bernstein data.
The demand for bitcoin has also stoked interest in smaller coins like ether and dogecoin, sending the value of the crypto market above US$2 trillion for the first time in two years.
CoinGecko estimates bitcoin's total market capitalisation at US$1.3 trillion, more than tripling its US$320 billion market cap at the end of 2022, known as the "Crypto Winter."
Global crypto market cap chart
Source: Bloomberg, CoinMarketCap
The FOMO fever that fuels the crypto surge
The rally is not solely driven by demand for Bitcoin ETFs. The forthcoming halving, which curtails the growth of bitcoin's supply, contributes to the optimistic sentiment.
Additionally, speculation that the US Securities regulator might green-light more spot-ETFs, such as for Ethereum, is fuelling the rally.
Ethereum has surged over 50% year-to-date, trading above the crucial resistance level of US$3,500. It remains about US$1,000 below its all-time high of US$4,721 reached in November 2021.
Investor fear of missing out (FOMO) has also escalated demand, subsequently inflating prices for crypto assets. The "Crypto Fear and Greed Index," which gauges market sentiment based on the trading positions of bitcoin and other significant cryptocurrencies, is currently at 90. A score between 75 to 100 indicates "Extreme Greed."
Ether daily chart
Source: IG
Crypto fear and greed index
Source: Cointree
Wall Street's warning: echoes of the dot-com bubble in bitcoin's surge
Analysts are split on whether bitcoin's recent rally signals sustained momentum or a looming bubble.
JP Morgan's Marko Kolanovic views the surge past US$60,000 and the dramatic equity rally as signs of market froth. Kolanovic is among several Wall Street analysts warning that the rapid ascent resembles the dot-com bubble or the market crash in late 2021 following post-pandemic euphoria.
Conversely, some analysts argue that this rally is different due to institutional interest spurred by the approval of spot-ETFs and the anticipated demand for bitcoin preceding April's halving.
Historically, bitcoin's value has spiked following each halving event, with some predictions suggesting bitcoin could reach US$80,000 by August.
Julius Baer's digital assets analyst, Manuel Villegas, is optimistic, noting the halving-induced shortage will spike demand. “All in all, we see a very sound fundamental backdrop for bitcoin and believe that prices are well supported around current levels with further upside potential,” he wrote.
Long-term bitcoin advocate, Ark's Cathie Wood, asserts that bitcoin is steadily replacing gold.
As of March 2024, bitcoin has outperformed traditional safe-haven assets like gold, marking a significant milestone in its journey.
Bitcoin vs gold's performance 2021 - 2024
Source: Bloomberg
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Technicals remain bullish even as it avoids record highs, while CoT speculators are back to raising their majority buy bias.
Source: Bloomberg
Indices Federal Reserve Inflation Monetary policy Central bank Purchasing Managers' Index
Written by: Monte Safieddine | Market analyst, Dubai
Publication date: Monday 04 March 2024 07:28
Manufacturing data diverges, cautious Fed members, and the monetary policy report
Quite a bit to digest late last week where manufacturing data painted a conflicting picture, with ISM’s (Institute for Supply Management) PMI (Purchasing Managers’ Index) still in contracting territory and worsening to 47.8 from 49.1, even as S&P Global’s was expansionary and improved to 52.2.
Federal Reserve (Fed) members spoke remained cautious, Daly on cutting rates quickly risking inflation getting stuck, Bostic once more on easing likely appropriate this summer, Kugler “cautiously optimistic” of ongoing progress regarding “disinflation without significant deterioration of the labor market”, Williams again expecting rate cuts later this year, and Mester that the January PCE prints won’t “really change my view” regarding getting to the central bank’s inflation target but shows “there is a little more work for the Fed to do here”.
There was also the release of the Fed’s Monetary Policy Report, in it citing the banking system that “remains sound and resilient” overall but that “a few areas of risk warrant continued monitoring”.
Week ahead: Services PMIs, NFP, and the Fed’s Powell testifies
As for the week ahead, it’s a light start out of the US and picks up tomorrow with services PMIs where it’s been a story of expansionary readings be it out of S&P Global or healthier out of ISM, and noting not just the sector but its pricing component that experienced a surge last time around to 64 from 56.7 before that.
If we’re still talking about the data, expect the attention to shift towards the US labor market with ADP’s non-farm estimate and job openings out of JOLTS on Wednesday, Challenger’s job cuts and the weekly claims on Thursday, and leading up to the market-impacting Non-Farm Payrolls (NFP) on Friday. Expectations are we’ll see growth of around 190K for the month of February, and for the unemployment rate to hold at 3.7%, with added focus on any weakness under the hood after what has been divergence between the establishment and household surveys.
Plenty of central bank members speaking, but expect the attention to be on Chairman Powell’s testimony on Wednesday before the House Financial Services Committee, and if there’s anything to add when he testifies before the Senate Banking Committee the day after. On the political front, the government shutdown has been avoided, but the deadlines pushed out to just March 8 and 22 means nowhere near out of the woods even as congressional negotiators unveil a bill for funding the remainder of the fiscal year. There’s also ‘Super Tuesday’ and the State of the Union Address.
Dow technical analysis, overview, strategies, and levels
Lacking a record high meant there wasn't as much focus on this index compared to the S&P 500 and Nasdaq 100. On the weekly time frame, there was a lack of a play for both conformists and contrarians, as the intraweek lows were within its previous weekly 1st Support. As for the daily late last week, same story on Thursday. It needed Friday's gains to offer little for both conformist buy-breakouts and contrarian sell-after-reversals off the daily 1st Resistance, where it also has a 'bull average' technical overview matching the weekly, but where action within its channel can tilt the narrative more easily in the shorter term.
Source: IG
IG client* and CoT** sentiment for the Dow
CoT speculators are heavy buy and up a notch to 70% (longs +542 lots, shorts -838), yet to reverse the pullback a couple weeks ago, and in all still cautious about upping their long bias significantly further at this stage. IG clients continue to look for a chance to unwind what was extreme sell bias amongst them at the start of last week, the Dow's pullback providing partial relief.
Source: IG
Dow chart with retail and institutional sentiment
Source: IG
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of this week for the outer circle. Inner circle is from the start of last week.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
The Week Ahead
Read about upcoming market-moving events and plan your trading week
ESTABLISHED 1974313,000+ CLIENTS WORLDWIDE17,000+ MARKETS
Week commencing 4 March
Chris Beauchamp's insight
The European Central Bank (ECB) meeting and US non-farm payrolls are the major event of the week, with the ECB’s rate decision likely to set the tone for eurozone assets for the rest of the month. Insurers are the main UK corporate news this week, while US earnings season continues to wind down, though retailers Target, Costco and Gap report figures.
Economic reports
Weekly view
Monday
None
Tuesday
1.45am – China Caixin services PMI (February): previous reading 52.7. Markets to watch: CNH crosses
3pm – US ISM services PMI (February): index expected to fall to 53.3. Markets to watch: USD crosses
Wednesday
12.30am – Australia GDP (Q4): QoQ rate expected to be 0.2%, YoY to slip to 1.5%. Markets to watch: AUD crosses
9.30am – UK construction PMI (February): previous reading 48.8. Markets to watch: GBP Crosses
12.30pm – UK Spring Budget. Markets to watch: GBP crosses
1.15pm – US ADP employment report (February): previous reading 107K. Markets to watch: USD crosses
2.45pm – Bank of Canada rate decision: rates expected to remain at 5%. Markets to watch: CAD crosses
3pm – Canada Ivey PMI (February): expected to fall to 56. Markets to watch: CAD crosses
3.30pm – US EIA crude oil inventories (w/e 1 March): stockpiles rose by 4.2 million barrels in the preceding week. Markets to watch: Brent, WTI
5pm – FOMC member Daly speaks. Markets to watch: USD crosses
Thursday
3am – China trade data (January & February): exports rose 2.3% in December. Markets to watch: CNH crosses
1.15pm – ECB rate decision: rates expected to remain at 4.5%. Markets to watch: EUR crosses
1.30pm – US initial jobless claims (w/e 2 March): claims to rise to 217K. Markets to watch: USD crosse
Friday
1.30pm – US non-farm payrolls (February): payrolls expected to slip to 188K from 353K. Unemployment rate to remain at 3.7%. Average hourly earnings forecast to rise 0.2% MoM. Markets to watch: US indices, USD crosses
Company announcements
Monday
4 March
Tuesday
5 March
Wednesday
6 March
Thursday
7 March
Friday
8 March
Full-year earnings
Clarkson
Fresnillo,
Travis Perkins,
Reach,
Greggs,
Foxtons
Legal & General,
Rathbones,
Tullow Oil
Admiral,
Aviva,
Entain,
Rentokil,
ITV,
PageGroup
Just Group
Half/ Quarterly earnings
Ashtead,
Ferguson,
Target
Trading update*
Assoc. British Foods
DS Smith
Kier,
Costco,
Broadcom,
Gap
Dividends
FTSE 100: Rio Tinto, HSBC, Standard Chartered
FTSE 250: Safestore, Renishaw, PZ Cussons, Energean
Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
Index adjustments
Monday
4 March
Tuesday
5 March
Wednesday
6 March
Thursday
7 March
Friday
8 March
Monday
11 March
FTSE 100
29.33
Australia 200
4.8
3.9
30.9
0.4
3.4
0.3
Wall Street
14.7
6.6
12.3
US 500
0.12
0.38
0.76
0.36
0.03
0.17
Nasdaq
0.13
1.99
0.35
Netherlands 25
EU Stocks 50
China H-Shares
Singapore Blue Chip
Hong Kong HS50
3.8
56.5
3.8
2.2
South Africa 40
50.2
Italy 40
Japan 225
Bitcoin's explosive 2024 rally sees a nearly 50% increase and with anticipation of the halving event, the king of crypto leads a potential alt-coin rally.
Source: Bloomberg
Forex Bitcoin Cryptocurrency Ethereum Currency
Written by: Tony Sycamore | Market Analyst, Australia
Publication date: Thursday 29 February 2024 03:52
Bitcoin reigns supreme: the 2024 surge
Bitcoin, the king of crypto, is back! After surging 20% this week, it is now up almost 50% calendar year to date, leaving all comers in its wake in the early months of 2024, including the resurgent nikkei.
Where it took the nikkei a mere thirty-four years to reclaim its 1989 high, bitcoin seems set to retake its November 2021 $69,000 high in just 27 months.
Bitcoin's resurrection from the crypto winter is comparable to that of the mythical Phoenix of Greek legend. But here we have a new legend taking shape, and whether it lasts for 500 years like the Phoenix, as bitcoin's proponents might hope, remains to be seen.
Fueling the rally: influx of bitcoin ETFs
Bitcoin's gains in recent weeks have been fuelled by record client inflows into the newly launched Bitcoin ETFs. Contributing factors include anticipation of the Bitcoin halving event in April, concerns over a partial US government shutdown, and MicroStrategy's Michael Naylor acquiring an additional 3,000 bitcoin for his already significant holdings.
Significantly, bitcoin's ascendancy has begun to extend into the altcoin space, supported by speculation that ETFs for some alternative cryptocurrencies, including Ethereum, Ripple, and Solana, may soon be introduced.
The next frontier: Altcoins on the rise
Ethereum is now firmly entrenched above $3,000, admittedly still with some work to do to reclaim its $4,868 November 2021 high. Solana at $118 is a long way from its November 2021 high. Once a pullback in bitcoin commences, traders will likely cycle into the alts, looking for the next outsized move within the crypto ecosystem.
Bitcoin technical analysis
This week's sharp increase in bitcoin is indicative of a Wave iii of III, the most dynamic phase of an impulsive move within our Elliott Wave framework.
Declines into the mid $50,000 range are expected to be strongly supported as the market prepares for a test and likely breach of the November 2021 all-time high of $69,000.
Bitcoin weekly chart
Source: TradingView
Ethereum technical analysis
A similar narrative unfolds for Ethereum. The recent surge in Ethereum's price is characteristic of a Wave III — the most dynamic phase of an impulsive move within our Elliott Wave framework.
Pullbacks towards $3,000 are expected to find strong support as the market prepares for a challenge and probable surpassing of the November 2021 high of $4,868.
Ethereum weekly chart
Source: TradingView
Source: TradingView. The figures stated are as of 29 February 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
European equities, particularly the German DAX, soar to new heights fueled by Nvidia's robust earnings, while investors await Euro area inflation data for further market cues.
Source: Bloomberg
Forex Indices Inflation Euro DAX European Central Bank
Written by: Tony Sycamore | Market Analyst, Australia
Publication date: Tuesday 27 February 2024 04:58
Riding the wave of Nvidia's impressive earnings report, European equities, including the stalwart German stock market, witnessed a surge to unprecedented highs last week.
While the Nasdaq and the Nikkei have hogged the spotlight with their stellar performances this year, the German stock market has quietly carved its path to success. With a solid 13.4% gain in 2023, the DAX has continued its ascent, boasting a 4% increase year-to-date, even amidst the absence of notable AI players.
As highlighted previously, the DAX's upward trajectory can be attributed to various crucial factors, such as a resurgence in manufacturing, a positive shift in sentiment towards China, and the resolution of the energy shock triggered by the Russian invasion of Ukraine.
Equally significant has been the rapid decline in Euro Area inflation over the past sixteen months, positioning the ECB as a frontrunner among central banks expected to implement rate cuts in 2024. Insights into the timing of these potential rate adjustments will be gleaned from this week's Euro Area inflation data, as outlined below.
What's on the horizon for Euro area inflation (Friday, 1 March 9:00pm)
In January, headline inflation in the Euro area dipped to 2.8% YoY from December's 2.9%. Core inflation also saw a decline, settling at 3.3% YoY, marking its lowest level since March 2022. This month, expectations point to a further decrease, with headline inflation projected to drop to 2.7% YoY and core inflation anticipated to decline even further to 2.9% YoY.
The minutes from the January ECB meeting, unveiled last week, underscored a widespread consensus that it was premature to broach the subject of rate cuts, emphasizing the fragile nature of the disinflationary process. This sentiment was reinforced by hawkish remarks from ECB Governing Council members Stournaras and President Lagarde, who echoed, "We are not there yet" regarding inflation.
Nevertheless, the rates market is already factoring in a 25bp ECB rate cut slated for April, with a total of 88bp in cuts projected for 2024.
EA annual headline inflation rate chart
Source: BoE
FTSE technical analysis
It's the same old story for the FTSE, as it starts the new week eying resistance at 7750/65ish, which has capped for the past nine months. If the FTSE can see a sustained break above 7750/65ish, it would warrant a positive bias and open a test of the April 7936 high, with scope to the 8047 high.
However, while the FTSE trades below resistance at 7750/60ish, there remains a high likelihood of further sideways rotating back towards the support at 7550/00, coming from the 200-day moving average and the mid-February 7492 low.
FTSE daily chart
Source: TradingView
DAX technical analysis
In our updates in mid to late January, we noted that due to the nature of the three-wave decline from the early January 17,123 high to the mid-Jan 16,464 low, it was likely a correction, and the DAX would push to new highs.
The Dax has since made a fresh record high at 17502, and while it remains above uptrend support at 17,200 from the October 14,666 low, the path of least resistance is for higher prices to follow.
Aware that should the DAX fall below support at 17,200 and below a cluster of horizontal support at 17,100, it would warn that a deeper pullback towards the 200-day moving average at 16,127 is underway.
DAX daily chart
Source: TradingView
Source: Tradingview. The figures stated are as of 27 February 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Rolls Royce’s impressive numbers have pushed the stock ever higher. Can the FTSE 100 blue-chip fly above 400p?
Source: Bloomberg
Indices Shares FTSE 100 Stock Free cash flow Roll-Royce
Written by: Charles Archer | Financial Writer, London
Publication date: Tuesday 27 February 2024 12:50
Rolls-Royce (LON: RR) shareholders have enjoyed an excellent couple of years. Despite the value destruction down to less than 39p per share at the start of October 2020, the stock has now recovered to 361p — and has risen by 21.2% year-to-date alone.
With some analysts predicting a rise to 400p amid excellent full-year results, Rolls-Royce shares may once again become the best-performing FTSE 100 stock of this year.
Rolls-Royce share price: 2023 full-year results
With CEO Tufan ‘Turbo’ Erginbilgic taking the reins at the start of last year, few would have guessed the impact. Of course, while the FTSE 100 company has benefitted from the wider recovery of civil aviation, Rolls has improved on almost every metric.
Underlying operating profit more than doubled from £652 million to £1.6 billion, driven by the recovering civil aerospace division, and reflecting the impact of ‘strategic initiatives, with commercial optimisation and cost efficiency benefits across the group.’ For context, the average analyst forecast had been for £1.4 billion, and in further good news, Rolls delivered an underlying margin of 10.3%.
Free cash flow rose to a record £1.3 billion, driven by operating profit and continued LTSA balance growth — while return on capital more than doubled to 11.3%. Statutory net cash flow from operating activities also increased, by £1 billion to £2.5 billion. And importantly in a time of elevated interest rates, the FTSE 100 operator saw net debt fall from £3.3 billion to a much more manageable £2 billion.
Erginbilgic enthused that the company’s ‘transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives. This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.’
Where next for Rolls-Royce shares?
While supply chain challenges are expected to persist for the next 18 to 24 months, Rolls-Royce still expects underlying operating profit to be between £1.7 billion and £2 billion in 2024 — with free cash flow to rise to between £1.7 billion and £1.9 billion.
Erginbilgic notes that ‘our strong delivery in 2023 gives us confidence in our 2024 guidance and is a significant step towards our mid-term targets. We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.’
In the key civil aerospace division, the company expects that 2024 large EFHs will grow to between 100 and 110% of its pre-pandemic level, based on civil net LTSA creditor growth at the low end of the mid-term range of between £800 million and £1.2 billion — compared to £1.1 billion in 2023.
And the 2023 performance and 2024 guidance on operating profit and free cash flow means that by 2024 Rolls will have delivered more than 50% of the improvement set out in our mid-term targets.
For context, it continues to target underlying operating profit of between £2.5 billion and £2.8 billion, operating margin of 13% to 15%, free cash flow of £2.8 billion to £3.1 billion and return on capital of circa 16-18% in the mid-term — all based on expectations for a 2027 timeframe.
Despite widespread speculation, the company has chosen not to make any shareholder payouts for 2023. No dividends is often poorly received by the markets, but not in this case. Rolls did recommit to reinstating and growing shareholder distributions once it’s ‘comfortably within an investment grade profile and the strength of our balance sheet is assured.’
On the other hand, the CEO recently told The Telegraph that he was not ‘ruling out’ building the first small modular nuclear reactors outside of the UK due to the slow pace of approval. The company — in which the government owns a golden share — is one of only three that have submitted plans for regulatory approval in the UK so far and Erginbilgic notes that ‘we are ahead of everyone else.’
For context, SMRs are expected to be partially publicly funded via new body Great British Nuclear and may become a core component of the country’s energy strategy.
Rolls-Royce may continue to rise through the FTSE 100 regardless. JP Morgan has a 400p price target on the stock, noting that ‘a much higher percentage of Rolls-Royce’s long-term service agreements will convert into profit.’ Goldman Sachs has a 370p target — and Citi are most bullish, with 431p the goal.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Consumer staples stocks are popular defensive portfolio investments, with a unique set of advantages and drawbacks. These five are the largest on the FTSE 100.
Source: Bloomberg
Indices Shares Reckitt Diageo Haleon Consumer
Written by: Charles Archer | Financial Writer, London
Consumer staples stocks are shares in companies which specialize in selling daily essentials — food and drink, hygiene and household products, cosmetics, alcohol and tobacco. These stocks are classified as ‘defensive’ — consumers will continue to buy them regardless of the state of the economy — meaning the companies benefit from inelasticity of demand.
These are non-cyclical businesses, which means sales, revenue and at least some profit is generally expected. However, consumer staples stocks are unlikely to make headlines for capital growth or explosive revenue increases.
Instead, they offer low price volatility, dividends, and defensive positioning within a wider portfolio. And a key trade-off is that consumer staples companies can be better able to pass on inflation-matching cost increases to customers — this is a huge advantage in inflationary periods which is becoming more apparent.
Given the perceived lower risk, lower return, consumer staples stocks are often popular with investors closer to retirement, or else investors starting to venture outside the diversification offered by ETFs.
Perhaps a core advantage that is often ignored is the heritage and branding power of most larger consumer staples companies. Many have been in operation for decades or more due to the defensive nature of the sector, and this can have a positive ongoing effect on investment attractiveness.
Of course, past performance is not an indicator of future returns.
Top consumer staples stocks to watch
The following five shares are the largest FTSE 100 consumer staples stocks by market capitalisaiton. There is an element of subjectivity to inclusion as there is no standardised ‘consumer staples’ definition.
Unilever
Diageo
British Amercan Tobacco
Reckitt Benckiser
Haleon
Unilever
Unilever is a very well-known transnational consumer staples business which produces a dizzying array of products including food, drinks, cleaning agents, beauty and personal care products. Some of its well-known brands include Dove, Ben & Jerry’s, Cornetto, Domestos and Hellmann's.
Full-year 2023 results saw underlying sales growth at the FTSE 100 company rise by 7% — with a turnover of €59.56 billion. Encouragingly, the business’s underlying operating margin rose by 60bps to 16.7%. CEO Hein Schumacher argues that ‘2023 Full Year results show an improving financial performance, with the return to volume growth and margins rebuilding. We are moving with speed and urgency to transform Unilever into a consistently higher performing business.’
Unilever shares have remained almost flat over the past five years, with some investors arguing it has underperformed the wider market. However, it is in the midst of a turnaround plan; Schumacher took the reins in July 2023 noting that it is not ‘reaching its potential’ and that productivity and returns have ‘under-delivered.’
Diageo
While some consider alcohol not to be a consumer staple, it is a consumer product that people tend to buy regardless of the wider economic climate. Diageo is one of the largest alcoholic drinks manufacturers in the world, and controls a premium brand portfolio covering Johnnie Walker, Guinness, Smirnoff, Baileys, Captain Morgan, Tanqueray and Gordon's.
In recent interim results, CEO Debra Crew did note that ‘the first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year…looking ahead to the second half of fiscal 24, despite continued global economic volatility, we expect to deliver improvement in organic net sales and organic operating profit growth at the group level.’
For context, an unfavourable foreign exchange market and the declines in Latin America and the Caribbean saw net sales decline by 1.4% to $11 billion. Accordingly, operating profit fell by 11.1% to $3.3 billion — though this fall was just $205 million when excluding the LAC region.
In more bad news, the stock has fallen to its lowest level in four years as news of China’s ‘anti-dumping’ investigation into brandy from the EU heats up.
British American Tobacco
Debate it if you must, but tobacco is also commonly thought of as a consumer staple. Smokers and vapers typically buy their favourite product — with the addictive component of nicotine an ethical question for individual investors to consider.
British American Tobacco is one of the world’s biggest tobacco companies, with a significant brand portfolio of famous names. However, the business is dealing with changing consumer preferences and government intervention. It wrote off circa £25 billion in value of its US-based cigarette portfolio in December 2023 — while the UK is planning to implement a ban on disposable vapes soon.
For context, revenue fell by 1.3% in full-year results (though rose by 3.1% at constant rates). ‘New category’ revenue grew by 21% — and revenue from non-combustibles now makes up 16.5% of the group’s overall revenue. Best of all, new categories achieved profitability in 2023 after years of losses and two years ahead of target.
But longer-term, combustibles revenue is expected to continue to fall, while some investors think replacing this revenue with vaping may be harder than the company expects. CEO Tadeu Marocco contends that the ‘refined strategy commits us to 'Building a Smokeless World', a predominantly smokeless business, with 50% of our revenue from Non-Combustibles by 2035.’
Reckitt Benckiser
Like Unilever, Reckitt Benckiser has been effectively flat over the past five years. The company owns many famous brand names, including Dettol, Strepsils, Veet, Gaviscon, Calgon and Air Wick. It’s widely assumed that consumers are prepared to pay a price premium for cleaning products and medications compared to other categories.
In Q3 results, Reckitt saw like-for-like net revenue growth rise by 3.4%, led by strong a broad-based growth of 6.7% across its hygiene and health segments. While overall volume declined by 4.1% year-over-year, the company remains the market leader in the US nutrition business — and with its recent strategic update, the company expects to target sustained mid-single digit life-for-like sales growth in the medium term.
In further good news, the company has initiated a £1 billion share buyback programme. CEO Kris Licht notes that ‘we are firmly on track to deliver our full year targets, despite some tough prior year comparatives that we continue to face in our US Nutrition business and across our OTC portfolio in the fourth quarter.’
Haleon
Like Reckitt Benckiser, Haleon is a consumer healthcare multinational which controls its own famous brand portfolio — including Sensodyne, Panadol and Centrum vitamins. And it’s widely regarded as one of the largest over-the-counter medicines operators in the world.
Spun off from GSK, the company could remain a stalwart of the FTSE 100 for decades to come. In Q3 2023 results, Haleon saw 5% organic revenue growth, while adjusted operating profit rose by 8.8% at constant currency rates. And the company saw an adjusted operating profit margin of 24.6%.
CEO Brian McNamara enthuses that the results ‘demonstrate continued strong momentum across the business. Despite challenging markets, we have delivered another quarter of strong organic growth…our FY guidance remains unchanged and we expect to deliver strong growth in both organic revenue and adjusted operating profit constant currency.’
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Explore how gold outperformed other commodities in 2023 and what investors can expect in 2024 amidst economic uncertainties and geopolitical tensions.
Source: Bloomberg
Forex Shares Commodities Inflation United States Gold as an investment
IG Analyst
Publication date: Wednesday 21 February 2024 01:21
Tom Bailey, Head of ETF Research at HANetf
Gold's stellar performance in 2023
Gold showcased remarkable resilience in 2023, surpassing expectations in a high-interest-rate environment and outperforming commodities, bonds, and global equities (excluding US stocks). Before examining the prospects of the yellow metal in 2024, let's first understand the investment case for gold and its key price drivers.
The unique appeal of gold
Gold is a unique asset class. During periods of economic uncertainty, investment demand for a safe-haven asset drives gold prices. At the same time, during periods of economic expansion, pro-cyclical consumer demand can support gold price performance. These two factors give gold the ability to provide stability in a range of economic environments. Most other commodities typically do not have this unique profile.
We can divide gold demand into three categories:
Economic expansion: positive for gold consumption as an expanding economy increases demand for jewellery and electronics
Risk and uncertainty: gold tends to shine in times of heightened risk and uncertainty, attracting investors seeking a safe haven
Opportunity cost: gold faces headwinds when bonds provide higher yields, and tailwinds when bonds provide lower yields.
2024 outlook: the US economy's impact on gold
The first factor to consider for gold’s outlook, therefore, is the outlook for the US economy. Gold’s fortunes in 2024 will partially depend on whether the US economy achieves a soft landing, hard landing, or no landing. In its latest outlook, the World Gold Council detailed which aspects of gold demand will be positive or negative in the three potential economic scenarios, as shown in the table below.
The global economy faces three likely scenarios in 2024
Source: World Gold Council
The dynamics of a soft landing
A soft landing is now widely expected, meaning the opportunity cost becomes a potential driver of gold prices. In such a scenario, the Federal Reserve will be in a position to cut interest rates and bring down US bond yields. That makes gold, a non-income producing asset, relatively more appealing. However, such a scenario could potentially detract from gold prices as risk and uncertainty recede, meaning less demand for gold as a safe-haven asset.
Balancing act: risk vs. reward in gold investment
According to the World Gold Council, these two competing factors may balance each other out, with gold prices potentially flat, assuming a soft landing is achieved. But, as the World Gold Council also notes, there is some upside potential. That potential upside, we believe, could come in the form of geopolitical risk.
A geopolitically unstable world
While investors have always considered geopolitical risk, the urgency was less in recent decades. As academic studies have shown, the end of the Cold War marked a more benign geopolitical environment, with conflicts declining.
However, this benign geopolitical environment, many fear, may now be coming to a close. With the global order potentially in flux, there is a sense that the world is now beset by growing tensions between major powers and, with it, greater risk of geopolitical shocks.
Gold: a safe haven amidst global uncertainty
Gold is a potential hedge against geopolitical shocks. This was exemplified by the outbreak of the Israel-Hamas conflict in 2023. Between 3% and 6% was added to gold's overall performance in that year, according to the World Gold Council. Historical data shows that gold has a strong correlation with geopolitical risk. As Mark Rosenberg, founder and CEO of GeoQuant notes, gold has a strong correlation with the GeoQuant Global Political Risk Index, sitting at around 0.72.
Correlations (day-on-day): 1 Jan 2017-7 Dec 2020
Source: Correlations (day/day) between GeoQuant geopolitical risk indicators
Election year uncertainties: gold's role amid political risks
2024 is also a year marked by major global elections, including those in the US, the EU, and India. The current US election poses a notable political risk to investors, with the prospects of Donald Trump's return to the White House or disputes over the validity of the election. As data from GeoQuant shows, US political risk is also very tightly correlated with gold.
The geopolitical case for gold in a shifting world order
But the current geopolitical environment adds a longer-term potential case for holding gold. Following Russia's invasion of Ukraine, the US responded with robust sanctions, leveraging the central role of the US dollar to the global financial system. Some have accused the US of "weaponising" the US dollar.
This, some argue, risks chipping away at the US dollar's global reserve status, as countries decide to diversify away from the dollar. Economic historian Barry Eichengreen has warned that the more the US uses the dollar to pursue its geopolitical interests, "the stronger the incentive for governments to invest in alternatives, and the faster the movement will be."
As a result, following sanctions on Russia in 2022, there has been growing talk of de-dollarisation. This has been spearheaded by Russia and China, alongside some members of the BRICS Group.
While the prospect of another currency replacing the global dominance of the US dollar looks unlikely, it is an added risk to consider in the face of geopolitical shocks and a world of increased international tensions. Gold, therefore, offers a potential hedge against this.
Central Banks and the rush to gold amid currency concerns
Indeed, in the absence of any other contender for reserve currency status, countries diversifying away from the dollar have opted for gold. Accordingly, central banks have been buying gold at record rates in recent years, with the People's Bank of China leading the way.
Potential geopolitical shocks, therefore, may further add to this sense of de-dollarisation, particularly if such shocks come in the form of growing US-China tensions. This will potentially be constructive for gold prices, adding to its appeal as a hedge.
Is inflation defeated? The enduring value of gold
Longer term, the case for gold as an inflation hedge should still be considered. The world's major economies have made significant progress in bringing down the inflation spikes experienced in 2021 and 2022. But are we now set to return to the low inflation environment of the past 30 years? There are reasons to believe not.
After all, a key driver of lower inflation was globalisation, with the entry of China and former Communist countries into the global economy in the 1990s. We are now potentially faced with a period of deglobalisation, with terms such as "reshoring" or "friendshoring" growing in popularity. Related to this, we have seen a return to industrial policy, such as with the US' Inflation Reduction Act. Such policies have the potential to be inflationary. So, if such an outlook is correct, gold and other commodities offer the potential to act as a store of value while inflation erodes the value of paper currency.
Gold's resilience in high inflation: a historical perspective
According to research from PGIM, while higher inflation periods proved challenging for equities and bonds, they have been positive for precious metals such as gold. PGIM's research paper 'Portfolio Implications of a Higher US Inflation Regime' compared returns of different asset classes in periods between 1973 and 2021 when inflation was above 4%. During such "high inflation regimes", real returns for stocks and bonds were negative while real returns for precious metals were positive.
During the 1973-2021 timeframe, across the periods of high inflation, the average inflation rate was 7.4%. Over those periods, precious metals returned, in nominal terms, 7.9%, and in real terms, 0.5%. If we are due a period of structurally higher inflation, gold is a potentially attractive asset class.
Historical return outcomes in low- and high-inflation regimes Q2 1973 – Q4 2021
Source: Datastream; Bloomberg; FactSet; PGIM Quantitative Solutions. Data as of 31.12.2021.
Source: Datastream; Bloomberg; FactSet; PGIM Quantitative Solutions. Data as of 31.12.2021.
Source: Datastream; Bloomberg; FactSet; PGIM Quantitative Solutions. Data as of 31.12.2021.
How to gain exposure to gold?
Investors looking for gold exposure may wish to consider the Royal Mint Responsibly Sourced Physical Gold ETC (RMAU). This ETC was the first financial product to be sponsored by the Royal Mint and the first gold ETC to be launched in partnership with a European Sovereign Mint.
All the gold within the ETC is custodied at the Mint rather than a bank's vault. Uniquely, retail investors can redeem for physical bars and coins, adding to its appeal as a safe-haven asset. Crucially, all the bars are London Bullion Market Association (LBMA) post-2019 responsibly sourced good delivery bars – the highest standard available.
A green twist: recycled gold bars
The ETC was also the first gold ETC to introduce recycled gold bars. Recycled gold is less carbon-intensive than mined gold, adding to its sustainable appeal.
Alternatively, investors may wish to consider gold mining stocks. Typically, in a bull market for gold, mining stocks have outperformed the price of the commodity itself.
ESG-focused gold mining investments
The AuAg ESG Gold Mining UCITS ETF (ESGO) offers exposure to an equal-weighted basket of 25 ESG-screened companies that are active in the gold mining industry. The gold mining ETF tracks the Solactive AuAg ESG Gold Mining Index, which focuses on companies that have low ESG risk characteristics.
The fund uses Sustainalytics to screen the mining universe for their ESG credentials, attributing a risk score based on their findings. Only the top 25 companies with the lowest ESG risk are included within the index.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
A short description of defensive stocks, and five of the best defensive stocks to watch in 2024. These are the five largest defensive FTSE 100 companies.
Source: Bloomberg
Shares GSK plc Market trend Diageo AstraZeneca Unilever
Written by: Charles Archer | Financial Writer, London
Defensive stocks are companies whose underlying business is expected to generate reliable revenue and profits regardless of the wider economic environment. This could be because they hold a dominant market position, hold a reputation for value for money, or even simply provide the bare necessities.
Accordingly, they are usually blue-chip companies benefitting from inelasticity of demand, making them ‘safe havens.’ In other words, if they raise prices to match inflation, consumers will continue to buy the products regardless.
Defensive companies rarely deliver significant capital growth, and therefore tend to underperform during bull markets, even underperforming passive investment in indices such as the FTSE 100. But in bear markets, they can appear more attractive for the consistent earnings.
By contrast, cyclical stocks are businesses which tend to outperform in the good times and fall sharply during downturns. These might include consumer discretionary stocks, miners, or oilers, all of which depend on a healthy economy to thrive.
Investing in defensive stocks — and particularly the timing of an investment — is not simple. If you reposition your portfolio too early, you might miss out on additional growth before a downturn becomes too severe. And when the economy recovers, defensive stocks can become undervalued as investors sell in favour of growth.
This makes buying these types of shares in a bull market and then selling them in bear market a popular contrarian investing strategy; though as always, this is harder to do than it sounds.
The following FTSE 100 dividend stocks can be considered to be some of the more popular defensive companies to own in the UK as many have a reliable history of paying out. But remember, past
performance is not an indicator of future returns.
The best defensive stocks to watch
These stocks are the largest defensive stocks on the FTSE 100, if you consider defensive sector companies to be only those which deal in healthcare, consumer staples, utilities or tobacco.
AstraZeneca
Unilever
GSK
Diageo
British American Tobacco
AstraZeneca
AstraZeneca is a multinational pharmaceutical titan which focuses on the development and commercialisation of novel prescription medicines. It works in areas such as cardiovascular, oncology, and respiratory medication — though has a presence across almost the entire development market.
Healthcare sector stocks remain highly defensive, and AstraZeneca is no exception.
In FY23 results, total revenue rose by 6% to $45.8 billion, despite a decline of over $3.7 billion in covid-19 medication sales. When excluding covid-10 medicines, revenue rose by 15%, with oncology revenue up by 21%. And the company boasted a core product sales gross margin of 82%.
CEO Pascal Soriot enthuses that he expects ‘another year of strong growth in 2024, driven by continued adoption of our medicines across geographies. Our differentiated and growing portfolio of approved medicines, global reach and rich R&D pipeline give us confidence that we will continue to deliver industry-leading growth.’
Excitingly, the company recently reported success in its Laura Phase III trial for its Tagrisso treatment, which showed a ‘statistically significant and highly clinically meaningful improvement’ in progression-free survival.
Unilever
Unilever is a multinational consumer goods company which produces a wide range of products including food, drinks, cleaning agents, beauty and personal care products. Some of its well-known brands include Dove, Ben & Jerry’s, and Hellmann's. While the company has arguably underperformed in recent years, it is working at a turnaround plan.
FY23 results saw underlying sales growth at the FTSE 100 defensive company rise by 7% — with a turnover of €59.56 billion. Encouragingly, the business’s underlying operating margin rose by 60bps to 16.7%.
CEO Hein Schumacher notes that ‘2023 Full Year results show an improving financial performance, with the return to volume growth and margins rebuilding. We are moving with speed and urgency to transform Unilever into a consistently higher performing business.’
GSK
GSK — formerly GlaxoSmithKline — is a global biopharma company which aims to positively impact the health of 2.5 billion people by the end of 2030. After spinning out consumer healthcare company Haleon, GSK’s R&D focus is on four therapeutic areas: infectious diseases, HIV, respiratory/immunology and oncology.
FY23 sales rose by 5% year-over-year to £30.3 billion, and by 14% when excluding covid-19 based sales. Top vaccine patent Shingrix, which protects against shingles, generated £3.4 billion alone. Further, adjusted operating profit rise by 12%, reflecting ‘strong sales ex COVID and higher royalty income, partly offset by increased investment in R&D and new product launches.’
With 71 vaccines and specialty medicines now in clinical development, CEO Emma Walmsley notes the company is ‘now planning for at least 12 major launches from 2025, with new Vaccines and Specialty Medicines for infectious diseases, HIV, respiratory and oncology. As a result of this progress and momentum, we expect to deliver another year of meaningful sales and earnings growth in 2024.’
Diageo
Diageo is a global leader in premium alcoholic drinks, controlling over 200 brands and with sales in nearly 180 countries. The company owns distilleries which produce 40% of all Scotch whisky including Johnnie Walker — and it also owns Guinness, Smirnoff, Baileys, Captain Morgan, Tanqueray and Gordon's.
In recent interim results, net sales declined by 1.4% to $11 billion, driven by an unfavourable foreign exchange impact and the widely reported net sales declines in Latin America and the Caribbean. Accordingly, operating profit fell by 11.1% to $3.3 billion — though this fall was just $205 million when excluding the LAC region.
CEO Debra Crew admitted that ‘the first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment…looking ahead to the second half of fiscal 24, despite continued global economic volatility, we expect to deliver improvement in organic net sales and organic operating profit growth at the group level, compared to the first half.’
British American Tobacco
British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. In terms of defensiveness, tobacco is a popular investing theme given the addictive nature of nicotine — though of course there is an ESG element to consider.
However, the company is contending with changing consumer preferences and government intervention. It wrote off circa £25 billion in value of its US-based cigarette portfolio in December 2023 as smoker rates fall — while the UK is planning to implement a ban on disposable vapes soon.
In full-year results, revenue dropped by 1.3% (though rose by 3.1% at constant rates). For context, ‘new category’ revenue grew by 21% — and revenue from non-combustibles now makes up 16.5% of the group’s overall revenue. Importantly, new categories achieved profitability in 2023 after years of losses and two years ahead of target, contributing £398 million to the profit pile.
CEO Tadeu Marocco notes that the ‘refined strategy commits us to 'Building a Smokeless World', a predominantly smokeless business, with 50% of our revenue from Non-Combustibles by 2035.I am confident that the choices we have made will drive our long-term success and create sustainable value for all our stakeholders.’
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Microsoft, Apple, Nvidia, Alphabet and Amazon could be the best AI stocks to watch next month. These stocks are the largest AI stocks in the US based on market capitalisation.
Source: Bloomberg
Shares Artificial intelligence Microsoft Amazon Nvidia Apple Inc.
Written by: Charles Archer | Financial Writer, London
2023 was arguably the year of AI — the NASDAQ Composite rose by 43% in the calendar year, driven by AI-fuelled bubbles in Nvidia alongside the rest of the so-called ‘magnificent seven.’
The year was immediately preceded by the launch of revolutionary — and crucially, free to use — ChatGPT, which was swiftly followed by a response from both Alphabet in the form of Bard (now Gemini) while many other tech companies soon followed.
In March 2023, the more advanced GPT-4 hit the market, which was swiftly followed by multiple AI-generated imagery tools — in one case, a realistic fake image of Pope Francis wearing a certain clothing brand circulated the internet, highlighting the openness of AI to abuse. That same month, tech leaders from across the US spectrum signed an open letter urging a pause on AI development for six months to assess the risks.
A couple of months later, ChatGPT gained internet connectivity — and was soon incorporated into Bing, Microsoft’s search engine. For context, Microsoft has a significant stake in ChatGPT’s parent, OpenAI.
Add in the constant stories of academic controversies, and the months-long Writers Guild of America strike over concerns that AI had the potential to replace human writers, and it’s easy to see how AI is already embedded throughout the global markets.
AI is already in use across a wide variety of real-world applications, including in entertainment, social media, art, retail, security, sport analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
Every Netflix recommendation, every supermarket rewards purchase, and every football match is analysed ever more relentlessly in order to provide more and better data. And analysts think the sector will only grow.
Of course, there will be casualties; whether Microsoft or Meta, virtually every tech company is engaged in layoffs. While much of this can be blamed on higher interest rates, arguably AI is already replacing some workers.
Best AI stocks to watch
There is some disagreement on what constitutes an AI stock — and whether it must be the main focus of a company or simply be a significant growth area. Here we have listed the top AI stocks in the US based on companies where AI is a growth area and ordered by market capitalisation.
Microsoft
Apple
Nvidia
Alphabet
Amazon
Microsoft
Microsoft is the original global computing power, so it makes sense that the US behemoth tops the list of the best AI stocks to watch — and is now the most valuable company in the world. The business already had a strong relationship with OpenAI prior to the ChatGPT launch and has invested $13 billion into the company since 2019.
In Q2 results, revenue increased by 18% year-over-year to $62 billion, while net income rose by 33% to $21.9 billion. CEO Satya Nadella enthuses that ‘we’ve moved from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.’
Most recently, the US titan has agreed a decade-long partnership with Vodafone to bring generative AI, digital, enterprise and cloud services to more than 300 million businesses and consumers.
Vodafone will invest $1.5 billion in customer-focused AI developed with Microsoft's Azure OpenAI and Copilot technologies and will replace its physical data centres with Azure cloud services — meanwhile, Microsoft plans to become an investor in Vodafone's managed IoT platform. On the other hand, Copilot has reportedly disappointed some early adopters.
Market Capitalisation: $2.90 trillion
Apple
Apple is in the middle of a sea change — it’s now topped Samsung as the largest smartphone maker by volume in the world but has lost its crown to Microsoft as the largest company on the planet.
Investor hopes for continued growth may lie in future innovation, and in particular, the long-awaited Vision pro headset which releases on 2 February in the US with a $3,499 price tag. For context, Meta’s Quest 3 can be reliably found on sale for circa £500.
However, the release of the Apple headset has been met with mixed results — and Meta CEO Mark Zuckerberg even released an informal video arguing that the cheaper device is not only better value for money, but better overall. In better news, Apple’s Keyframer AI tool has impressed new users with its ability to animate images using text descriptions.
In Q1 results, Apple saw revenue rise by 2% year-over-year to $119.6 billion, while quarterly earnings per diluted share increased by 16% to $2.18. CEO Tim Cook noted the company’s ‘all-time revenue record in Services’ and also enthused that the company’s ‘installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments.’
Market Capitalisation: $2.82 trillion
Nvidia
Nvidia is arguably the prime beneficiary of the AI boom, last week overtaking Alphabet in market capitalisation, and then eclipsing Amazon a day later. While this rise may be unsustainable, Q3 results saw revenue rise by 206% year-over-year and 34% quarter-on-quarter to $18.12 billion. CEO Jensen Huang now considers that ‘NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off.’
Barclays analysts remain particularly enthusiastic over the AI company, noting that ‘With supply constraints, customers are often using the entire NVDA platform in order to get priority shipments of accelerators.’ Q4 results are to be released on 21 February.
Market Capitalisation: $1.39 trillion
Alphabet
Google parent Alphabet may control 84% of the global search market share — but Yahoo was once king of search too. In addition to launching Bard, AI is already used across many of Google’s current functions. And it’s got at least two more AI-focused projects; its coding-focused Generative Language API, and DeepMind which it acquired in 2014.
In Q4 results, CEO Sundar Pichai enthused that ‘we are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.’ Quarterly revenue rose by 13% year-over-year to $86 billion.
Perhaps most importantly, Alphabet is now ready to launch Gemini 1.5. This is seen as the company’s serious answer to ChatGPT-4, with Pichai arguing that it ‘represents one of the biggest science and engineering efforts we've undertaken as a company.’
Then there’s its new custom-built AI chips to consider — Apple may win its crown back before too long.
Market Capitalisation: $1.79 trillion
Amazon
Amazon is well-known as the largest e-commerce retailer in the world, but the company is also a growing operator in the AI space. It offers several cutting-edge AI tools within its AWS business, including Code Whisperer and SageMaker — and clients can customise Amazon’s own machine learning model.
Of course, competitors have their owns services, but Amazon is by far the largest cloud computing company, with circa a third of the global market share.
Within its e-commerce offering, Amazon uses AI to identify consumer trends, manage inventory and also make personalised product recommendations — including targeted advertising. Then there’s the smart devices, including Alexa and the Fire tablets. CEO Andy Jassy enthuses that the AI opportunity will be ‘tens of billions of dollars of revenue for AWS over the next several years.’
Q4 net sales increased by 14% year-over-year to $170 billion.
Market Capitalisation: $1.58 trillion
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
What are some of the key events to watch next week?
Source: Bloomberg
Inflation Federal Reserve United States Interest Interest rates Interest rate
Written by: Yeap Jun Rong | Market Strategist, Singapore
Publication date: Friday 16 February 2024 08:15
This week’s overview
Despite some inflation jitters brought by a hotter-than-expected US consumer price index (CPI) print this week, Wall Street managed to regain its footing with the S&P 500 setting yet another record high. It seems like the risk rally has been left unscathed, as market participants recalibrated their rate expectations to be more in line with the Federal Reserve (Fed).
Japan’s Nikkei stole the limelight in Asia, briefly topping the 38,800 mark for the first time since January 1990 and leaving it just than 2% away from a new record high. The ASX 200 is flirting with previous record-high territory as well, while closer to home, the Straits Times Index (STI) has also seen renewed signs of life, rebounding by close to 4% since Wednesday to reclaim its 200-day moving average (MA).
As we head into the new week, here are six things on our radar.
US earnings season: Walmart, Home Depot, NVIDIA, Berkshire Hathaway
The US earnings releases next week will leave spotlight on Nvidia’s results as the key risk event for markets. With Nvidia accounting for the bulk of the market rally through 2023 and into 2024, high expectations are in place, which leaves little room for error.
Thus far, corporate earnings momentum has been robust. As of 16 February 2024, 79% of S&P 500 companies have released their results, with 80% delivering an earnings beat. This rate of outperformance towers above both the 5-year average (77%) and 10-year average (74%).
Source: Refinitiv
20 February 2024 (Tuesday, 8.30am SGT): Reserve Bank of Australia (RBA) meeting minutes
In its February meeting, the RBA maintained the official cash rate at 4.35% in line with expectations. The Bank observed that elevated interest rates are effectively moderating inflation and fostering a balanced supply-demand equilibrium.
"Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy."
The RBA highlighted its data-driven approach, maintaining a slight tightening bias.
"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out."
Analysts will meticulously analyse the minutes for insights into the RBA Board's deliberations in February, indicators for future policy adjustments based on its tightening stance for 2024, and any indications towards a shift to a more neutral policy outlook.
Source: Refinitiv
22 February 2024 (Thursday, 3am SGT): Federal Open Market Committee (FOMC) meeting minutes
In its January session, the Fed kept the Fed Funds target rate steady at 5.25%-5.50% for the fourth consecutive meeting. The Fed updated its policy stance, indicating rate cuts are on the horizon, though not immediate.
"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
Analysts will thoroughly examine the minutes for insights into the Fed's balance sheet strategies, potential timing for rate reductions, its perspective on recent US economic data exceeding expectations, and perceived risks to the global economy.
Source: Refinitiv
22 February 2024 (Thursday, 10.45pm SGT): S&P Global flash US Purchasing Managers' Index (PMI)
Last month, the US PMI numbers from S&P Global have revealed a stronger upturn in economic activities, with the manufacturing sector delivering its highest read since September 2022 at 50.7. Growth in services has been robust as well, delivering its fourth straight month of increase to 52.5. Overall, this brought the US composite PMI to a six-month high at 52.0.
The takeaway from the sub-components over the past months is one of lukewarm economic growth and waning cost pressures, which may be encouraging for soft landing hopes and impending rate cuts, currently priced to be leaning towards the June meeting. The upcoming read for February is expected to reinforce more of the same, with the manufacturing sector expected to ease to 50.1 from previous 50.7, while the services sector PMI may ease to 52.0 from previous 52.5.
Source: Refinitiv
22 February 2024 (Thursday, 5pm SGT): Hamburg Commercial Bank (HCOB) Eurozone PMI
While economic conditions in the Eurozone have been in contraction territory for the eighth straight month, there are slight signs of improvement lately. From its January PMI figures, the manufacturing sector has turned in a softer contraction at 46.6, while the services side continue to stabilise around the 47-48 range, following a sharp moderation since April 2022.
The improvement is set to continue into January, with expectations for manufacturing PMI to improve to 47.0 from previous 46.6. Services PMI is expected to turn in a lesser contraction as well at 48.7 versus 48.4. The still-subdued economic conditions may likely help in the current disinflation process, potentially raising optimism about getting inflation back to the European Central Bank (ECB)’s 2% target and support upcoming cuts, potentially in June.
Source: Refinitiv
23 February 2024 (Friday, 1pm SGT): Singapore’s inflation rate
Singapore’s headline and core inflation rate has seen a surprise uptick in December 2023, attributed to a faster pace of increase in private transport costs and services inflation. While the persistence in pricing pressures is likely to continue into early 2024 to reflect the latest Goods and Services Tax (GST) rate increase, the Monetary Authority of Singapore (MAS) and Ministry of Trade & Industry (MTI) still expect a “gradual moderating trend” in core inflation over 2024.
With that, authorities may look beyond any near-term uptick in inflation as long as it continues to fall within its projected range for 2024 (3%-4% for headline, 2.5%-3% for core). For the upcoming read, consensus is for Singapore’s headline inflation to tick higher to 3.9% from previous 3.7%.
Source: Refinitiv
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These are the five largest semiconductor stocks in the world by market capitalisation.
Source: Bloomberg
Shares Semiconductor Nvidia TSMC Integrated circuit Manufacturing
Written by: Charles Archer | Financial Writer, London
Reviewed by: Axel Rudolph FSTA | Senior Financial Analyst, London
Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
Semiconductors — or microchips — are essential to the functioning of electronic devices and have seen particular investor interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, or a hundred other applications, all of which are essential to 21st century living.
OpenAI’s revolutionary ChatGPT chatbot, the growing political importance of AI development, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022. It’s also worth noting that China and the US are both attempting to harm each other’s ability to use advanced semiconductors to develop AI technology; the US through export bans of certain semiconductors and China through export bans of certain critical minerals.
Best semiconductor stocks to watch
Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
For example, the Vaneck Vectors Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
In terms of individual shares, the five stocks listed below are widely considered to be the largest AI companies in the world by market capitalisation right now. However, analysts disagree on what exactly constitutes a semiconductor stock, and further, these may not be the best value opportunities.
Nvidia
Taiwan Semiconductor Manufacturing Company
Broadcom
Samsung
ASML
Nvidia
Nvidia shares have been on a dizzying rally to a $1.77 trillion valuation, rising by 1,720% over the past five years. This is more than the entire Chinese stock market.
The microchip behemoth was arguably the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
Q3 results were remarkable; revenue came in at $18.12 billion compared to the LSEG analyst consensus of $16.18 billion, a rise of 206% year-over-year. The al-important data-centre revenue rose by a whopping 279% to $15.51 billion — with half of this cash coming from cloud infrastructure providers including Amazon.
And Nvidia also expects to generate 231% revenue growth in Q4 — equivalent to $20 billion. On the other hand, it has a huge price-to-earnings ratio, alongside significant exposure to a faltering Chinese economy and rising Sino-US export tensions.
Q4 results are expected on 21 February.
Taiwan Semiconductor Manufacturing Company
While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to Taiwan Semiconductor Manufacturing Company. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
TSMC shares have did well in 2023, and have continued to rise in 2024, given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
However, Taiwan’s complex political status, including its relationship with China remains a long-term risk. The company recently announced plans to build a second semiconductor manufacturing plant in Japan.
Broadcom
Broadcom may not be the most fashionable name in the semiconductor world, but the company’s designs and manufacturing acumen underpins masses of data centre, networking, software, broadband, wireless, storage, and industrial markets.
The company’s 2023 fiscal year served up many highlights: revenue grew by grew 8% year-over-year to a record $35.8 billion, driven by investments in accelerators and network connectivity for AI by hyperscalers.
President and CEO Hock Tan enthused that ‘the acquisition of VMware is transformational. In fiscal year 2024 we expect semiconductor to sustain its mid to high single digit revenue growth rate, with the contribution of VMware driving consolidated revenue to $50 billion, and adjusted EBITDA to $30 billion.’ And the company delivered a record adjusted EBITDA margin of 85%, delivering $17.6 billion in free cash flow.
Broadcom shares now up by 115% over the past year.
Samsung
Samsung is a South Korean titan that is well-known as one of the world’s largest producers of electronic devices — ranging from appliances to digital media devices, semiconductors, memory chips, and integrated systems.
In recent fiscal 2023 results, it reported KRW 258.94 trillion in annual revenue and KRW 6.57 trillion in operating profit — and in the current quarter is focusing on improving profitability by increasing sales of high value-added products. The company further indicated that the second half of this fiscal year should show ‘more significant improvement.’
Samsung also signed a supply deal with Nvidia in September, and further collaboration remains a key opportunity in the new year.
ASML
ASML is a world leader in chip-making equipment. It’s a common misconception that the company actually makes semiconductors; it does not. It designs and manufactures the lithography machines that are an essential component in microchip manufacture and is therefore indispensable within the wider supply chain.
You could argue that ASML is an even more crucial to the manufacturing line than TSMC, but the stock has only risen by a comparatively small 43% over the past year.
In 2023 full-year results, the semiconductor stock delivered €27.6 billion in net sales, on a gross margin of 51.3% Accordingly, it delivered a significant €19.91 of earnings per share.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
easyJet, Royal Mail, PZ Cussons, Wizz Air and Crest Nicholson could be the five best FTSE 250 stocks to watch next month. These shares have been selected for recent market news.
Source: Bloomberg
Indices Shares Royal Mail EasyJet Inflation FTSE 100
Written by: Charles Archer | Financial Writer, London
The FTSE 250 has fallen by 2.1% year-to-date, 5.9% over the past year, and by more than 5,000 points since September 2021 to circa 19,100 points today. Unlike its older brother — the FTSE 100, whose constituents derive the majority of their income from overseas — the FTSE 250 is far more domestically focused.
And on the question on whether the UK will see the desired soft landing — the jury is still out.
In terms of fiscal policy, the spring budget is due to be announced on 6 March. Chancellor Jeremy Hunt has intoned that the scope for tax cuts is limited, a position also held by the International Monetary Fund.
On the other hand, a general election must be held within the next 11 months, the Conservatives are trailing in the polls, and tax cuts can be popular with voters.
In terms of monetary policy, there appears to be good news on the horizon. While the Bank of England has kept the base rate at 5.25% since September 2023, it now expects CPI inflation to fall to 2% by May. For context, Governor Andrew Bailey has specifically noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’
There is a danger that inflation could resurge later on in the year, as the impact of above-inflation pay rises and new supply chain challenges in the Red Sea poses fresh problems. But the markets are pricing in rate cuts in 2024, and this in theory will help the best FTSE 250 shares to grow.
Of course, this potential advantage must also be weighed against recession risk, making investing decisions increasingly more complex.
Top FTSE 250 shares to watch
These shares have been selected for recent market news and are not investment advice.
Crest Nicholson
PZ Cussons
Wizz Air
easyJet
Royal Mail
Crest Nicholson
Crest Nicholson's 2023 full-year results may make for poor reading — but for perspective, the UK housing market slowed drastically last year in response to rising mortgage costs and falling sales volume.
Consequentially, the housebuilder saw revenue fall by 28% year-over-year to £657.5 million, reflecting ‘weakness in the housing market.’ And completions fell steeply from 2,734 in 2022 to just 2,020 in 2023 — with pretax profit falling from £137.8 million to just £41.4 million in the year.
Profitability has been hit by increased costs at legacy sites including its Brightwells Yard regeneration scheme in Farnham, alongside a possible £13 million legal bill to settle costs arising from a 2021 fire at one of its apartment sites.
Issuing its third profit warning in six months, outgoing CEO Peter Truscott noted that these were ‘a disappointing set of results in FY23.’ However, the company is getting a new CEO in the form of Persimmon’s chief commercial officer Martyn Clark. And the Barratt-Redrow merger could spark further interest in the company — especially at its current valuation.
PZ Cussons
PZ Cussons is also in hot water. The consumer goods titan’s half-year results saw the stock slump as it slashed adjusted operating profit forecasts for the full year to between £55 million and £60 million — down from previous expectations of between £61.5 million and £68.2 million, and also a significant drop from the £73.3 million generated in fiscal 2023.
For context, revenue fell by 17.8% to £277.1 million between June and November — and the interim dividend was almost halved to just 1.5p per share.
The key problem is arguably the devaluation of the Naira (Nigeria’s currency) as the country is responsible for more than a third of the company’s revenue. However, PZ Cussons still retains significant brand labels including Carex and Imperial Leather, and the current weakness may feel attractive to investors who are prepared to accept the risks.
Wizz Air
Wizz Air's recent Q3 results made for better reading: revenue jumped by 16.8% to €1,064.8 million, while passenger ticket revenue increased by 19.2% to €553.9 million. Meanwhile, the airline saw Available Seat Kilometres (multiply available seats on any given aircraft by the number of kilometres flown on a given flight) rise by a significant 26.9% year-over-year. And it saw record traffic of 15.1 million passengers in the quarter compared to just 12.4 million the year before.
CEO József Váradi enthuses that ‘Wizz Air continued to deliver industry-leading capacity growth during the third quarter…while financial performance in the last quarter was materially affected by the suspension and reallocation of Israel capacity, we maintain our expectations for F24 net income.’
easyJet
easyJet's Q1 results also appeared to be positive — while it made a headline loss before tax of £126 million, this was an improvement on the £133 million of a year ago. Passenger numbers grew by 14%, and easyJet Holidays remain a highlight, with profit more than doubling to £30 million.
Perhaps most importantly in a forward-looking market, the airline reported ‘strong turn of year bookings with seats sold and yield ahead YoY.’ Further, is expects to see more than 25% year-on-year customer growth in easyJet Holidays for FY24.
CEO Johan Lundgren enthuses that ‘we delivered an improved performance in the quarter which is testament to the strength of demand for our brand and network. The popularity of easyJet holidays also continues to grow, with 48% more customers in the period.’ However, the airline did take a £40 million hit from the Middle East conflict.
Royal Mail
Royal Mail’s parent International Distribution Services has seen adjusted operating losses in its recent half-year results rise by 45% year-over-year to £319 million. This was driven by lower parcel volumes and the cost of the pay settlement agreed with the Communication Workers Union.
For context, the parent was fined £5.6 million recently for missing first and second class delivery targets over the 2022-23 financial year. However, regulator OFCOM is considering allowing Royal Mail to reduce its letter delivery service from the current six days a week to as little as three days a week — which could see profitability rise sharply.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
We look at market breadth and its uses for traders and investors when looking at stock market indices.
Source: Bloomberg
Indices Stock market index Market trend S&P 500 Stock market Trader
Written by: Chris Beauchamp | Chief Market Analyst, London
Publication date: Thursday 08 February 2024 14:48
Understanding Market Breadth
Market breadth is a powerful analytical tool used by traders to assess the health and direction of the overall market. It is a concept that looks at the number of stocks advancing versus those declining within a specific index such as the New York Stock Exchange (NYSE) or the Nasdaq. Market breadth is a form of technical analysis that provides insights into the underlying strength or weakness of market moves that are not always visible from the index's price chart alone.
When more stocks are advancing than declining, it indicates a bullish sentiment, suggesting that investors are confident and are driving up prices. This scenario is often seen as a confirmation of a broad market uptrend. On the flip side, a greater number of declining stocks points towards bearish sentiment, which could be indicative of a potential downtrend in the market.
Volume is a key factor that is sometimes included in market breadth indicators. The rationale behind this is that price movements with higher volume are deemed more significant as they represent a larger consensus among investors about the value of a stock.
The Significance of Market Breadth Indicators
Market breadth indicators come in various forms, each providing unique insights. These indicators are utilized to identify confirmation and divergence. Confirmation occurs when both the market index and the breadth indicator are moving in the same direction, which strengthens the case for the current trend. Divergence, however, is a situation where the market index and the breadth indicator move in opposite directions, signalling the possibility of a trend reversal.
One commonly used market breadth indicator is the Advance-Decline Index, or A/D line, which shows the net difference between the number of advancing and declining stocks. This indicator can be particularly telling; for instance, if the S&P 500 (S&P 500) is on an uptrend while the A/D line is trending downward, it could imply that the uptrend is not supported by a broad base of stocks and may soon weaken.
The New Highs-Lows Index is another tool that compares the number of stocks hitting 52-week highs to those touching 52-week lows. This indicator can suggest a bearish or bullish market depending on whether more stocks are at lows or highs, respectively.
Additionally, the S&P 500 200-Day Index measures the percentage of S&P 500 stocks trading above their 200-day moving average. A reading over 50% suggests that the market is generally bullish. Extreme readings on this indicator can also help traders spot overbought or oversold conditions.
The Cumulative Volume Index is an example of a volume-based indicator that adds up the volume from advancing stocks and subtracts the volume from declining stocks. The result is a cumulative total that helps traders gauge overall market sentiment.
Leveraging Market Breadth for Trading Decisions
Traders often rely on market breadth indicators to make informed decisions. These indicators can provide early warnings of a potential drop or rise in the index. However, it is crucial to note that market breadth indicators are not perfect timing tools. They can sometimes provide premature signals or fail to predict market reversals.
Market breadth should be one of the tools in a trader's arsenal, but not the only one. It is important to use these indicators in conjunction with other forms of analysis, such as price movements and economic data, to create a more comprehensive trading strategy.
The Role of Market Breadth in Investor Sentiment
Market breadth is closely tied to investor sentiment. A market where more stocks are advancing demonstrates confidence among investors, while a market with more declining stocks may indicate uncertainty or fear. By analysing market breadth, traders can get a sense of the prevailing mood in the market, which can be a valuable piece of information when making trading decisions.
Conclusion
Market breadth indicators are vital tools for traders looking to understand the underlying movements of major stock indices. These indicators can reveal divergences and confirmations that are not immediately apparent from price charts. While they should not be the sole basis for trading decisions, they provide valuable context that, when combined with price analysis and other market data, can help traders navigate the complexities of the stock market with greater confidence. By understanding and utilizing market breadth, traders are better positioned to identify potential trends and make trades that align with the overall market momentum.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Technical overview remains bullish, and retail traders’ short bias rises into heavy sell territory.
Source: Bloomberg
Indices Federal Reserve Market trend Nasdaq S&P 500 Technical analysis
Written by: Monte Safieddine | Market analyst, Dubai
Publication date: Thursday 08 February 2024 07:46
Sector performance puts tech on top
Most sectors finished yesterday's session in the green, with defensives generally at the bottom. On top were tech, consumer discretionary, and communication—the exact trio needed to power the tech-heavy Nasdaq 100 higher to a record close, outperforming both Dow 30 and S&P 500. It was a record close for key large-cap equity indices, with added attention on the S&P 500 as it approaches 5,000.
Light on data, heavy on Fed member speak
There wasn’t too much impactful economic data out of the US: the trade deficit for December was not far off forecasts, consumer credit change for the same month plummeted to just $1.56 billion after the big and unexpected jump for November, potentially signifying a tested consumer in the next phase. Weekly mortgage applications were up 3.7%.
But it was heavy on central bank member speak, with the Federal Reserve’s (Fed) Barkin on policy "very supportive of being patient to get where we need to get to," Kugler "pleased with the disinflationary progress thus far" expecting it to continue but any stalling in that progress means holding "the target range steady at its current level for longer," and Kashkari on interest rates expecting only "two or three cuts" and that there are "compelling arguments to suggest we could be in a longer, higher rate environment going forward."
Treasury yields finished the session only slightly higher, and so did real terms. Market pricing (CME's FedWatch) still anticipates the first rate cut in May after holding in March. More Fed member speak is on offer today, along with the 30-year auction after yesterday's decent 10-year results.
Nasdaq technical analysis, overview, strategies, and levels
Its price eventually went beyond its previous 1st Resistance level, stopping out contrarian sell-after-reversals and favoring conformist buy-breakouts, even if the follow-through beyond it didn't reach its previous 2nd Resistance. The higher highs and record close have kept most of its key technical indicators bullish, and its ADX (Average Directional Movement Index) still in trending territory. In all, it remains a bullish technical overview, with added caution for conformist strategies only when buying on dips to key support levels.
Source: IG
IG client* and CoT** sentiment for the Nasdaq
As for retail traders, they have upped their majority short bias to a heavy 67% from 63% yesterday morning, as fresher longs got enticed into closing out while shorts initiated. CoT speculators are an opposite heavy buy 65% according to last Friday’s report.
Source: IG
Nasdaq chart with retail and institutional sentiment
Source: IG
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 7am for the outer circle. Inner circle is from the previous trading day.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
These five FTSE 100 dividend shares could be some of the best to watch next month. They are currently the highest yielding on the index.
Source: Bloomberg
Indices Shares Dividend FTSE 100 Investment Stock market index
Written by: Charles Archer | Financial Writer, London
Down 1.4% year-to-date, the FTSE 100 has once again started the year by underperforming the S&P 500 and Nasdaq Composite. Of course, the index is famously viewed as a more conservative investment — filled with mature banks, oilers and miners which pay out dividends rather than focus on capital growth.
For context, the FTSE 100 rose slightly in 2022 as interest rates rose sharply, while the Nasdaq fell into a bear market. Over the longer term, the US stocks have historically outperformed the UK (though past performance is not an indicator of future returns), but the best FTSE 100 dividend stocks are often included in portfolios for the relatively reliable income.
Of course, many FTSE 100 companies deliver high dividend returns — though many are cyclical and the highest returns on offer may not be sustainable. It’s worth noting that popular dividend companies tend to attract significant investment in times of macroeconomic stress, which can become a problem as the economy improves and investors sell shares to seek more lucrative opportunities elsewhere.
On the monetary policy front, the Bank of England has once again kept the base rate at 5.25% — a rate it has kept since September 2023 — though now expects CPI inflation to fall to 2% by May. While it has signalled that rate cuts may be incoming, the Bank has also warned that it would need to see evidence that inflation was sticking to the target level first.
For context, the Bank still expects that inflation will rise back above the target range later this year due to robust pay growth and the fading impact from lower energy prices. Governor Andrew Bailey has specifically noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’
On the fiscal policy front, the government will issue the spring budget on 6 March. While Chancellor Jeremy Hunt has tried to make clear the scope for tax cuts is limited — especially after the recent IMF intervention — the political reality is that this may be the last major fiscal policy in place before the General Election.
Top FTSE 100 dividend shares to watch
These shares are the highest yielding on the index as of 5 February 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.
Vodafone
Phoenix Group
British American Tobacco
M&G
St James's Place
Vodafone
Today’s Vodafone quarterly update received a mixed reaction from the markets —total organic revenue grew by 4.7%, a significant improvement on the 1.8% growth of a year ago. The company remains one of the largest telecoms companies in Europe, and the current strategy may be delivering. Global services revenue is up by 8.8% while the B2B division grew by 5% year-over-year.
Further, the all-important German sales rose by 0.3% in the quarter. However, the company is actually losing customers in the region, with the revenue growth driven by price increases.
The key risk could remain the circa £55 billion debt mountain, which remains multiples of Vodafone’s market capitalisation. However, the company remains confident in previous guidance for future underlying earnings — and with a price to equity ratio of just 2, it may be attractive to value investors.
Dividend Yield: 11.2%
Phoenix Group
Phoenix Group's recent trading update saw the company deliver £1.5 billion of new business long-term cash generation in 2023, achieving its 2025 target much earlier than expected.
CEO Andy Briggs remains ‘delighted that Phoenix Group has delivered another year of strong organic growth in 2023, with increased new business net fund flows supporting us… we have achieved our 2025 new business long-term cash target two years early, reflecting the focus and investment we have put into our growth strategy.’
For context, new business net fund inflows rose by circa 80% year-on-year to £7 billion, driven by improved performances at the Standard Life branded Pension & Savings and Retirement Solutions segments.
Within pensions and savings, Phoenix’s workplace business saw net fund flows nearly double year-over-year to circa £4.5 billion. According to Briggs, this included ‘the transfer of one of the largest workplace schemes tendered in the UK market in recent years.’
Dividend Yield: 10.3%
British American Tobacco
British American Tobacco is due to report full-year results this week — but despite the high dividend, the company is once again bracing for poor numbers. Analysts consider that the company will deliver revenue growth of between just 3% and 5% due to difficulties in the US market. For context, the FTSE 100 tobacco company wrote off £25 billion of its US brand portfolio recently after acknowledging they have ‘no long-term future.’
Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — though may also drive out cheaper brands, especially if similar bans are introduced elsewhere.
Positively, the titan and competitor Philip Morris International have finally agreed an eight-year long resolution to long running patent disputes on their cigarette alternatives technology.
Dividend Yield: 9.8%
M&G
M&G plans to generate operating capital amounting to £2.5 billion by the end of 2024 and had achieved more than 50% of this three-year target, 18 months in. Moreover, its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year.
In half-year results, M&G increased its interim dividend by 5% to 6.5p per share. For context, it saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million.
CEO Andrea Rossi enthused that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March.’
Full-year results will be released in March.
Dividend Yield: 9%
St James’s Place
Shares in St James's Place have nearly halved over the past year, with the wealth manager now reporting that it saw only £5.1 billion in net inflows in the 2023 calendar year — compared to £9.8 billion in 2022.
However, it remains the largest wealth manager in the UK, with more than 900,000 clients and total funds under management now standing at a record £168.2 billion, up from £148.4 billion at the end of 2022.
New CEO Mark FitzPatrick plans to launch an efficiency review into the business within the next few months — partially driven by its October announcement to radically overhaul its fee structure in response to pressure from the Financial Conduct Authority, including scrapping exit fees to clients withdrawing from pension and bond investments early.
Dividend Yield: 8.2%
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
BoE's unexpected hawkish stance delays rate cut hopes, pressuring the FTSE amid revised lower unemployment rates and sustained inflation forecasts.
Source: Bloomberg
Indices Inflation Unemployment Technical analysis Bias DAX
Written by: Tony Sycamore | Market Analyst, Australia
Publication date: Tuesday 06 February 2024 06:08
Last week's Bank of England (BoE) meeting delivered a more hawkish-than-expected outcome, just as the FTSE was building towards another attempt to break higher.
While the BoE kept rates on hold at 5.25% as expected and removed its tightening bias, several hawkish elements stood out. Two policymakers voted for another 25bp rate hike. The bank's latest inflation forecasts showed inflation above target during H2 2024 and 2025. The BoE reiterated that "monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target", dampening hopes of imminent rate cuts.
The UK rates market, which did have a first BoE 25bp rate cut priced for June and a total of 100bp of rate cuts priced for 2024, responded by pushing back expectations of a first cut until August and now has only three rate cuts priced for 2024.
To make matters worse, revised data overnight showed the UK's unemployment rate was at 3.9% in the three months to November, the lowest level since April last year and significantly below the initial print of 4.2%. Cooling in the labour market is necessary to relieve inflationary pressures, and to enable the BoE to cut rates.
UK unemployment chart
Source: BoE
FTSE technical analysis
For the past eight months, the FTSE has been encapsulated below horizontal resistance at 7750ish and above support at 7200.
While the FTSE remains above the 200-day moving average at 7556, it remains positioned to set up another test of the horizontal and trendline resistance at 7730/60.
If the FTSE can see a sustained break above the aforementioned resistance band, it would warrant moving from a neutral bias to a bullish bias, looking for a test of the April 7936 high, with the scope to the 8047 high. Aware that while the FTSE remains below resistance at 7750ish, more range trading is likely.
FTSE daily chart
Source: TradingView
DAX technical analysis
In recent updates, we noted that due to the nature of the three-wave nature decline from the early Jan 17,123 high to the mid-Jan 16,464 low, it was likely a correction, and that the DAX should push to new highs in the 17,200/400 area.
While the DAX has yet to print a fresh cycle high, we wouldn’t be giving up on it just yet. Neither would we be chasing the market higher, as we remain of the view a 5-10% pullback is not too far away.
DAX daily chart
Source: TradingView
Source: Tradingview. The figures stated are as of 6 February 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Technical overview remains bullish, and in sentiment CoT speculators upping their heavy buy bias.
Source: Bloomberg
Shares Federal Reserve Market trend Unemployment Big Tech Technical analysis
Written by: Monte Safieddine | Market analyst, Dubai
Publication date: Monday 05 February 2024 07:39
Strong headline labor data
Plenty to digest last Friday out of the US: (1) Non-Farm Payrolls (NFP) for the month of January showed growth of 353K, smashing the roughly 180K estimates with higher revisions for the two months that preceded it; (2) the unemployment rate held at 3.7% instead of rising, but household survey divergence again as it showed a drop of 31K, and the U6 was a notch higher at 7.2%; (3) the labor force participation rate held at 62.5%; (4) the employment-population ratio was a notch higher at 60.2%; and (5) wage growth month-on-month (m/m) was a much hotter 0.6%, taking it higher year-on-year (y/y) to 4.5%, but came with weakness in overall hours worked.
UoM's figures generally improved, and the reaction to Big Tech’s earnings was net positive
There were also revised figures out of UoM (University of Michigan), with consumer sentiment improving to 79 and, more importantly, their inflation expectations holding for the 12-month at 2.9%, even if a notch higher for the five-year to the same level. And more from Big Tech in terms of earnings last Thursday: (1) Apple’s figures beat but sales in China were disappointing, and potentially weaker iPhone sales this quarter resulted in its share price declining; (2) Amazon saw decent gains after its earnings and revenue beat, which came with strong guidance for the current quarter; and (3) Meta was the clear outperformer, with its share price closing over 20% higher after managing to beat estimates, announcing a $50bn share buyback program, and its first-ever dividend payment.
Key stock indices enjoyed another positive weekly finish, while over in the bond market, we saw mixed performance for Treasury yields that finished lower on the further end (even after Friday’s jump) while the more policy-sensitive closed higher, and market pricing (CME’s FedWatch) with far more clarity on a hold this March.
Week ahead: Services PMIs, auctions, Fed member speak, and more earnings
As for the week ahead, it’s a relatively quiet one when looking at the data, and where it’ll be busier for some early on. We’ll get services PMIs (Purchasing Managers’ Index) later today out of the US from both S&P Global and ISM (Institute for Supply Management), both expected to remain in expansionary territory. There’s also the Federal Reserve’s (Fed) loan officer survey for the fourth quarter of last year to see how bank lending and conditions have been faring. A few auctions over the next three days with the 3-year tomorrow, 10-year on Wednesday, and 30-year on Thursday, and Fed member speak on all three days, earlier its chairman Powell in an interview on reducing “interest rates carefully” with a strong economy. We’ve got the weekly items like inventory data, mortgage applications, and claims, but that aside and on the earnings front in the US, there are a few notable ones including McDonald’s today, Eli Lilly and Uber tomorrow, Disney on Wednesday, ConocoPhillips on Thursday, and PepsiCo on Friday.
Dow technical analysis, overview, strategies, and levels
Its previous weekly 1st resistance level might have initially held, favoring contrarian sell-after-reversals, but the moves after going past it and stopping them out give conformist buy-breakouts the eventual win. The higher close keeps key technical indicators green, and so too does its overview as bullish in both weekly and daily time frames.
Source: IG
IG client* and CoT** sentiment for the Dow
IG clients remain in extreme sell territory and have raised that bias to start the week off at 81%. Although is lower than the more extreme levels seen prior, there will likely be further caution on shorts getting in until a more pronounced pullback in price is witnessed. CoT speculators are an opposite majority buy and have raised their heavy long bias again, this time to 73% (longs 6,790 lots, shorts 21), momentum likely raising it while shorts generally holding.
Source: IG
Dow chart with retail and institutional sentiment
Source: IG
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of this week for the outer circle. Inner circle is from the start of last week.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients
With thousands of ETFs to explore, here are five of the best to watch from around the world. These ETFs are chosen for their significant popularity among investors and constant media coverage.
Source: Bloomberg
Forex Shares Commodities ETF Investment S&P 500
Written by: Charles Archer | Financial Writer, London
What's on this page?
Top Global ETFs to watch
How to trade or invest in top global ETFs with us
Investing using Exchange Traded Funds (ETFs) is an increasingly common strategy, for a variety of reasons. ETFs allow you to buy into a ‘basket of securities’ based on a specific sector or investing approach, without having to buy the assets individually.
This approach gives investors increased exposure to a diversified range of investments in a single trade, with the ability to manage risk by trading futures just like an individual stock. Further, ETFs boast the trading liquidity of equity unlike the rigidity of a mutual fund. Other than the convenience, passive ETFs usually offer low expense ratios and lower broker commissions than buying the constituent assets individually.
Naturally, ETFs can contain all sorts of investments, including stocks, commodities, and bonds — sourced from all over the world. With inflation falling amid analyst hopes that interest rates will start to tumble in H2 2024, investors are nevertheless seeking the diversification on offer in some of the best global ETFs to protect their portfolios in case of a hard landing.
It’s worth noting that an ETF will only ever perform as well as its underlying constituents. We do offer an ETF screener that can help to inform your investing decisions — but these five could be some of the best global ETFs to watch as a starting point.
Top global ETFs to watch
The following five ETFs have been chosen for their widespread popularity among investors. They are not necessarily the top performing ETFs but are often found in portfolios. Past performance is not an indicator of future returns.
Vanguard FTSE All-World UCITS ETF
iShares Core S&P 500 ETF
Invesco Physical Gold ETC
Vanguard FTSE Emerging Markets ETF
iShares UK Dividend UCITS ETF
Vanguard FTSE All-World UCITS ETF
The Vanguard FTSE All-World UCITS ETF is arguably the most ‘global’ ETF on the market today, as well as being one of the most popular ETFs in the world. It aims to track the performance of the FTSE All-World index, made up of large and mid-sized companies across both developed and emerging markets.
This index provides exposure to almost 4,000 companies from across 50 countries at a low annual fee, and arguably offers possibly the most diversified portfolio of stocks possible. On the other hand, it does have a geographical bias, with 60% of companies in the ETF based in the US. And because of the relative size of the US tech giants, the FTSE All-World’s biggest sector is usually technology — which can be volatile.
And over the longer term the index is usually beaten by the S&P 500. But the perceived safety of diversification can be attractive — investors get exposure to some emerging markets, the capital gains of the AI-fuelled US tech bubble, and a modicum of protection from single country downturns.
iShares Core S&P 500 ETF
There are many S&P 500 tracker ETFs on offer, but the iShares Core S&P 500 UCITS ETF is one of the most popular among UK investors.
This passive ETF attempts to, as closely as possible, follow the performance of the S&P 500 index, which tracks the performance of the largest 500 companies listed in the United States bymarket capitalisation. This includes market titans such as Microsoft, Apple, Tesla, Amazon, and IBM — but also smaller mid-sized companies that could grow into the blue chips of tomorrow.
The ETF has an expense ratio of just 0.03%, and the S&500 has delivered average annual returns of 10.15% since 1957. This makes the tracker an exceptionally popular ETF for SIPP holders looking to benefit from long-term capital gains growth — and though past performance is no guarantee of future success, S&P 500 index investing is often considered to be a lower-risk investing strategy.
Indeed, legendary investor Warren Buffett has often argued the index is the only investment the average person needs for retirement savings — though others disagree. It’s worth noting that that this particular ETF has lower liquidity than others on the market with higher expense fees, so is better suited to long-term investors.
Invesco Physical Gold ETC
The Invesco Physical Gold ETC seeks to replicate the performance of the London Gold Market Fixing Ltd PM Fix Price/USD, with the fund backed one-to-one with gold bullion held by JP Morgan Chase in London bank vaults.
Gold remains at circa $2,000/oz levels, as the traditional real asset inflation-hedge, which preserves purchasing power and acts as a protective asset in times of severe market stress, once again performs admirably in this inflationary environment.
For context, central banks bought a record 1,136 tons of the precious metal in 2022 and continued to buy record amounts in 2023. And with the US dollar likely to fall in value should rates start to come down, gold could on to another record high in 2024.
Vanguard FTSE Emerging Markets ETF
The Vanguard FTSE Emerging Markets ETF tracks the FTSE Emerging Markets All Cap China A Inclusion Index — which, as the name suggests, tracks the performance of equities issued by companies in emerging markets. This includes China, Brazil, Taiwan, and South Africa.
Vanguard notes that the index has ‘high potential for growth, but also high risk; share value may swing up and down more than that of stock funds that invest in developed countries.’ Its top three holdings include the market leading Taiwan Semiconductor Manufacturing Company Limited, alongside Chinese platform stock Tencent, and e-commerce titan Alibaba.
The ETF does have a low expense fee at 0.08%, but can be regarded as much higher risk than others on this list.
iShares UK Dividend UCITS ETF
The iShares UK Dividend UCITS ETF focuses on some of the best London-listed companies — those which boast the highest dividend yields.
Instead of investing in all the companies on the FTSE 100 or FTSE 250 (a common approach), it instead offers diversified exposure to the top 50 UK companies within the FTSE 350 with the highest dividend yield (excluding investment trusts).
HSBC, Rio Tinto, and Legal & General are its top holdings, alongside other miners, banks, and several defensive stocks with a reliable history of dividend pay-outs. Of course, there are risks — dividends are not guaranteed and cyclical companies like Rio Tinto or Persimmon can see their dividend yields fall in poor years.
How to invest and trade in the best global ETFs with us
You can choose to either invest in an ETF, or to trade it. When you invest, you own the underlying shares in the ETF outright and are entitled to any dividends that are paid; you also make a profit if the ETF price appreciates. With us, you can buy ETFs using a share dealing account.
Learn about the difference between trading and investing.
Trading an ETF enables you to speculate on the future share price’s movement of an ETF – whether you believe it will fall (in which case you’d go short) or rise (in which case you’d go long).
You would not own the underlying ETF and won’t receive any dividends, but you can use leverage. Leverage enables you to open a larger position with a small deposit (called a margin), which can help you stretch your capital a little further. However, total profits and losses could easily exceed your margin amount, as they are calculated on total position size, so you’re advised to trade carefully.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Amazon is poised to reveal its Q4 2023 earnings on February 2nd, 2024. Anticipated to showcase a robust increase in EPS and strong sales growth, the report is eagerly awaited by investors.
Source: Bloomberg
Shares Amazon Amazon Web Services E-commerce Cloud computing Revenue
Written by: Hebe Chen | Market Analyst, Melbourne | Publication date: Wednesday 31 January 2024 05:02
Amazon earnings date:
The tech giant is scheduled to disclose its Q4 2023 earnings on 2 February at 8.00am AEDT, following the US market closure.
Amazon Q4 expectations and key observations
The anticipated earnings report for the upcoming quarter indicates a substantial improvement in earnings per share (EPS), projected to be $0.79. This represents a significant increase from the corresponding quarter in 2022, where the EPS was only $0.12 per share.
Regarding revenue, Amazon's Q4 guidance from the previous earnings report suggests that net sales are expected to range between $160.0 billion and $167.0 billion. This indicates a growth rate of 7% to 12% compared to the fourth quarter of 2022, marking a double-digit increase from the preceding quarter.
Furthermore, the forecast for operating income is estimated to be between $7.0 billion and $11.0 billion, a notable rise from the $2.7 billion reported in the fourth quarter of 2022.
FY24 Q2 expectations
Source: Amazon
AWS and online advertising
Focusing on key business segments, Amazon's premier cloud service, AWS, is forecasted to continue its robust growth trajectory. AWS's sales are expected to increase by 15% year-over-year in Q4, slightly higher than the 12% growth observed in the prior period, while maintaining a remarkable operating margin above 30%. Despite facing stiff competition from Microsoft’s Azure and Google Cloud, Amazon's dominance in cloud services has been reinforced by the surge in AI, with existing customers launching generative AI workloads on AWS.
Another area under scrutiny in the upcoming report is Amazon's online advertising venture. This sector reported revenues of $12.06 billion in Q3, a 26% increase year-over-year. With Q4 encompassing the peak holiday shopping season, an influx of shoppers to Amazon's e-commerce platform is likely, further bolstering its retail and advertising revenues.
Analyst ratings and future projections
In 2023, Amazon's stock significantly outperformed the S&P 500, achieving a remarkable 63% annual gain and affirming its status among the top performers of the 'Magnificent Seven' club. Emerging from the turmoil of 2022, the retail behemoth has impressed investors with its solid growth and optimistic future prospects. Not surprisingly, based on the IG platform’s TipRanks rating, Amazon boasts a smart score of 9 out of 10.
Consensus among all 37 analysts surveyed in the last three months has been unanimous, with Amazon rated as a 'buy.'
Analyst ratings
Source: IG
Technical analysis
From a technical perspective, Amazon’s stock prices are advancing towards the early 2022 peak, with the $160 mark posing as a significant barrier and test ahead of the earnings announcement.
Looking at the long-term trend, the stock's price trajectory remains strong. Particularly, the reversal of the head-and-shoulders pattern suggests potential for further gains once the pattern’s neckline, also around the $160 mark, is breached.
In the short term, immediate support is identified at $155, with any further downturn potentially bringing the 20-day SMA into focus.
Amazon weekly chart
Source: Tradingview
Amazon daily chart
Source: Tradingview
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Technical overview remains bullish ahead of the fundamental events, sentiment showing CoT speculators in heavy buy while retail traders are extreme sell.
Source: Bloomberg
Shares Personal consumption expenditures price index Market trend Big Tech Speculation Day trading
Written by: Monte Safieddine | Market analyst, Dubai | Publication date: Monday 29 January 2024 07:47
Goldilocks economy narrative aided by data
It was mostly about US pricing data last Friday, with the PCE (Personal Consumption Expenditures) price index showing a year-on-year (y/y) growth of 2.6% for December and a month-on-month (m/m) increase of 0.2%, both as anticipated. When removing food and energy, the growth showed 2.9% and 0.2%, respectively. Personal income for the same month was up 0.3%, but spending was up a stronger 0.7%, with the difference taken from savings and/or added debt. This followed last Thursday’s advance GDP for the fourth quarter of last year, showing a healthier 3.3% with the price index a welcoming miss at 1.5% (Atlanta Fed’s GDPNow estimate for this quarter is at 3%), and durable goods orders in December were unchanged.
It was another week of gains for the stock market, but tech didn’t outperform this time around. As for Treasury yields, they finished the week little changed, while higher in real terms on the further end of the curve, and market pricing (CME's FedWatch) is near a coin toss on cut vs hold this March.
Week ahead: FOMC, labor data, QRA, and more earnings from big tech
As for the week ahead, it’s a light start in terms of data but picks up with housing price data tomorrow (from FHFA and S&P/CS), where it’s been a story of ongoing month-on-month (m/m) and year-on-year (y/y) growth, even if not matching forecasts at times. This comes after the jump in both new and pending home sales readings late last week for the month of December. We'll also see the Conference Board's (CB) consumer confidence, which improved sizably last time, and job openings from JOLTS, which missed for November but are still well above pre-pandemic levels.
The labor market will remain in focus thereafter, with ADP’s non-farm estimate on Wednesday and the employment cost index for the fourth quarter. Both claims and Challenger’s job cuts will be released on Thursday, leading up to the market-moving Non-Farm Payrolls on Friday. Expectations are for growth of over 170K for the month of January, and the unemployment rate to rise a notch to 3.8%, with a focus on whether the divergence worsens between the establishment and household surveys.
Manufacturing PMIs (Purchasing Managers’ Index) will be released on Thursday from both S&P Global and ISM (Institute for Supply Management). Though preliminary figures for the former showed a surprise expansion, the narrative is expected to remain one of contraction only for the latter.
In terms of central bank action, don’t expect any from the Federal Open Market Committee (FOMC) this Wednesday, as they are expected to hold. However, both investors and traders will likely be searching for any clues of a further change in tone after December’s ‘pivot party’.
The earnings front gets serious with tech giants releasing their figures: Microsoft and Alphabet on Tuesday, and Apple, Amazon, and Meta on Thursday. While Nvidia’s figures are still weeks away, we'll have to make do with AMD tomorrow and Qualcomm the day after.
For the bond market, there are the Treasury’s quarterly refunding announcements (with funding details today and the maturity breakdown on Wednesday).
Dow technical analysis, overview, strategies, and levels
The intraweek highs were beneath its previous weekly 1st resistance level and meant a lack of a play on the weekly time frame for conformist and contrarian strategies, but where key technical indicators are still bullish and its overview unchanged as ‘bull average’. As for the daily time frame late last week, Friday's close above Thursday's 1st Resistance level with the intraday highs offering enough for conformist buy-breakout strategies even if it didn't reach its daily 2nd Resistance level, the overview there matching the weekly.
Source: IG
IG client* and CoT** sentiment for the Dow
As for sentiment, CoT speculators are still in heavy buy territory raising it a notch to 70% (longs +262, shorts -516), but still below the majority long sentiment levels witnessed a few weeks ago. IG clients have generally opting not to short into price gains at these levels, and falling back from extreme sell 86% at the start of last week to 79%.
Source: IG
Dow chart with retail and institutional sentiment
Source: IG
*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of this week for the outer circle. Inner circle is from the start of last week.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
The Week Ahead
Read about upcoming market-moving events and plan your trading week
ESTABLISHED 1974313,000+ CLIENTS WORLDWIDE17,000+ MARKETS
Week commencing 29 January
Chris Beauchamp's insight
Earnings season reaches full flow this week, as the rest of the Magnificent 7 Big Tech firms report – Apple, Meta, Alphabet, Amazon and Microsoft all populate the week and will be the key focus for investors around the globe.
In addition to this, the Federal Reserve (Fed) will also issue its latest rate decision, though no change is expected. The Bank of England (BoE) also gets in on the act, and after the latest UK inflation reading it might find itself having to err on the hawkish side.
Gross domestic product (GDP) readings from the eurozone come through this week, with the German reading on Wednesday likely to command particular attention.
Finally, the week is rounded off by the monthly US non-farm payrolls report, with the ADP report preceding it as usual. All in all, it promises to be a busy time for investors.
Economic reports
Weekly view
Monday
11.30pm – Japan unemployment rate (December): rate to hold at 2.5%. Markets to watch: JPY crosses
Tuesday
10am – eurozone GDP (Q4, flash): growth expected to be -0.1% QoQ and 0.4% YoY. Markets to watch: EUR crosses
3pm – US consumer confidence (January): index expected to rise to 111.5. Markets to watch: USD crosses
Wednesday
12.30am – Australia CPI (Q4): price growth forecast to be 4.3% YoY and 0.8% QoQ, from 5.4% and 1.2% respectively. Markets to watch: AUD crosses
1.30am – China PMI (January): manufacturing PMI expected to rise to 49.2 from 49, and non-manufacturing PMI to rise to 50.5 from 50.4. Markets to watch: CNH crosses
9am – German GDP (Q4, flash): GDP forecast to shrink 0.3% QoQ and 0.8% YoY. Markets to watch: EUR crosses
1pm – German CPI (January, preliminary): prices to rise 2.3% YoY and fall -0.4% MoM, from 3.7% and 0.1% respectively. Markets to watch: EUR crosses
1.15pm – US ADP employment report (January): 130K jobs expected to have been created, from 164K last month. Markets to watch: US indices, USD crosses
2.45pm – US Chicago PMI (January): index expected to rise to 47. Markets to watch: USD crosses
3.30pm – US EIA crude oil inventories (w/e 26 January): stockpiles fell by 9.2 million barrels in the previous week. Markets to watch: Brent, WTI
7pm – FOMC rate decision: rates expected to remain at 5.5%, but any hints around future policy direction could drive market volatility. Markets to watch: US indices, USD crosses
Thursday
1.45am – China mfg PMI (January): PMI forecast to hold at 50.8. Markets to watch: CNH crosses
10am – eurozone inflation (January, flash): prices expected to rise 2.2% YoY and fall 0.9% MoM, from 2.9% and 0.2% respectively. Core CPI to slow to 3.3% from 3.4%. Markets to watch: eurozone indices, EUR crosses
12pm – Bank of England rate decision: no change in policy expected, and with the recent rise in UK inflation the MPC votes may reflect renewed caution on the prospect of any rate cuts in the near future. Markets to watch: GBP crosses
1.30pm – US initial jobless claims (w/e 27 January): claims to rise to 218,000. Markets to watch: USD crosses
3pm – US ISM manufacturing PMI (January): index expected to shrink to 47.6. Markets to watch: USD crosses
Friday
1.30mp – US non-farm payrolls (January): payrolls to grow by 162,000, down from 216,000 last month. Unemployment rate to hold at 3.7% and average hourly earnings to rise 0.3% MoM and 4% YoY, from 0.4% and 4.1%. Markets to watch: US indices, USD crosses
Company announcements
Monday
29 January
Tuesday
30 January
Wednesday
31 January
Thursday
1 February
Friday
2 February
Full-year earnings
Sthree
GSK,
H&M
Roche,
Deutsche Bank,
BNP Paribas
Half/ Quarterly earnings
Ryanair
Diageo,
Pfizer,
General Motors,
AMD,
Microsoft,
Alphabet
Boeing
Apple,
Peloton,
Meta,
Amazon
Chevron,
Exxon Mobil
Trading update*
Smith & Nephew
Pets at Home,
Diversified Energy Co,
AO World,
Saga
Entain
BT,
Shell,
Glencore,
Anglo American
Dividends
FTSE 100: None
FTSE 250: SSP Group, Paragon Banking, Edinburgh Inv. Trust
Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
Index adjustments
Monday
29 January
Tuesday
30 January
Wednesday
31 January
Thursday
1 February
Friday
2 February
Monday
5 February
FTSE 100
Australia 200
Wall Street
0.8
US 500
0.39
0.16
0.26
0.21
0.08
0.14
Nasdaq
1.58
0.30
0.60
0.46
0.71
Netherlands 25
0.3
EU Stocks 50
0.8
China H-Shares
Singapore Blue Chip
0.15
Hong Kong HS50
South Africa 40
Italy 40
Japan 225
2.0
