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MongiIG

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  1. 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.
  2. 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.
  3. The start of China's annual National People's Congress saw a muted response, with the Hang Seng index falling over 2% after Beijing set a modest 5% growth target for 2024 without any major fiscal stimulus measures. However, mainland Chinese shares rose amid suspected state-backed buying of exchange-traded funds tracking the CSI 300 index. Global markets are bracing for an eventful week with Fed Chair Jerome Powell's testimony, the US jobs report, the ECB's policy decision, and the UK budget. Investors are continue to search for cues on the Fed's future rate hike path, with the Atlanta Fed president suggesting no pressure to ease policy amid sticky inflation risks.
  4. The European Central Bank (ECB) is expected to take another significant step in normalizing its monetary policy stance at its upcoming March 7th meeting. Source: Bloomberg European Central Bank Inflation Central bank Macroeconomics Monetary policy Wage Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Monday 04 March 2024 13:49 March Meeting to Mark Shift Towards Neutral Policy While recent economic data has been relatively resilient, concerns about growth and the inflation outlook persist, leaving the timing and pace of potential rate cuts still uncertain. At next week's gathering, the European Central Bank (ECB) is poised to move from its current restrictive policy stance towards a more neutral position. The new staff projections are anticipated to revise down growth forecasts for 2024 but leave the 2025 and 2026 outlooks broadly unchanged. Critically, inflation for 2025 is projected to be revised down to the 2% target. Rate Cut Timing Hinges on Wage and Inflation Developments While the new projections may not definitively rule out rate cuts at a particular meeting, market consensus remains that the first 25 basis point reduction will occur at the June meeting rather than April. Recent economic data has not been judged weak enough yet to bring forward easier policy. The ECB has repeatedly stated it wants to ensure inflation returns sustainably to the 2% target over the medium term before cutting rates. As such, the path of wage growth will be closely monitored given its pivotal role in the inflation outlook. Market Repricing but Muted Reaction Expected Throughout February, markets repriced policy easing expectations significantly. They now anticipate around 87 basis points (bps) of ECB rate cuts for 2024, with 82bps coming in the second half of the year after an initial 25bps move in June. This repricing brings market expectations more in line with the ECB's own outlook. Despite the recent adjustment in rate forecasts, a muted market reaction is anticipated following next week's meeting, as current pricing is seen as relatively well-aligned with ECB communications. Better macro data helps to calm nerves Recent macro data has afforded the ECB some breathing room ahead of kicking off rate cuts. While economic growth is stagnating, the region is not facing an outright contraction. Moreover, inflation expectations remain anchored and employment increased during Q4 2023. The ECB will be weighing these resilient factors against persistent underlying inflationary pressures stemming from the tight labour market and the uncertainty around how wage gains will ultimately pass through to consumer prices. 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.
  5. 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.
  6. 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
  7. Gold price enjoys surge, while WTI crude price recovers $80 and silver price moves higher Gold has returned to its previous highs from December, while oil is back at levels last seen in late December. While silver has rebounded, it lags far behind gold. Source: Bloomberg Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Monday 04 March 2024 11:44 Gold soars Gold prices took off on Friday, rallying to their highest level since late December. This puts the price squarely on a bullish footing, continuing the recovery from the lows of mid-February. A close above $2088.60, the high from late December, leaves the price on course to test the record intraday high from early December. A reversal back below $2035 would be needed to put this bullish outlook on pause. Source: ProRealTime WTI back at $80 The recovery from the December low continues, and now the price is testing $80 once more. A close above $81 would put the price back above the November and December high, and then open the way to further gains, towards $84. A reversal back below $76 is needed to negate tis near-term bullish view. Source: ProRealTime Silver rallies, but lags behind gold While gold soars, silver has managed only a modest rally. The consolidation pattern of the year so far continues; rallies towards $23.50 tend to peter out, while on the downside the buyers have defended $22. Notably last week’s low found support at a higher low, which could provide a foundation for a new push on above $23.50. Source: ProRealTime
  8. FTSE 100 stalls as Nikkei 225, S&P 500 hit yet more record highs Outlook on FTSE 100, Nikkei 225 and S&P 500 ahead of Powell testimony and US labour data. Source: Bloomberg Written by: Axel Rudolph FSTA | Senior Financial Analyst, London Publication date: Monday 04 March 2024 11:54 The Nikkei 225 made yet another record high above the 40,000 mark The Nikkei 225 has once more topped the psychological 40,000 mark, having already done so on Friday, boosted by tech/AI stocks like Tokyo Electron amid a shift towards tech nearshoring and foreign funds leaving Chinese stock markets for Japanese ones. However, risks such as China's economic fluctuations, potential yen strengthening, and changes in the Bank of Japan's policy could impact the index's upward trajectory as could the currently highly overbought levels of the index. A minor retracement lower may take the Nikkei 225 back towards its 23 February high at 39,638 below which lies the 1989 previous record high at 38,957. Source: ProRealTime FTSE 100 is finding it difficult to reach the 7,710 to 7,769 region The FTSE 100’s recovery from last week’s 7,596 low is finding it difficult to reach the early February high at 7,710. This level and the 23 February high at 7,717 need to be exceeded for the more significant 7,750 to 7,769 resistance area to be reached. It consists of the December-to-February highs. Minor support sits between Friday’s low and the 55-day simple moving average (SMA) at 7,645 to 7,640. Source: ProRealTime S&P 500 makes yet another record high The S&P 500 surged higher again towards the end of last week and came close to the 5,150 region, hitting yet another record high ahead of this week’s Fed Chair Jerome Powell testimony and US labour data. Further up lies the 5,200 zone while support can be spotted around the 23 February high at 5,111. Below it lies the February-to-March tentative uptrend line at 5,088. Source: ProRealTime
  9. The dollar could be tested later this week with the release of US jobs data, including the ADP employment change on Wednesday. Written by: Angela Barnes | Financial presenter/producer, London Publication date: Monday 04 March 2024 11:17 US private businesses are forecast to have hired 150,000 workers in February, after 107,000 job creations in January. Also on Wednesday, there will be JOLTs job openings. The number of job openings is thought to have dropped to 8.895 million in January, 131,000 fewer than in December. On Friday, Non-farm payrolls. Early expectations are for 200,000 job creations. Last month, the US economy added 353,000 jobs in January, after an upwardly revised 333,000 in December, and way above market forecasts of 180,000. (AI Video Summary) The US Dollar This week, there will be important news about jobs in the United States that could affect the value of the USD. On Wednesday, there will be two reports called the ADP employment change and the Jolt's job openings. The Automatic Data Processing (ADP) employment change will show how many people were hired by private businesses in February. In January, there were 107,000 new jobs created, and the forecast for February is 150,000 new jobs. The Jolt's job openings report will show how many job openings there were in January compared to December. It is expected that there will be a decrease of 131,000 job openings. Non-farm payrolls data Then on Friday, there will be a report called the non-farm payrolls data. This report will give an early estimate of how many jobs were created in February. In January, the US economy added 353,000 jobs, which was better than what people expected. The forecast for February is 200,000 new jobs. All of these job reports are important because they can give us clues about what the Federal Reserve might do with interest rates, which can affect the value of the US dollar. The Federal Reserve Right now, the US dollar is down a little bit, about 0.02%. Traders are watching closely what Jerome Powell, the Chair of the Federal Reserve, says when he speaks to Congress. They are also watching the jobs data. All of this information will help traders understand what the Federal Reserve might do with interest rates, this in turn can affect how strong or weak the US dollar is compared to other currencies. 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.
  10. The AUD/USD dropped 0.58% to .6525, hit by poor Australian economic data and falling commodity prices, amidst dovish signals from the RBNZ and looming concerns over Australia's economic outlook. Source: Bloomberg Forex AUD/USD GDP United States dollar Australian dollar Australia Written by: Tony Sycamore | Market Analyst, Australia Publication date: Monday 04 March 2024 06:27 The faltering three-week rally in the AUD/USD concluded last week as it closed 0.58% lower at .6525, despite the US dollar index, the DXY, also losing ground. The decline in the AUD/USD was prompted by softer-than-expected Australian inflation and retail sales data. This was compounded by an intensification in offshore headwinds, as crucial commodity prices, including iron ore, dipped, and the Reserve Bank of New Zealand (RBNZ) indicated a reduced likelihood of rate hikes and an earlier commencement of rate cuts, which sent the Kiwi dollar tumbling lower. Adding to the pressures on the AUD/USD, data this week is expected to reveal that growth in Australia during Q4 2023 was below par amid subdued consumption and a significant drop in business inventories. What is expected from GDP Q4 (Wednesday, March 6th at 11:30am AEDT) Australian GDP grew by 0.2% in the September quarter of 2023 and 2.1% YoY. While this marked the eighth consecutive rise in quarterly GDP, it was deemed weak, as more typical GDP levels in Australia are nearer to 3%. Within the details: Per capita GDP growth declined by 0.5% QoQ. This was the third successive quarterly fall in per capita GDP, also dubbed a “per capita recession.” The household saving-to-income ratio dropped to 1.1%, its lowest level since December 2007, as households tapped into accumulated savings to counter cost of living pressures. Government spending and capital investment were the primary growth drivers. Household spending remained stagnant as government benefits and rebates reduced household expenditure on essential services such as electricity. This quarter (December or Q4), GDP is anticipated to grow by 0.2%, and the annual growth rate is expected to increase by merely 1.5%, offering further proof that economic activity has decelerated in response to higher interest rates. A negative quarterly figure on Wednesday is within the realms of possibility. We anticipate that softer inflation, easing labour markets, and slower growth will lead the RBA to retract its tightening stance in June before implementing rate cuts of 25bp in August and November 2024. AU annual GDP rate chart Source: TradingEconomics AUD/USD technical analysis In last week's article, we noted that the AUD/USD had struggled to overcome resistance coming from the 200-day moving average currently at .6560 and said “The longer it spends lingering under the 200-day moving average, the more chance there is of a retest of the mid-February .6442 low with scope towards weekly support near .6310.” The scenario above remains our base case, aware that the AUD/USD needs to see a sustained move above the 200-day moving average at .6560 and then above the mid-January .6625 high to negate downside risks and warn that a more robust recovery is underway. AUD/USD daily chart Source: TradingView Source:Tradingview. The figures stated are as of 4 March 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.
  11. Global markets have kicked off the week on a largely positive note ahead of major central bank meetings and data releases that will impact rate hike expectations. Japan's Nikkei index moved on past 40,000, having enjoyed a strong rally so far this year, buoyed by tech and AI stocks like Tokyo Electron. The Nikkei has benefitted from a shift towards tech nearshoring as foreign funds leave Chinese markets. Japanese Tokyo inflation data on Tuesday will test whether price rises are slowing as expected after base effects. Markets expect the Bank of Japan to end negative rates and yield curve control in April given strong wage growth. Japan may also declare an end to deflation this week, further supporting policy tightening. Upbeat Q4 GDP data suggests Japan may have avoided recession after all. China's National People's Congress this week could unveil new stimulus measures and set a 5% 2022 GDP target. Attention will turn to Fed Chair Powell's Congressional testimony midweek for any fresh rate hike signals. Friday's US jobs report could also shift expectations if hiring remains robust in February after January's strong gains.
  12. Apple’s recent stock weakness marks a divergence with other members of the Magnificent 7 and the broader Nasdaq 100. Source: Bloomberg Indices Shares Apple Inc. Artificial intelligence Price iPhone Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Friday 01 March 2024 13:26 AI Efforts in Question Apple's stock fell below $180 on Thursday for the first time since early-November, underperforming the broader market. While the S&P 500 and tech-heavy Nasdaq indices posted solid gains, Apple shares slipped around 1%. Source: Google Finance The decline comes as doubts loom about Apple's artificial intelligence (AI) initiatives. Rivals like Microsoft are delivering strong earnings growth tied to burgeoning AI technology. This was highlighted by Tuesday's report that Apple is discontinuing its decade-long electric vehicle project. Back in 2017, Apple CEO Tim Cook called the autonomous car endeavour the "mother of all AI projects." Stock Underperforms Broader Market So far in 2024, Apple shares have dropped 3%, trailing the S&P 500's 7% gain and the Nasdaq's 9% climb. Despite its long-term market-beating returns, Apple has recently lagged the S&P 500 on 6-month, 1-year, and 2-year timeframes, according to FactSet data. After spending most of 2021 to 2023 as the world's most valuable public company by market capitalization, Apple surrendered that crown to Microsoft in January. Microsoft's sales and profit growth have far outpaced Apple's, which posted negative growth in its 2022 fiscal year ending last September. AI Investment Hints but Details Lacking At Wednesday's shareholder meeting, Cook suggested Apple is "investing significantly" in generative AI. He said more specifics will be announced later this year. UBS analyst David Vogt predicts Apple's first major AI launch will come in June at its annual Worldwide Developers Conference. iPhone Sales Weakness Looms In addition to AI uncertainties, expectations for weak iPhone sales growth continue to weigh on Apple. iPhones accounted for 58% of Apple's total revenue last quarter. Some See Positives in Car Project Halt Some analysts see a silver lining in the halt of Apple's electric car plans. It enables the company to refocus AI talent on nearer-term products with greater market potential. To Morgan Stanley, it also shows Apple's "cost discipline." Apple analyst rating LSEG (formerly known as Refinitiv) data shows a consensus analyst rating of ‘buy’ for Apple with 10 strong buy, 17 buy, 13 hold and 2 sell – and a mean of estimates suggesting a long-term price target of $201.41 for the share, roughly 16% higher than the current price (as of 1 March 2024). Source: LSEG Technical outlook on the Apple share price The Apple share price continues to precariously weigh on its $180.30 to $179.25 support zone which consists of the January-to-February lows. A fall through and daily chart close below this area looks increasingly likely and would lead to levels being reached which were last traded in early-November with the 3 November low at $176.65 representing the first downside target. Apple Daily Candlestick Chart Source: TradingView Further down sits the $174.49 August low below which key support can be spotted between the September and October lows at $167.62 to $165.67. Were the $180.30 to $179.25 support zone to hold, though, a rise and daily chart close above last week’s high at $185.04 would need to occur, for a recovery off the support area to gain traction. In this scenario the Apple share price would trade back above its 200-day simple moving average (SMA) at $183.90 and target the 55-day SMA at $188.50. This will continue to favour a fall through support at $179.25 to take place as long as the Apple share price continues to trade below last week’s high at $185.04. 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.
  13. The new month kicked off with several stock market indices hitting record highs on Thursday. Japan's Nikkei Average, the S&P 500, and the Nasdaq all closed at fresh record peaks. The gains were buoyed by tech stocks like NVIDIA and Advanced Micro Devices. Stock markets are in an upbeat mood after US inflation figures came in line with expectations on Thursday. This helped shape forecasts for the timing of future Fed interest rate cuts. It extended the ongoing global equity rally and also pushed Treasury yields lower. The DAX also reached a new all-time high on Thursday. Europe opens today waiting for inflation data that should indicate inflation is moving back toward the 2% target. This comes after data showed inflation dropping in countries like Germany, France and Spain thanks to lower energy and food prices. The ECB has maintained record-high interest rates since September. Also on the calendar today is the US ISM manufacturing PMI.
  14. Dow and Nasdaq 100 ease back while Hang Seng bounce hits a wall US indices continue to tiptoe lower after last week’s highs, while the Hang Seng’s bounce from the January lows is coming under pressure. Source: Bloomberg Written by: Chris Beauchamp | Chief Market Analyst, London Publication date: Thursday 29 February 2024 11:57 Dow drifts down The index continues to edge lower, surrendering some of yesterday’s recovery from the lows. In the short-term, we may finally see a test of the still-rising 50-day simple moving average, something that has not happened since the rally began in October. Before this the price may find support at the rising trendline from mid-January. Should this see a bounce develop, then the previous highs at 39,287 come into play, and could clear the way for a test of 40,000. Source: ProRealTime Nasdaq 100 edges down to trendline support Like the Dow, the Nasdaq 100 is easing back from its recent highs, though the declines here are even more muted. Potential trendline support from early January comes into play near 17,600, while below this is the 50-day SMA and last week’s low at 17,320. Source: ProRealTime Hang Seng under pressure as rally fades Those waiting for a fresh leg lower in this index’s ongoing downtrend will have been pleased to see the sharp drop on Wednesday that culminated at a close almost at the lows and back below the 100-day SMA. Further losses below last week’s low at 16,065 would reinforce the bearish view and suggest that the downtrend is back in play, targeting the lows of January at 14,755. Bulls will want to see a close back above 16,900 to indicate that the index is continuing its counter-trend bounce. Source: ProRealTime
  15. WTI slips on large US stock build while silver price falls and Chicago wheat stays range bound Source: Bloomberg Written by: Axel Rudolph FSTA | Senior Financial Analyst, London Publication date: Thursday 29 February 2024 11:47 WTI declines on large US stock build Front month WTI futures have once again been rejected by their mid-November to February 78.87 to 79.62 resistance zone amid a large US stock build. The oil price slid back to the 200-day simple moving average (SMA) at 77.73 around which it is expected to oscillate over the coming days. While this week’s low at 75.77 underpins, the medium-term uptrend will remain intact, though. Minor support ahead of this level sits at the 21 February 76.31 low. Source: ProRealTime Silver price remains under pressure Spot silver’s descent from its $23.50 per troy ounce February peak is taking it back to its January and February lows at $21.94 to $21.93. On the way down lies the 8 February low at $22.15. Minor resistance above the February downtrend line at $22.67 sits at the 4 January low at $22.69. Source: ProRealTime Chicago Wheat prices still hover above major support Chicago wheat front month futures continue to hold above their key 557 to 552 September and November lows which offered support in February. Further sideways trading above this key support zone and below last week’s 594 high remains at hand. Above it the December-to-February downtrend line can be spotted at 600. Support above the 557 to 552 area lies at last week’s 561 low. Source: ProRealTime
  16. 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.
  17. The US dollar and US indices steadied after a generally positive session in Asia ahead of today's widely anticipated US PCE inflation reading - the Fed's preferred inflation gauge - and as a partial US government shutdown has been averted. Speeches by Fed members Bostic and Mester might provide further colour but will probably have less of an impact. The Japanese Yen got a boost from the BoJ's Takata who hinted at stronger wage growth this year and that the central bank's price target was 'coming into sight.' Other than that the data in Japan was mixed with industrial production coming in worse than expectations but retail sales beating forecasts. German CPI for February and a speech by Bundesbank President Nagel will probably determine whether the DAX 40 will make yet another record high or flatten out like its peers.
  18. Hi @JustinCamm Thanks for sharing Below from our analysts: DAX 40 once again trades at record highs The DAX 40 index seems to be unstoppable as it rallies to yet another record high around the 17,600 mark as the latest earnings season highlighted that European stocks remain undervalued compared to their American counterparts with regards to Price-to-Earnings (PE) ratios. This has attracted further investment in Europe’s largest economy as Germany’s consumer morale also improves slightly. Minor support is seen along the accelerated uptrend line at 17,464. Above the current record high at 17,607 lies the 18,000 region. DAX 40 DAILY CHART FTSE 100 and S&P 500 Consolidate while DAX 40 Trades in New Record Highs Feb 28, 2024 1:00 PM +02:00 Axel Rudolph, IG Senior Market Analyst
  19. An uneasy calm has settled over global markets as traders wait for new inflation data later this week, which will provide clues about the interest rate outlooks in the U.S. and Europe. While Asian markets were subdued overall, there were some bright spots. New Zealand's central bank signaled a slightly less aggressive stance on rate hikes, sparking a rally in bonds and a dip in the Kiwi dollar. South Korean shares continued their relentless February rally, lifted by AI enthusiasm and moves to boost shareholder returns. The main events this week will be the U.S. inflation report on Thursday and the eurozone numbers on Friday, which are expected to drive market direction in the coming days. For now, caution prevails, with European and U.S. futures pointing to a muted open.
  20. 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.
  21. It’s one of the most popular traded markets on our end, and we take a look at the S&P 500’s technical overview in both weekly and daily time frames, the strategies to deploy for conformist, contrarian and ‘hold’ camps. Written by: Monte Safieddine | Market analyst, Dubai Publication date: Tuesday 27 February 2024 06:48 Dive into the conflicting sentiments of IG clients versus COT speculators and stay ahead of the game with upcoming market events. Don't miss out on this essential guide to understanding the current state of the S&P 500 and preparing for what lies ahead! 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.
  22. WTI recovers on supply worries, cotton price nears 1 1/2 year high as Arabica coffee price falls While oil and cotton price rise, Arabica coffee prices fall ahead of this week’s US GDP estimate and inflation data releases. Source: Bloomberg Written by: Axel Rudolph FSTA | Senior Financial Analyst, London Publication date: Tuesday 27 February 2024 12:30 WTI recovers from Monday’s low Front month WTI futures are recovering from Monday’s 75.77 low amid ongoing shipping disruptions and repeated breakdowns in talks for a Gaza cease fire that raise supply worries. The 200-day simple moving average (SMA) at 77.68 is being retested, a rise above which would have the November-to-February resistance line and last week’s high at 78.80 to 78.84 in its sights. Minor support sits at the 21 February 76.31 low ahead of Monday’s 75.77 low. Source: ProRealTime Cotton price rises to near 1 ½ year high Front month cotton futures have resumed their ascent to their 96.38 near one-and-a-half-year high above which sits the psychological 100.00 mark. Immediate upside pressure should be maintained while Monday’s low at 92.50 underpins. Below it lies last week’s low at 90.89. Only a currently unexpected bearish reversal and fall through that low would indicate a topping formation. As long as it holds, the medium-term bullish trend will stay firmly entrenched. Source: ProRealTime Arabica coffee futures prices slip through uptrend line Front month Arabica coffee futures topped out at their 194.06 to 194.32 late January and early February highs and are now trading in near six-week lows, having last week fallen through their October-to-February uptrend line. The 8 January low at 178.56 is now in sight, a drop trough which would engage the 174.03 January trough. Minor resistance sits at last week’s 182.39 low and can also be seen along the breached uptrend line at 185.45. Further up meanders the 55-day simple moving average (SMA) at 186.63. Source: ProRealTime
  23. 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.
  24. Global stocks have hit record highs recently but turned sideways this week as investors await important inflation data that could impact interest rate policy. Key economic data out later today includes French and German consumer confidence, Eurozone money supply, and US durable goods, consumer confidence, and home prices. Japanese inflation rose 2% year-over-year in January, exceeding expectations and supporting potential rate hikes in Japan this year. Japanese stocks hit a record high but then retreated to flat. US core price data on Thursday is the main event for the week, after a headline CPI reading that was stronger than expected earlier in February. On the calendar for today are US durable goods orders and consumer confidence.
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