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MongiIG

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  1. MongiIG
    The three local banks are set to report their Q4 2023 earnings over the coming weeks.
    Source: Bloomberg   Shares Interest Interest rates Loan Singapore DBS Bank
     Written by: Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 26 January 2024 05:54 Source: Singapore Exchange  
    The three local banks are set to report their Q4 2023 earnings over the coming weeks. Based on their one-year return, OCBC has been the outrunner, with its +8.8% gain towering above the other two banks. Returns for DBS (+0.2%) and UOB (+0%) have been largely in line with the broader Straits Times Index (STI), which only manages to eke out a 0.1% return over the past year.
     
    Source: Refinitiv Source: Refinitiv  
    Peak interest rate cycle to see net interest margin resume its gradual tapering
    With further confirmation that the US Federal Reserve (Fed) is at the peak of its hiking cycle, the Singapore Overnight Rate Average (SORA) and other benchmark lending rates have seen a slight drift lower in 4Q 2023. But at least, the pace of moderation remains gradual, which may translate to a more measured tapering of the banks’ net interest margin ahead.
    Back in 3Q 2023, DBS continued to see an expansion in net interest margin (up 3 basis points (bp) from 2Q), but the same cannot be said for OCBC and UOB, seemingly presenting a divergence that is down to individual bank’s ability to balance loan repricing and funding costs.
    With that, Refinitiv estimates are looking for contraction in net interest income from UOB and OCBC this time round. While year-on-year growth in net interest income for the banks has already been slowing for three straight quarters due to a higher base effect from last year, this may mark the first time where we see a contraction.
    Any guidance on outlook will also be on watch. DBS CEO Piyush Gupta previously guided that higher-for-longer interest rates will be a net benefit to earnings in the coming year, but with rate expectations currently pricing for six rate cuts from the Fed through 2024, focus will be on whether his view still hold.
     
    Source: Monetary Authority of Singapore (MAS), Banks’ earnings report  
    Slight rebound in lending activities on renewed confidence
    Loan volume in Singapore for October and November 2023 reflected a slight rebound in lending activities from the third quarter, overall suggesting that the slump in lending since September 2022 is stabilising. Greater conviction of a peak in the global interest rate cycle and resilient economic conditions pushing back against recession concerns could renew some confidence in 4Q 2023, and with loan demand contracting year-on-year for two previous quarters, whether it can stabilise in 4Q 2023 will be in focus.
     
    Source: Refinitiv  
    Improvement in non-interest income may be set to continue
    The banks have witnessed a broad-based recovery in its net fees and commission income in 3Q 2023, which may be set to continue into the fourth quarter. For the quarter, market conditions have improved significantly amid a risk-on environment, which could aid to support an increase in wealth management activities.
    Air traffic statistics also point to robust travel momentum in the fourth quarter, with Singapore’s airport passenger movements surpassing 90% of the level recorded in 2019. That may help to support fee income from credit card as well.
    Guidance from the banks’ management in 3Q 2023 has been optimistic, with UOB CEO saying that consumer sentiment remain strong and see rising investment flows in the Southeast Asia region. DBS CEO also guided for his bank's 2024 net interest income to be around this year's level, and fee income momentum to be sustained by wealth management and cards.
    That said, we may expect the banks to still exercise some prudence in its loan loss provisions, given that we are still in uncharted waters around geopolitical tensions, while economic environment still faces some degree of uncertainty. A more measured build-up in provisions is likely for the fourth quarter, with OCBC and UOB already lowering their provision amount quarter-on-quarter back in 3Q 2023.
    Fund flow data revealed ongoing net outflows over past months
    The Singapore Exchange (SGX) fund flow data has revealed a trend of net institutional outflows for the financial sector in 4Q 2023, unwinding all of its net inflows of close to S$800 million in the third quarter. For the full-year 2023, the three local banks led the net institutional outflows within the STI with S$2.6 billion of net institutional selling. This is followed by the REITs sector, which saw close to S$1 billion of net institutional outflows.
     
    Source: Singapore Exchange, IG  
    DBS share price: Technical analysis
    DBS seems to be trading on some broader indecision, with the formation of higher lows and lower highs keeping its share price in a symmetrical triangle pattern. Any break of the upper trendline resistance may be on watch to provide conviction of buyers in greater control. On the downside, the $31.20 level may serve as immediate support to hold, where the bottom trendline stands.
     
    Source: IG charts  
    OCBC share price: Technical analysis
    OCBC has been holding up so far, with a series of higher lows formed since July 2022. Near-term upward bias remains intact, with its relative strength index (RSI) on the daily chart defending the key 50 level since December last year. Ahead, a break above the $13.00 level may see prices move to retest the $13.23 level – a key horizontal resistance in 2023. On the downside, the $12.64 level will serve as trendline support to hold.
     
    Source: IG charts  
    UOB share price: Technical analysis
    UOB has been trading somewhat in a range, but with past two days seeing some renewed traction. Ahead, the $29.20 level may be a key level to watch, where a downward trendline resistance stands. On the downside, support may be found at the $27.70 level, where a retest of its Ichimoku cloud zone on the daily chart saw prices hold up.
     
    Source: IG charts
      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.
  2. MongiIG
    Successive increases keep the technical overview bullish, while heavy sell client bias has resumed shorting into price gains.
      Source: Bloomberg
      Indices Shares Nasdaq Nasdaq-100 Personal consumption expenditures price index Market trend
    Written by: Monte Safieddine | Market analyst, Dubai | Publication date: Thursday 25 January 2024 07:51 Another record high, tech shines
    Another day, another record high for both the S&P 500 and Nasdaq 100, while the Dow 30 and Russell 2000 struggled a bit. Most sectors actually finished yesterday's session in the red, but communication and tech were outperformers, with the losses limited for consumer discretionary, and meant this tech-heavy index managed to best the rest with gains of about 1%.
    Mixed earnings, decent data, and a bad auction
    Component performance by the close put Netflix and ASML on top, following their respective earnings, AMD in third, enjoying an upgrade from New Street Research to buy. The attention in after-hours was on heavyweight Tesla, whose share price took a hit after its earnings and revenue miss; that came with a warning on growth for this year.
    Economic data out of the US showed preliminary Purchasing Managers’ Index (PMIs) improved and easily beat forecasts, both manufacturing and services above 50 - signifying expansion. The weekly mortgage applications showed another increase, even if by a smaller 3.7% after the week before’s 10.4%.
    As for treasury yields, they finished the session higher again, and the very disappointing five-year auction took some attention. Yields also closed up in real terms as breakeven inflation rates were little changed, and market pricing (CME's FedWatch) now via majority, anticipating a hold in March instead of a cut, and failing to get beneath 4% by the end of this year.
    More earnings and data to digest
    We’ve got plenty more to digest over the next two days with more of the Nasdaq 100’s components expected to release their figures including Intel. As for economic data, durables and advance Gross Domestic Product (GDP) releasing today, and closely watched pricing data tomorrow with Personal Consumption Expenditures (PCE).
    Nasdaq technical analysis, overview, strategies, and levels
    A spike in price that briefly went past its previous second resistance favoring conformist buy-breakout strategies before the pullback as of writing this morning, to its previous first resistance; in all keeping, the key technical indicators green and an overview that’s still bullish. But with any uptick in volatility comes added caution, and more so for conformist buys off its first support that ideally should only be done via significant reversal for those anticipating the overview to remain bullish.
      Source: IG
    IG client and CoT sentiment for the Nasdaq
    When it comes to IG client sentiment, we were in a period where price gains didn’t result in traders shorting, with the sell bias amongst them dropping. But they’ve starting to take that short bias higher once more, from a heavy 69% yesterday to a heavier 72% as of this morning. CoT speculators have been on the buy side throughout this period, opting to hold at 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.
  3. MongiIG
    Discover how Microsoft's strategic focus on cloud services and AI technology has propelled a significant 20% increase in net income and an 18% rise in operating income in FY23 Q4.
      Source: Bloomberg
      Shares Microsoft Cloud computing Revenue Microsoft Windows Artificial intelligence  
     Written by: Tony Sycamore | Market Analyst, Australia | Publication date: Wednesday 24 January 2024 05:07 When will Microsoft report its latest earnings?
    Microsoft Corp is scheduled to report its fiscal Q2 2024 results on Wednesday, 31 January at 8am AEDT, after the market closes.
    Key financials
    Wall Street's expectations for the upcoming results are as follows:
    Earnings per share: $2.77 vs. $2.99 in Q1 Revenue: $61.1 billion vs. $56.52 billion in Q1 The backdrop
    Investors cheered Microsoft's first-quarter results, reported in late October, as it beat Wall Street's estimates and promised future product offerings infused with AI.
    "With copilots, we are making the age of AI real for people and businesses everywhere," said Satya Nadella, Chairman and Chief Executive Officer of Microsoft. "We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers."
    Summary of Microsoft's Q1 2024 results
      Source: Microsoft
    Within the details, Microsoft reported the following highlights.
    Revenue from Microsoft's Intelligent Cloud segment was $24.3 billion, up 19%. Within that, Server products and cloud services revenue increased by 21%, driven by Azure and other cloud services revenue growth of 29%. Revenue in Productivity and Business Processes was $18.6 billion, up 13%. Within that, Office Commercial products and cloud services revenue increased by 15%, driven by Office 365 Commercial revenue growth of 18%. Revenue in More Personal Computing was $13.7 billion and increased 3%. Within that, Windows revenue increased 5%, with Windows OEM revenue growth of 4% and Windows Commercial products and cloud services revenue growth of 8%.  
    What to look for in Q2?
    During Q1, Microsoft experienced a notable acceleration in its Azure cloud revenue growth, marking a significant shift after two years of slowing momentum. This uptick has captured the attention of analysts who anticipate a continuation of this trend in the upcoming Q2 Earnings Report. Additionally, there's a growing interest in the performance of the Microsoft 365 CoPilot AI add-on, which was launched last year and is available on a subscription basis. Despite its innovative approach, the add-on has so far received mixed reviews.
    Microsoft's recent completion of the $68.7 billion acquisition of video game publisher Activision Blizzard is set to influence Q2 earnings. This acquisition, finalised in mid-October, is expected to be a topic of discussion by Microsoft executives, particularly in regards to its impact on the financial guidance for Q3.
    Another point of interest is the management's perspective on the recent developments at OpenAI, along with their viewpoints on the current structure of the OpenAI board, which has been the subject of much discussion.
    Microsoft FY24 outlook
      Source: Microsoft
    Microsoft's revenue 2015 - 2024
      Source: TradingEconomics
    Microsoft technical analysis
    Building on an almost 57% gain in 2023, Microsoft's share price has surged over 6% in the opening weeks of 2024, as investors began the new year with renewed enthusiasm for tech stocks that offer exposure to AI.
    The chart of Microsoft's share price is a textbook example of a market in an uptrend, putting in place a sequence of higher highs and higher lows punctuated by corrective and orderly pullbacks. The RSI is now pushing into overbought territory, which offers hope that a pullback may not be too far away, providing an opportunity to buy Microsoft shares at better levels.
    Near-term horizontal support comes in at $380/378 and below that at around $360, coming from July highs/ December lows. Medium-term support is strong in the $350/335 area, coming from the uptrend drawn from January 2023's $219.35 low and the 200-day moving average at $337.00.
    To note, a sustained break below $335 would negate the uptrend and warn that a deeper pullback is underway.
    Microsoft daily chart
      Source: TradingView
     
    Source: TradingView. The figures stated are as of 24 January 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.
  4. MongiIG
    Get the latest insights on Alphabet's anticipated Q4 2024 financial results, highlighting potential double-digit growth in Google cloud and services, the impact of generative AI on products.
    Source: Bloomberg   Shares Alphabet Inc. Artificial intelligence Google Cloud computing Revenue  
     Written by: Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 24 January 2024 04:00 When does Alphabet report its earnings?
    Alphabet Inc is set to release its fourth quarter (Q4) financial results on Wednesday, 31 January at 5am (GMT+8), after the market closes.
    Financial expectations
    For Alphabet’s upcoming results, expectations are for a broad recovery on all fronts. Double-digit growth in both its key segments (Google cloud and Google services) are expected to power a 12.1% year-on-year (YoY) growth in overall revenue to US$85.3 billion.
    Likewise, its 4Q 2023 earnings per share (EPS) is expected to improve to US$1.59 from previous quarter’s US$1.55, which will extend its streak of positive YoY EPS growth to the third straight quarter.
    Source: Refinitiv Rebound in advertising activities to continue in 4Q 2023
    Advertisement revenue accounts for 78% of Alphabet's top line. Having reverted to positive YoY growth over the past two quarters, the recovery momentum for this segment is expected to continue with a stronger 11.6% growth in Q4 2023, up from 9.5% in Q3 2023.
    Increasing views of a US soft landing and further clarity on the peak in the Federal Reserve (Fed)'s hiking cycle in Q4 2023 may see business confidence return, potentially accelerating ad spending. Back in Q3 2023, Alphabet's management noted some 'stabilisation' in advertising spend, setting the tone for better times ahead.
    Source: Refinitiv  
    Ongoing race to unlock synergies of generative AI on product offerings
    With the ongoing traction towards generative artificial intelligence (AI), Alphabet has previously incorporated AI-powered solutions like Search and Performance Max to help customers increase their ads' return on investment (ROI). This may allow Alphabet to maintain its edge over the broader advertising industry.
    Further integration of Bard with Google apps and services is also in the pipeline. However, it's a race against time against Microsoft, who has been a first mover with its ChatGPT. Microsoft's CoPilot feature, integrating AI into its office applications, poses a threat to Alphabet's cloud-based products, including Google Sheets and Google Docs. Meanwhile, further developments of Microsoft's search engine Bing could continue to vie for Google’s market share.
    The race to unlock synergies of generative AI in product offerings remains tight, with any progress of new features closely monitored at the upcoming earnings call.
    Cloud business performance will remain high on market participants’ radar
    In the Q3 2023 results, Alphabet topped both revenue and EPS estimates, but its share price plunged as much as 10% in a single day due to a miss in its cloud revenue. This highlights the importance market participants place on this segment as Alphabet's key growth driver, amid the rising trend of generative AI, which should translate to growing demand for public cloud services.
    Any lack of growth momentum could mean losing market share to Amazon Web Services (AWS) and Microsoft Azure, the other frontrunners in the highly competitive cloud computing space. A significant miss in this segment could singlehandedly drag the stock price down, given the heavy investments in its cloud unit and the high expectations for its growth.
    Source: Refinitiv  
    Can YouTube continue to hold up against its competitors (eg., TikTok)?
    YouTube Shorts, Alphabet's short-form video feature as a response to competitor TikTok, has been performing well. In the Q3 2023 results, it reported 70 billion daily views, a significant increase from the 50 billion daily views at the beginning of 2023.
    Focus will be on whether the solid momentum in both YouTube's ads and subscription businesses from Q3 2023 can be mirrored in the upcoming results.
     
     
    Technical analysis: Alphabet’s share price eyeing for a retest of its all-time high
    Alphabet’s share price has been trading on a series of higher highs and higher lows since the start of 2023, fitting into a broad ascending channel pattern. Trading above its Ichimoku cloud on the daily chart, along with various moving averages (MAs) (100-day, 200-day), validates the overall upward trend.
    On the weekly chart, its weekly relative strength index (RSI) has been trading above its key 50 level since March 2023, briefly retesting the key level in October 2023, which saw some defending from buyers. Buyers may aim for a potential retest of its all-time high at the US$152.00 level, with current prices standing just 3% away from the target.
    On the downside, immediate support to defend may be at the US$142.50 level. A stronger area of support confluence may be found at the US$132.40 level, where the lower channel trendline coincides with the lower edge of its Ichimoku cloud on the daily chart.
    Alphabet daily chart
    Source: IG charts
      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.
  5. MongiIG
    Netflix (NASDAQ:NFLX) is set to disclose its Q4 2023 earnings report on January 23rd, 2024 after the US markets close. What are the expectations, and what is the outlook for the stock price?
     
    Source: Bloomberg   Shares Netflix Revenue Streaming media Share price Technical analysis
    Written by: Hebe Chen | Market Analyst, Australia | Publication date: Wednesday 17 January 2024 08:47 Netflix earnings date

    Netflix (NASDAQ:NFLX) is set to disclose its Q4 2023 earnings report on January 23rd, 2024 after the US markets close.

    Netflix earnings key expectations
     
     
    Q4 Expectation
     
     
    Q3 reported
     
    Q4,2022
     
    QOQ
     
    YOY
     
    EPS:
     
     
    $2.15
     
    $3.49
     
    $0.51
     
    -38%
     
    322%
     
    Revenue:
     
     
    8.7B
     
    8.54B
     
    7.86B
     
    2%
     
    +11%
    Source: Netflix
    Netflix earnings key watches

    Strong growth momentum

    Netflix's performance in the third quarter of 2023 was remarkable. The company achieved an impressive 8% growth in revenue, reaching a record high level, primarily attributed to the higher-than-expected paid membership growth. Its global expansion of its streaming services played a crucial role, with a net addition of 8.76 million paid memberships in Q3 alone, pushing the total paid membership to a new record high of 247 million.

    Into the fourth quarter, the company remains optimistic about its growth prospects and anticipates the continuation of robust user growth momentum.According to forecasts from the streaming giant, its Q4 revenue is projected to increase by 11% year-over-year, reaching $8.7 billion. The net addition of paid memberships is projected to be close to the previous quarter, potentially with another 8-9million new subscribers.
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    Netflix Q4, 2023 Forecast
    Source: Netflix Cost and margin headwind

    The streaming king’s rosy outlook does not come without challenges.

    Netflix’s operating margin is projected to take a dip in the fourth quarter. After reaching a 22.4% record high in the Q3, the notably surging content costs combined with a moderating global ARM (Average Revenue per Membership) are likely to mark an inflection point in Netflix’s profitability from Q4 2023 and onwards.

    Earlier this month, Citigroup revised down its rating on Netflix from "Buy" to "Hold" emphasising its concerns about the stream king’s falling margins. Citigroup projected that Netflix's content spending would rise to around $20.4 billion by 2025, casting doubt on the company's profitability in the next two years. Based on the company’s forecast, its operating margin could plunge to 13% in Q4 from 22% in the recent quarter.

    Additionally, Netflix also admitted that a strong US dollar versus other currencies would cost roughly $200M on the company’s Q4 revenue and ARM.

    Netflix stock price and technical analysis

    Before we embark on another year of uncertainties for price movements, let's first take a glance in the rear-view mirror at Netflix stock's past performance.

    Over the last three years, Netflix's share price has experienced a rollercoaster ride, recording gains of 11% in 2021, a significant decline of -51% in 2022, and a juicy 65% gain in 2023. In contrast, the S&P 500 exhibited returns of 27% in 2021, faced a downturn of -19% in 2022, and rebounded with a 24% rise in 2023. It’s also not hard to see from the comparison charts below that Netflix's share price has demonstrated wilder volatility compared to the key benchmark in the past five years.
     
    Source: Tradingview At the moment, Netflix's share price is hovering around the key threshold of $500, maintaining a clear and valid uptrend since July 2022 with the prices trading above all the major moving averages. Its remarkable performance in the past 18 months has earned an 8 out of 10 score rating by TipRanks, coupled with a strong endorsement from 25 buy ratings out of 35 global analysts in the past three months.
    Source: IG In the short term, trend followers may welcome the breakout from the $500 hurdle as a robust bullish momentum in harmony with the longer-term uptrend, and set their sights on the next target, near $560.

    Nevertheless, it's worth noting that the range between $500 and $560 might pose a greater challenge, considering its historical congestion patterns dating back to June 2020 to August 2021 (as highlighted in the chart).

    Conversely, a breach below the $480-$490 range could potentially serve as an early warning sign for a correction risk, as the ascending trajectory formed since October 2023 would lose its efficacy.
    Source: IG Netflix Q4 earnings preview summary

    Overall, I believe the crucial watch for the impending earnings would be on Netflix's strategy and outlook to navigate declining profitability while sustaining its growth trajectory. In terms of stock prices, the upcoming quarterly update is poised to play a crucial role in determining if the stock price can successfully surpass the significant psychological level of $500.

        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.
  6. MongiIG
    Tesla’s share price: what to expect from Q4 results

    Written by: Monte Safieddine | Market analyst, Dubai | Publication date: Wednesday 17 January 2024 05:57 When is Tesla reporting?
    It’s expected to get volatile for Tesla’s share price on Thursday, January 25th at 8am (AEDT) after market close, as that’s when they’ll be releasing their fourth-quarter results.
    Analysing Tesla's Q3: a disappointment
    It wasn’t a pretty picture last time around, as third-quarter results were a miss on both earnings and revenue and came with added caution on the Cybertruck’s potential (or lack thereof) to deliver significant short-term positive cashflow.
    Breaking down Tesla's Q4 production and deliveries
    Looking beyond these challenges and breaking down deliveries and production for the final quarter of 2023, it was a record. Deliveries totalled over 484,000 with production nearly reaching 495,000. Overall, Tesla produced 1.846 million and delivered just under 1.81 million vehicles. While these figures were above 2022’s 1.37 million and within the October guidance of 1.8 million, they fell short of its earlier 2023 goal of two million.
    The breakdown for the final quarter of 2023 showed that nearly 477,000 Model 3/Y vehicles were produced and over 461,000 were delivered. Meanwhile, “Other Models” accounted for 18,200 (3.8% of the total) and 23,000 respectively.
    Tesla’s eventful quarter
    This quarter saw Chinese rival BYD, with its lower-priced models, overtake Tesla as the world's largest producer of electric vehicles. Elon Musk, however, argues that Tesla is “an AI/robotics company that appears to many to be a car company,” suggesting it shouldn't be directly compared to traditional car manufacturers.
    The quarter was also busy on other front including:
    Troubles in Scandinavia, which, however, didn’t seem to dent its sales in the region Mixed numbers in other areas, with testing in Germany and the UK but strong performance in China, reporting a 69% increase year-on-year for December according to the CPCA (China Passenger Car Association) The Cybertruck release A Model 3 refresh for some markets, which is considered necessary as the lineup, aside from recent releases, has aged significantly Further progress on the charging port adoption front, with its massive network of chargers Recalls, which are not uncommon among automakers and for Tesla only required an over-the-air software update Price cuts, with the average being lowered again during the fourth quarter (cargurus.com). And then came more at the start of this quarter with rising labor costs, further price cuts, and supply chain woes on recent geopolitical factors. Investors are expected to take note of these issues and any further updates on the low-cost model, which is reportedly “quite far advanced” and targets the mass market with a lower price point, unlike the Cybertruck.
    Key points of interest include Tesla's guidance for 2024 in light of subsidy and tax credit reductions/removals, potential further price cuts this year to sustain growth, the impact on profit margins, and plans for geographic expansion. All these factors are in the context of anticipated rate cuts this year, which might ease what was expected to be a “stormy” macroeconomic situation.
    EPS and revenue forecasts
    In all, expectations for the fourth quarter indicate an earnings per share (EPS) of $0.74. This figure is lower both quarter-on-quarter and year-on-year. Revenue is anticipated to be stronger, rising to $25.5 billion, with growth expected across all key segments. Although margins are likely to remain tested relative to figures prior to 2023, they are predicted to improve to around 18%, up from 17.89% in Q3 (source: Refinitiv).
    As for analyst recommendations, there are five in the ‘strong buy’ category, 12 ‘buy’, 19 ‘hold’, and four for both ‘sell’ and ‘strong sell’. The average price target among these analysts has only recently surpassed its falling share price (source: Refinitiv).
    Trading Tesla’s Q4 results: weekly technical overview and trading strategies
    There’s no denying the strength of 2023 for the ‘magnificent seven’, with Tesla notably outperforming among them (Nvidia +233%, Meta +188%, Tesla +109%, Amazon +78%, Alphabet +57%, Microsoft +55%, Apple +48%). However, these gains were primarily realized in the first half of the year, with Tesla's share price starting to be tested after mid-July.
    The technical overview on the shorter-term daily timeframe was more positive when the price managed to remain within its bull channel. The break below this channel at the start of this year disrupted its key technical indicators. This included a negative DMI (Directional Movement Index) cross and the price falling below all its main short and long-term daily moving averages.
    When we zoom out to the weekly timeframe, while the same negative cross has occurred, the proximity of price-indicator and indicator-indicator relationships has made it difficult to gain clear insights on the technical front, given the ease with which they can generate signals on a not-so-significant move.
    This has led to a more cautious overview at this stage, despite the negative technical bias, with most weeks showing relatively controlled intraweek moves. It's important to note that the earnings release is a fundamental event where technical analysis is less relevant, particularly if there's a surprise. This means technical levels will likely struggle, or even fail, to hold once the latest figures are released.
    Conformists should approach with added caution, avoiding fading any move towards 1st levels and maintaining that caution even when approaching 2nd levels. Contrarian breakout strategies may see added follow-through if the price has already neared these levels just before the event.
      Source: IG
    Tesla weekly chart with key technical indicators
      Source: IG
    Tesla weekly chart with IG client sentiment
      Source: IG
    IG client sentiment* and short interest for Tesla shares
    In terms of sentiment among IG clients, there has been a consistent trend of heavy to extreme buy bias for several months. This bias saw some unwinding when the price reached the upper end of the channel, and increased again following the recent price pullback. Starting last week at 77%, the bias has escalated to 80% at the beginning of this week after a red weekly close.
    Short interest has remained relatively stable in recent months, briefly exceeding 92 million shares in November. The most current data indicates over 86 million shares in short interest, accounting for 2.73% of the total (source: Refinitiv).
      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 the week for the outer circle. Inner circle is from the start of the previous week.  
       
    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.
  7. MongiIG
    Thus far, communications around a policy-pivot timeline have been muddled, which will leave markets scouring comments for any hints at the upcoming meeting.
    Source: Bloomberg   Forex Bank of Japan Inflation Bond Japan Government bond
     Written by: Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 18 January 2024 10:25 What to expect at the upcoming Bank of Japan (BoJ) meeting?
    The BoJ is set to hold their monetary meeting across 22 – 23 January 2024, with broad expectations for its short-term interest rate target to be kept unchanged at -0.1% and for the 10-year bond yield around 0%, at least for now.
    Earlier policy tweaks from the BoJ include raising the flexible bandwidth around its 10-year yield target to 1% in July last year, before the central bank headed for more policy flexibility in October 2023 by referring to the 1% bound as purely a ‘reference’.
    These intermittent steps seem to lay the groundwork for an eventual policy pivot, but communications around the timeline from BoJ officials have been muddled, which will leave markets scouring the BoJ Governor’s comments for any hints at the upcoming meeting.
    Positive wage-inflation and sustainable 2% inflation conditions still on the lookout
    While BoJ Governor Kazuo Ueda acknowledged last month that prices and wages appeared to be moving in the right direction, he mentioned that conditions remained uncertain, seemingly calling for more time to assess that the pricing and wage trend will stick.
    Fresh economic data following his comments also provided some validation for further policy hold, with Japan’s November headline wage growth slowing to its lowest pace (+0.2% year-on-year) since December 2021. Tokyo’s core inflation data, which served as a precursor to nationwide price trends, has also eased to its June 2022 level of 2.1%, giving the BoJ more room for patience in its exit plan.
    Not to mention a devastating earthquake, which rocked Japan on New Year's Day. With the economic impact still uncertain and the country engaging in disaster relief efforts currently, it seems rational for the central bank to avoid rocking the boat for now.
     
    Source: Refinitiv  
    Market pricing for BoJ to end negative rates in 2Q 2024, fresh economic projections in focus
    Market expectations are for the BoJ to end negative rates only in 2Q 2024, with comments from BoJ Governor Kazuo Ueda on watch to validate the timeline. Updated economic projections from the central bank will also be released. With an increase in inflation forecasts for FY2024 and FY2025 in the previous report, further upward revisions in inflation, though an unlikely case, could be a signal for markets for a quicker policy shift.
     
    Source: Refinitiv, as of 17 January 2024.  
    A look at Japanese 10-year bond yields revealed a moderation from its November 2023 peak to a near five-month low lately, seemingly a reflection of some dissipation in bond traders’ hawkish bets. The implied volatility for the 10-year government bonds futures has also been tame as compared to previous pre-meeting surges, which suggests broad expectations in place that the upcoming meeting may deliver less surprise and more of further wait-and-see.
     
    Source: TradingView  
    USD/JPY: Renewed move higher on widening yield differentials
    Widening US-Japan bond yield differentials since the start of the year have driven a recovery in the USD/JPY, as US 10-year Treasury yields saw a renewed resurgence with some pushback against earlier Federal Reserve (Fed) rate cuts. The pair has managed to reverse above its Ichimoku cloud on the daily chart, with its daily relative strength index (RSI) reclaiming its 50 level for the first time since November 2023, leaving a near-term upward bias in place.
    Further upmove could leave the 150.00 level of resistance on watch, where the BoJ has intervened in October 2022 with aggressive yen-buying. On the downside, the 146.50 level may serve as immediate support to hold, where the upper edge of the cloud stands.
     
    Source: IG charts  
    Nikkei 225: Starting the year strong with a record-breaking rally
    The Nikkei 225 index has been an outperformer this year, pushing to its multi-decades high to trade at levels last seen in February 1990. Recent economic data has offered room for equities to continue basking in the supportive policy environment from the BoJ, with any dovish validation from policymakers at the upcoming meeting likely to keep the upward momentum going.
    Thus far, foreign buying of Japanese stocks has been robust, with the latest data by the Japanese Ministry of Finance revealing a net 1.2 trillion yen ($8.1 billion) inflows into Japanese stocks last week, which marked its strongest buying spree since October 2023.
    For now, a 10% rally since the start of the year calls for a near-term breather for the index, but a bullish flag continuation pattern remains in place to keep the broader uptrend intact. Further retracement may leave the 34,800 level on watch as support to hold, where a 23.6% Fibonacci retracement level stands. On the upside, the year-to-date high at the 36,200 level will be a near-term resistance for buyers to overcome.
     
    Source: IG charts
      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.
  8. MongiIG
    Netflix (NASDAQ:NFLX) is set to disclose its Q4 2023 earnings report on January 23rd, 2024 after the US markets close. What are the expectations, and what is the outlook for the stock price?
    Source: Bloomberg   Shares Netflix Share price Revenue Streaming media Technical analysis  
    Hebe Chen | Market Analyst, Melbourne | Publication date: Wednesday 17 January 2024 08:48 Netflix earnings date

    Netflix (NASDAQ:NFLX) is set to disclose its Q4 2023 earnings report on January 23rd, 2024 after the US markets close.

    Netflix earnings key expectations
     
     
    Q4 Expectation
     
     
    Q3 reported
     
    Q4,2022
     
    QOQ
     
    YOY
     
    EPS:
     
     
    $2.15
     
    $3.49
     
    $0.51
     
    -38%
     
    322%
     
    Revenue:
     
     
    8.7B
     
    8.54B
     
    7.86B
     
    2%
     
    +11%
    Source: Netflix
    Netflix earnings key watches

    Strong growth momentum

    Netflix's performance in the third quarter of 2023 was remarkable. The company achieved an impressive 8% growth in revenue, reaching a record high level, primarily attributed to the higher-than-expected paid membership growth. Its global expansion of its streaming services played a crucial role, with a net addition of 8.76 million paid memberships in Q3 alone, pushing the total paid membership to a new record high of 247 million.

    Into the fourth quarter, the company remains optimistic about its growth prospects and anticipates the continuation of robust user growth momentum.According to forecasts from the streaming giant, its Q4 revenue is projected to increase by 11% year-over-year, reaching $8.7 billion. The net addition of paid memberships is projected to be close to the previous quarter, potentially with another 8-9million new subscribers.

    Netflix Q4, 2023 Forecast
    Source: Netflix Cost and margin headwind

    The streaming king’s rosy outlook does not come without challenges.

    Netflix’s operating margin is projected to take a dip in the fourth quarter. After reaching a 22.4% record high in the Q3, the notably surging content costs combined with a moderating global ARM (Average Revenue per Membership) are likely to mark an inflection point in Netflix’s profitability from Q4 2023 and onwards.

    Earlier this month, Citigroup revised down its rating on Netflix from "Buy" to "Hold" emphasising its concerns about the stream king’s falling margins. Citigroup projected that Netflix's content spending would rise to around $20.4 billion by 2025, casting doubt on the company's profitability in the next two years. Based on the company’s forecast, its operating margin could plunge to 13% in Q4 from 22% in the recent quarter.

    Additionally, Netflix also admitted that a strong US dollar versus other currencies would cost roughly $200M on the company’s Q4 revenue and ARM.

    Netflix stock price and technical analysis

    Before we embark on another year of uncertainties for price movements, let's first take a glance in the rear-view mirror at Netflix stock's past performance.

    Over the last three years, Netflix's share price has experienced a rollercoaster ride, recording gains of 11% in 2021, a significant decline of -51% in 2022, and a juicy 65% gain in 2023. In contrast, the S&P 500 exhibited returns of 27% in 2021, faced a downturn of -19% in 2022, and rebounded with a 24% rise in 2023. It’s also not hard to see from the comparison charts below that Netflix's share price has demonstrated wilder volatility compared to the key benchmark in the past five years.
     
    Source: Tradingview At the moment, Netflix's share price is hovering around the key threshold of $500, maintaining a clear and valid uptrend since July 2022 with the prices trading above all the major moving averages. Its remarkable performance in the past 18 months has earned an 8 out of 10 score rating by TipRanks, coupled with a strong endorsement from 25 buy ratings out of 35 global analysts in the past three months.
    Source: IG In the short term, trend followers may welcome the breakout from the $500 hurdle as a robust bullish momentum in harmony with the longer-term uptrend, and set their sights on the next target, near $560.

    Nevertheless, it's worth noting that the range between $500 and $560 might pose a greater challenge, considering its historical congestion patterns dating back to June 2020 to August 2021 (as highlighted in the chart).

    Conversely, a breach below the $480-$490 range could potentially serve as an early warning sign for a correction risk, as the ascending trajectory formed since October 2023 would lose its efficacy.
    Source: IG Netflix Q4 earnings preview summary

    Overall, I believe the crucial watch for the impending earnings would be on Netflix's strategy and outlook to navigate declining profitability while sustaining its growth trajectory. In terms of stock prices, the upcoming quarterly update is poised to play a crucial role in determining if the stock price can successfully surpass the significant psychological level of $500.

       
    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.
  9. MongiIG
    Rolls’ shares rocketed in 2023, buoyed by improved financial fortunes as it reaped the fruits of CEO Tufan Erginbilgic’s turnaround strategy. Where next?
    Source: Bloomberg   Indices Shares FTSE 100 Roll-Royce Stock Investment
     Charles Archer | Financial Writer, London | Publication date: Monday 15 January 2024 18:30 Rolls-Royce shares soared by circa 220% in 2023, buoyed by recovering civil aviation, increased state defence spending, and a newly appointed energetic CEO with a clear turnaround strategy. Indeed, Rolls was the top performing large cap stock in Europe last year as measured by the Stoxx Europe 600 index.
    For context, Marks & Spencer — which re-entered the FTSE 100 last year — returned ‘just’ 120%. However, while Rolls shares are now changing hands just above the 300p mark, multiple brokers consider that the company has further to run in 2024.
    But remember, past performance is not an indicator of future returns.
    Rolls-Royce share price: results and targets
    In August’s half-year results, underlying operating profit came in at £673 million with free cash flow of £356 million reflecting ‘continued end-market growth and focus on commercial optimisation and cost efficiencies across the Group.’
    Further, the FTSE 100 operator raised its 2023 guidance for underlying operating profit to between £1.2 billion and £1.4 billion, and free cash flow to £900 million to £1 billion — due to transformation efforts accelerating its ‘financial delivery.’
    Then at its Capital Markets Day on 28 November, the company announced a plan to develop a ‘high performing, competitive, resilient and growing business.’ Among other things, this included a mid-term target to deliver operating profit of between £2.5 billion and £2.8 billion, on an operating margin of between 13% and 15% — with free cashflow of £2.8 billion to £3.1 billion and a return on capital of between 16% and 18%.
    This is all intended to create an ‘investment grade’ profile for the stock, as part of a strategy to support at least £1 billion of gross disposals over the next five years.
    CEO Tufan Erginbilgic enthused that ‘Rolls-Royce is at a pivotal point in its history. After a strong start to our transformation programme, we are today laying out a clear vision for the journey we need to take and the areas where we must focus. We are creating a high performing, competitive, resilient and growing Rolls-Royce.’
    Where next for Rolls Royce shares?
    Setting financial targets is one thing — achieving them is another. However, city brokers seem impressed. Citi has a price target of 431p, while JP Morgan has set theirs at 400p and Barclays has gone down the middle at 409p. And all three price targets are set with the expectation of being achieved within the next 12 months.
    Barclays analysts are particularly positive about the increased expected cash flow — which should boost the net cash position over the next year, allowing Rolls to recover its investment grade credit rating — and also help the FTSE 100 company pay down its debt pile.
    Looking beyond civil aviation recovery, increased defence spending, and the promising UltraFan gearbox programme, the next catalyst may be Rolls’ small modular nuclear reactors. Prime Minister Rishi Sunak plans to relax planning ruleS restricting the plants, noting that ‘nuclear is the perfect antidote to the energy challenges facing Britain.’
    The long-term plan is to get 25% of the UK’s energy needs from nuclear by 2050, representing some 24GW of capacity, and almost double the 14% of today. The government retains a golden share in Rolls-Royce and has already granted the company some funding to get started. However, the FTSE 100 business still needs to compete for government contracts alongside five other hopefuls, with a winner set to be announced within months.
    Erginbilgic came in at the start of 2023 to fix, in his own words, a ‘burning platform.’ The share price performance and near universal ‘buy’ targets suggest more growth may be imminent. But the FTSE 100 company cut 9,000 staff during the pandemic and even more throughout last year. This loss of institutional knowledge could be a problem as demand for services return.
    However, given the success thus far, Rolls-Royce remains one of the best FTSE 100 stocks to watch in 2024.
    Financial results are due in February.

       
    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. MongiIG
    Technical overview remains bullish though has stalled heavily on the daily time frame, and CoT speculators continue to raise their heavy buy bias.
      Source: Bloomberg
      Shares Revenue Consumer price index JPMorgan Chase Citigroup Market trend
     Monte Safieddine | Market Analyst, Dubai | Publication date: Monday 15 January 2024 07:01 Mixed pricing data and earnings from the financial heavyweights
    More pricing data was available last Friday, following Thursday’s CPI (Consumer Price Index) readings for December. These readings were hotter than anticipated. In contrast, the producer prices for the same period were lighter than forecast. The year-on-year (y/y) reading was 1% for the headline and -0.1% month-on-month (m/m). Excluding food and energy, the figure fell to 1.8% y/y, due to a lack of m/m growth in its core.
    On the earnings front, there was plenty to process. Financial heavyweights released their figures, which included one-off hits such as refilling the deposit insurance fund and setting aside more for loan loss provisions.
    Key outcomes were:
    Discover how to trade the markets
    Learn how indices work – and discover the wide range of markets you can trade on – with IG Academy's free ’introducing the financial markets’ course.
    Try IG Academy   JPMorgan Chase, beating on revenue and reporting an annual profit of nearly $50bn, even as quarterly net income dropped Bank of America, beating on earnings but missing on revenue with net interest income (NII) dropping 5% Wells Fargo, an exception, enjoying a rise in profits and beating both earnings and revenue, though NII dropped as well Citigroup, suffering a $1.8bn loss with revenue missing estimates and sizable charges that were announced earlier. Key US stocks finished the week higher, with tech outperforming. Treasury yields were in retreat, though impacted less on the furthest end. Market pricing (CME's FedWatch) is heavily in favor of a rate cut in March and back at anticipating beneath 4% by the end of the year.
    Week ahead
    The upcoming week starts off light due to a US holiday, gradually picking up towards Wednesday’s retail sales for December. In the housing sector, there's plenty of data. This includes the weekly mortgage applications on Wednesday, followed by NAHB’s housing market index, which remains sub-50, signifying a negative outlook. On Thursday, both building permits and housing starts are due, where previously the former dropped m/m while the latter jumped. Existing home sales on Friday are struggling to rise to pandemic lows, with rates still high enough to discourage many homeowners locked in with lower rates from selling.
    Manufacturing indices from the Federal Reserve banks of New York and Philadelphia will likely remain negative as the sector continues to suffer contraction. On Friday, we’ll have preliminary readings from UoM (University of Michigan) where consumer sentiment has improved from mid-2022 lows, and inflation expectations are in notable retreat.
    Additionally, there are more earnings to consider, with (Dow 30 component) Goldman Sachs and Morgan Stanley reporting tomorrow and numerous regional banks throughout the week. A government shutdown looks less likely as we approach the first deadline, following reports that congressional leaders have agreed to a continuing resolution to keep it going until March. For the US primary elections, there’s the Republican Iowa caucus today.
    Dow technical analysis, overview, strategies, and levels
    The Dow saw a positive close, but it failed to undo the losses from the preceding week. There was a lack of play for both conformist and contrarian strategies on the longer-term weekly, with the intraweek highs and lows within its previous weekly 1st levels.
    However, the daily time frame was different. Thursday's lows got past its 1st Support and S/L, initially favoring contrarian sell-breakouts and stop-outs for conformist buy-after-significant reversals. Later, it offered the latter a chance at redemption with a move back up on that day and Friday. The overview remains bullish in both time frames but is stalling more noticeably on the daily.
      Source: IG
    IG client* and CoT** sentiment for the Dow
    IG Clients are still in extreme sell territory but have dropped from 83% to 80%, with a small portion trading these higher ranges.
    As for CoT speculators, they have increased their long bias, taking it to a heavy buy at 74% on an increase in longs and a simultaneous drop in shorts (longs +2,678 lots, shorts -1,859). With another percentage sentiment gain like that, it'll be in extreme long territory when the next report is released.
      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 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.
    CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
  11. MongiIG

    S&P 500 Momentum Report

    By MongiIG,


    Market News
    The S&P 500 concluded the first week of January with its first weekly decline since October 2023, but were quick to pare the losses into the new week as inflows into big tech resume.
    Source: Bloomberg   Indices S&P 500 Inflation Federal Reserve Refinitiv Technical analysis
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 09 January 2024 11:20 S&P 500 pare losses into the new week following first weekly decline since October 2023
    The S&P 500 concluded the first week of January with its first weekly decline since October 2023, but were quick to pare the losses into the new week as inflows into big tech resume. There has not been much on the economic data front to start the week, apart from a broad-based fall in consumer inflation expectations from the New York Federal Reserve (Fed) survey driving the disinflation narrative. But given the outsized positive reaction in risk sentiments, it suggests that market participants are eager to take advantage of any near-term retracement to jump back into the markets.
    Focus shifts to US inflation data
    Ahead, attention will turn to the US consumer price index (CPI) this week to determine if the rally can have more legs to run. Thus far, markets continue to race ahead of the Fed in pricing for six rate cuts through 2024, with the first cut priced to be as early as March 2024, and significant disinflation progress is needed to justify such views.
    Current expectations are for an uptick in US December headline inflation to 3.3% from previous 3.1%, but the core aspect will likely carry more weight in swaying Fed officials’ views. Current consensus is for further easing in core pricing pressures to 3.8% year-on-year from previous 4.0%, where a match or below-consensus read may help to keep the market confidence going.
    Nasdaq technical analysis: Attempting to regain composure following recent retracement
    Following the retracement since end-December last year, the Nasdaq 100 index is attempting to find some support off the 16,300 level, where a 23.6% Fibonacci retracement stands from its October low to December 2023 peak. This comes as its relative strength index (RSI) on the daily chart heads back towards the key 50 level, which calls for some defending from the bulls to keep the near-term upward bias intact. Ahead, the 16,300 level will remain as a key support to hold, while the bulls may set their eyes on the key 17,000 level for a retest.
     
     
    Source: IG charts
     
    S&P 500 technical analysis: Buyers eager to take any retracement as dip-buying opportunity
    Following a brief dip below the 4,700 level for the S&P 500, buyers showed that they are not ready to cave in just yet as its daily RSI found some defending at the key 50 level. The formation of a bullish pin bar candle last Friday points to some dip-buying at the 4,670 level, while the index attempts to head back to retest its 2023 high at the 4,800 level. Any successful move above the 4,800 level may potentially leave the psychological 5,000 level on watch next, while on the downside, support confluence may be found at the 4,600-4,640 level.
     
     
    Source: IG charts
     
    Sector performance
    The first week of 2024 brought a defensive shift in the markets, as sector performance revealed a pull-ahead in healthcare (+2.9%) and utilities (+2.6%), compared to mixed performance in economically-sensitive sectors. The S&P 500 was lower by 1.5% for the week, with some unwinding in the heavyweight big tech following its recent rally. Notably, Tesla was down 3.2%, while Amazon was lower by 1.9%, leading to the consumer discretionary sector (-1.7%) being the underperformer. Apple was dragged 3.6% in the red as well, but losses in the technology sector (-1.4%) were mitigated by a 5.5% jump in Nvidia. As we look towards the major US banks’ earnings this week, the financial sector will be cast into the limelight. Thus far, the Financial Select Sector SPDR Fund has gained for the fourth straight week to register its highest level since March 2022, with all eyes set on its all-time high in January 2022 next.
     
     
    Source: Refinitiv
     
    Source: Refinitiv
     
    Source: Refinitiv
    *Note: The data is from 2nd – 8th January 2024.
     
    Source: Refinitiv
    *Note: The data is from 2nd – 8th January 2024.
     
    Source: Refinitiv
    *Note: The data is from 2nd – 8th January 2024.

      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.
  12. MongiIG
    These five FTSE 100 dividend stocks could be some of the best to watch next month. These shares have been selected for their highly defensive natures.
    Source: Bloomberg   Indices Shares Dividend yield Revenue Debt FTSE Group  
     Charles Archer | Financial Writer, London What's on this page?
    FTSE 100 2023 Performance Defensive FTSE 100 Stocks Best FTSE 100 Dividend Stocks to Watch   FTSE 100 2023 performance
    2023 was a volatile year for the FTSE 100, but the UK’s premier index nevertheless ended the year up by 3.8%. This compares with a global average growth of 20% when using the MSCI All Country World Index, the 25% growth experienced by the S&P 500 and the 45% NASDAQ Composite leap driven by the artificial intelligence boom.
    However, the FTSE is widely regarded as a defensive index, and compares more favourably when dividend payouts are factored in. And for context, 2022 saw the NASDAQ Composite lose more than a third of its value while the FTSE rose by around 1%.
    Defensive FTSE 100 stocks
    Further, within the FTSE 100 there are some specific dividend stocks with a highly defensive nature. These companies enjoy an underlying business model whereby revenue and profits will continue to be generated regardless of the wider economic environment. Typically, this is because they provide essential products or services, or enjoy a wide economic moat.
    In other words, a hallmark of FTSE 100 defensive stocks is that they benefit from inelasticity of demand — such that they can increase prices to match inflation if necessary. This makes them attractive in downturns, but on the other hand, these types of stocks rarely deliver large capital gains.
    There are several sectors considered as defensive: for example, consumer staples, utilities, healthcare, and tobacco companies.
    When considering the best dividend stocks, key factors to consider include the dividend yield, the dividend coverage ratio (how many times a company could pay the dividend with current net income), the payout ratio, whether there’s a proven history of payouts, and whether the dividend has grown over time. In particular during this high rate environment, debt is a key factor to watch; previously manageable debt piles are becoming more expensive to maintain and could eat into dividends.
    These five FTSE 100 dividend stocks are popular defensive choices. But remember, past performance is not an indicator of future returns, and popularity does not mean an investment is better. In addition, while these are defensive companies, there are higher returns to be found in cyclical industries.
    Best FTSE 100 dividend stocks to watch
    1. Unilever2. Phoenix Group3. National Grid4. Vodafone5. British American Tobacco Unilever (LON: ULVR)
    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.
    Operating in the consumer staples sector, Unilever’s Q3 results saw underlying sales grow by 5.2% year-over-year, while its €billion premium brand portfolio saw underlying sales growth of 7.2%.
    Regardless of price rises, brand loyalty towards certain food staples appears robust.
    However, Unilever shares have fallen by nearly 10% over the past year — and the company has responded with an action plan to improve value creation through 2024. The dividend yield may appear underwhelming, but this is often the trade-off for defensive qualities.
    Dividend Yield: 4%
    Phoenix Group (LON: PHNX)
    Phoenix Group has made a strong recovery since mid-October, but nevertheless remains almost 14% down compared to a year ago. This may appear an opportunity, as H1 results saw the FTSE 100 insurer deliver cash generation of £898 million, allowing the company to boost its interim dividend by 5% to 26p per share.
    Given that Phoenix is now on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend appears safe — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    Insurance is often seen as one of the safest defensive dividend sectors. However, the company’s bonds have likely fallen in value with elevated interest rates, and Phoenix also has a large debt pile to manage.
    JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    Dividend Yield: 9.8%
    National Grid (LON: NG)
    National Grid works within the utilities sector, operating electricity and natural gas transmission across the UK and parts of northeastern United States. It’s hard to think of a more defensive company than the one delivering the country’s energy network.
    Indeed, the FTSE 100 company has risen by 35% over the past five years and still boasts an index-beating dividend yield. National Grid has invested £7.7 billion in build smart, clean energy infrastructure to boost network reliability — and found £236 million of operating cost efficiencies during 2023 to mitigate the impact of high energy prices.
    And the company recently updated its five-year financial framework to 2025/26 to increase total cumulative capital investment to £42 billion — balancing dividends with future proofing.
    Dividend Yield: 5.4%
     
    Vodafone (LON: VOD)
    Vodafone shares have fallen by 56% over the past five years. This may be a cautionary tale — telecoms are widely regarded as defensive and yet the stock has failed to retain its value. On the other hand, new investors might be tempted by the double-digit dividend yield alongside a price-to-earnings ratio of just 2.
    But it’s worth noting this figure is based on asset sales in its last financial year which included the €8.61 billion generated from the sale of Vantage Towers. And in recent half-year results, net debt increased by €2.9 billion to €36.2 billion, raising questions over the dividend’s sustainability.
    However, recent German growth could be encouraging for investors because Vodafone relies on the country for a significant chunk of its revenue. For context, 2021 legislation saw housing associations banned from bundling TV services with rental contracts, hurting Vodafone’s prospects.
    CEO Margherita Della Valle enthused that ‘during the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter.’
    Dividend Yield: 11.2%
    British American Tobacco (LON: BATS)
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine — and yet, shares have fallen by almost a third over the past year.
    The company continues to face regulatory problems; the UK is considering a ban on single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products.
    BATS is also contending with the wider fall in smoking worldwide; recently writing off £25 billion in value due to falling outlook for its brands as cigarette sales struggle in the US. And like Vodafone and Phoenix, the FTSE 100 business also has a large debt pile.
    Nevertheless, the business is investing heavily in alternative products including vapes, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%.
    Dividend Yield: 9.9%
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    *Based on revenue excluding FX (published financial statements, October 2021).

        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. MongiIG
    As per tradition, the 4Q 2023 earnings parade will kick off with the major US banks, starting with JPMorgan, Citigroup, Wells Fargo and Bank of America this Friday.
    Source: Bloomberg   Shares Bank United States JPMorgan Chase Price Interest
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Monday 08 January 2024 04:58 US bank stocks: Earnings schedule
    Source: Refinitiv  
    As per tradition, the 4Q 2023 earnings parade will kick off with the major US banks, starting this Friday (12 January 2024) with JPMorgan (JPM), Citigroup, Wells Fargo and Bank of America (BAC) leading the pack.
    US bank stocks: Share price performance
    On a one-year basis, the share price performance for the banks has varied widely. JPM is the clear outperformer with a 26.9% gain over the past year, while BAC lagged the broader industry (+9.3%) with a mere 0.9% gain. Its underperformance may partly be attributed to a slower price recovery from the March 2023 US banking turmoil, given its relatively larger exposure to unrealised losses in its bond portfolio.
     
    Source: Refinitiv Source: Refinitiv. Data as of 3 January 2024.  
    For 4Q 2023, expectations are for most major US banks to turn in positive revenue growth from the previous year. Notably, a double-digit growth (11.8%) for JPM is the consensus, with optimism surrounding the revenue and cost synergies brought by the ongoing integration of First Republic Bank into its business.
    On the other hand, BAC is expected to be the exception with a negative top-line growth (-2.6%) out of the major US banks, while turning in the biggest earnings per share (EPS) decline (-19.9%).
    Falling bond yields in 4Q 2023 may offer banks stock some breathing space
    4Q 2023 has seen a drastic plunge in bond yields on expectations of rate cuts ahead, with the US 10-year Treasury yields easing sharply from its peak of 5.02% to the current 4.05%. Given that the banks are previously forced to pay up for deposits to compete with higher yielding instruments, falling yields may aid to ease some pressures on the banks’ funding costs.
    The recovery in bond prices in 4Q 2023 may also alleviate the losses on the banks’ securities portfolio, potentially aiding to bring back some confidence for the stability of the banking sector.
     
     
    Impact on net interest income on watch
    In 3Q 2023, most banks' net interest margins (NIM) largely declined, as banks moved to provide higher deposit costs to limit deposit outflows. Therefore, with the rate narrative pivoting towards lower rates through 2024, eyes will be on the subsequent impact on the banks’ NIM and whether margins can remain supported.
    Based on the Federal Reserve (Fed)’s data which tracks commercial bank balances, lending activities in the 4Q 2023 may remain weak, amid tighter lending standards and high interest rates. This seems to be a continuation of the prevailing trend throughout 2023, and market participants will be on the lookout for any positive surprises on the lending front from the banks.
    Validation for soft landing hopes on the lookout
    With market participants basking in hopes of a soft landing scenario into 2024, the banks’ guidance will be closely watched for validation of a resilient economy. During 3Q 2023, the major banks have provided lower-than-expected allowance for credit losses, with a decline from 2Q 2023.
    The extent of provisions for credit costs provides a gauge of economic risks that the banks foresee, therefore, market participants will want to see loss provisions moderating further towards ‘normal’ levels (levels preceding the Covid-19 pandemic) to support views of soft landing.
    The banks have also previously guided that US consumers finances remain healthy while noting some resilience in US economic conditions, which leaves views in place for similar positive guidance ahead.
    Improved risk environment may support investment banking and wealth management activities
    Following a disappointing first nine months of 2023 in investment banking activities, expectations are in place that better times are ahead, with resilient economic conditions and a different course of rate outlook into 2024.
    The improved risk environment seen in 4Q 2023 could be supportive of such views and with early signs of revival in deal-making, market participants will want to see the positive impact being reflected in the banks’ results, although it may come with a few months lag. Nevertheless, any signs that the worst is over on that front will be very much cheered and may help to contribute to the banks’ earnings recovery.
    Technical analysis – JPMorgan’s share price hovers around record high
    JPMorgan’s share price has briefly touched a fresh record high last week for the first time in more than two years, hovering around its October 2021 peak at the US$173.00 level. Near-term overbought technical conditions may call for some cooling in its recent rally, but any sell-off could still be a near-term retracement within a broader upward trend at current point in time. Prices continue to trade above its Ichimoku cloud support on the weekly chart, alongside various moving averages (MA) which keep the bullish bias intact. On the downside, the US$166-$168 level may serve as support zone to hold with recent consolidation.
     
    Source: IG charts  
    Technical analysis – Bank of America’s share price showing some signs of life
    Despite underperforming the broader industry for the bulk of 2023, BAC share price has been showing some signs of life lately, having broken above a broad descending wedge pattern in November 2023. Notably, on the weekly chart, its share price has overcome its Ichimoku cloud resistance for the first time since March 2022, while its weekly moving average convergence/divergence (MACD) headed above the key zero mark as a sign of building upward momentum. Further upside may leave its 2023 high at the US$37.12 level on watch for a retest, while on the downside, recent consolidation leaves US$32.84 as potential support to hold.
     
    Source: IG charts  
    Technical analysis – Goldman Sachs’ share price broken out of descending triangle
    Goldman Sachs’ share price has broken out of a broad descending triangle last month, moving on to retest the US$388.40 horizontal resistance, which marked its November 2022 peak. Similarly, on the weekly chart, its MACD has also reverted back above the zero level as a reflection of building upward momentum. Overcoming the US$388.40 level of resistance may leave its all-time high at the US$429.80 level on watch next.
     
    Source: IG charts
       
    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.
  14. MongiIG

    Top investments to watch in 2024

    By MongiIG,


    Market News
    Gold, Dow Jones, Nvidia, Rolls-Royce and Coinbase may be the top investments to watch in 2024. These investments have been chosen for their success in 2023 amid recent market news.
    Source: Bloomberg   Forex Shares Investment United States Nvidia Cryptocurrency
     Charles Archer | Financial Writer, London What's on this page?
    1. Gold2. Dow Jones3. Nvidia4. Rolls-Royce5. Coinbase   Going into 2024, investors may be hoping for less instability and calmer growth. Whether stocks, bonds or commodities, virtually every asset class has seen significant volatility, driven by geopolitical instability alongside uncertainty over both inflation and the monetary policy sufficient to rein it under control.
    Fortunately, the consensus seems to be forming that inflation will continue to fall, that interest rates have peaked, and that they will also start to slide downwards in 2024.
    However, if the past few years have taught UK investors anything, it’s that predictions are based on known criteria. And after Brexit, the Johnson landslide, the covid-19 pandemic, the Ukraine War, Silicon Valley Bank, and the Truss mini-budget, it’s fair to say that investors will be on guard for the next ‘black swan.’
    But while there may have been volatility, many investments have done very well in 2023, and may continue to do so in 2024. Five are listed below — but always remember that past performance is not an indicator of future returns.
    Top investments to watch
    Gold
    Gold has historically served as the reliable ‘safe haven’ asset and inflationary hedge during times of severe economic stress, and this trend continued reliably in 2023.
    For perspective, central banks purchased 1,136 tonnes of gold worth $70 billion in 2022, the highest amount since records began in 1950. This marks a notable departure from the trend of selling gold in previous decades, and the buying has continued in 2023.
    The appeal of gold lies in its characteristic as an asset that is not tied to any specific issuer or government, providing diversification for central banks away from other traditionally safe assets such as the US Dollar or US treasuries — and this is especially pertinent as the US debt ceiling crisis rumbles on.
    Gold has rocketed above $2,000/oz in 2023 and may continue to climb in 2024.
    Dow Jones
    The Dow Jones is well-known as the ‘blue chip’ US index, hosting 30 of the most prominent US stocks including Apple, Walmart and McDonalds. The index hit a record high today, rising above 37,100 points as investors cheered the more dovish tones set out by the Federal Reserve.
    While inflation scarring may take some time to heal — and with the caveat that even blue chips carry some risk — there’s a reason why Warren Buffett argued in 2021 that ‘I have yet to see a time when it made sense to make a long-term bet against America.’
    For context, the Dow has risen by 54% over the past five years, including the pandemic mini-crash and all the increased geopolitical tensions since. Of course, this flight to quality may reverse should risk appetite return.
    Nvidia
    Nvidia shares have been on a dizzying rally this year to a $1.2 trillion valuation. The semiconductor champion is clearly one of the most popular stocks of 2023 — though of course, popularity does not mean it is the best investment available.
    The rally is a result of AI demand, spurred on by the release of the revolutionary ChatGPT. In Q3 results, Nvidia saw record revenue of $18.12 billion, up by 34% quarter-on-quarter, and by a whopping 206% compared to a year ago. A highlight was data centre revenue, which increased by 279% over the past year to $14.51 billion.
    Founder and CEO Jensen Huang enthuses 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.’
    Of course, with a price-to-earnings ratio of 63 and the US government imposed export bans on certain chips to China, there are some risk factors to consider.
    Rolls-Royce
    Up 205% year-to-date to over 300p, Rolls-Royce shares have been the star performer of the FTSE 100, after CEO Tufan Erginbilgic delivered a stunning turnaround in his first year in charge.
    For fairness, he came on board at a fortuitous time; soaring post-pandemic travel demand has increased flying hours, the Russia-Ukraine war has seen defence spending rise, and the rising political importance of energy independence — consider the modular nuclear reactors — are all macroeconomic catalysts for the business that were out of his hands.
    But the growth could be set to continue. With a slew of banking giants upgrading their targets in recent days, Fitch Ratings has upgraded Rolls to BB+, a step towards regaining its all-important BBB investment grade status, lost during the pandemic.
    For context, the FTSE 100 stalwart plans to deliver operating profit of as much as £2.8 billion and free cash flow of up to £3.1 billion by 2027.
    Coinbase
    Coinbase shares have risen by nearly 350% year-to-date after a disastrous 2022 saw much of the company’s value wiped out. For investors looking for exposure to the cryptocurrency asset class, but without taking ownership directly, the exchange could be attractive.
    Coinbase is the largest crypto exchange in the US and may be viewed as the ‘picks and shovels’ crypto stock.
    For context, Bitcoin — inarguably the most well-known cryptoasset — has risen by over 150% year-to-date, and BlackRock — the world’s largest asset manager — is revising its spot Bitcoin exchange traded fund to enable major banks such as Goldman Sachs and JP Morgan to participate in the market more easily despite regulatory restrictions preventing them from keeping direct holdings.
    Naturally, Bitcoin is an unregulated asset that is viewed by many as both volatile and extremely high risk.
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).

        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.
  15. MongiIG

    S&P 500 Momentum Report

    By MongiIG,


    Market News
    With rate-cut views validated by US policymakers at the recent FOMC meeting, the risk rally has found further momentum towards year-end, as the S&P 500 logged its seventh straight week of consecutive gains.
    Source: Bloomberg   Indices S&P 500 Personal consumption expenditures price index United States Inflation Federal Reserve
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 21 December 2023 09:08 S&P 500 logged its seventh straight week of gains, with eyes on its all-time high ahead
    With rate-cut views validated by US policymakers at the recent Federal Open Market Committee (FOMC) meeting, the risk rally has found further momentum towards year-end, as the S&P 500 logged its seventh straight week of consecutive gains. We may have to go back all the way to 2017 to see a seven-week winning streak from the index.
    From the macro lens, the trend of easing US inflation and soft landing hopes have kept risk-on sentiments well-anchored, with earlier pushback on rate cuts by Federal Reserve (Fed) members failing to trigger much of a dent. As we head into year-end, with both the Dow Jones Industrial Average (DJIA) and Nasdaq touching its all-time high, all eyes will be on whether the S&P 500 can deliver as well, standing just less than 1.5% away.
    For now, extreme overbought technical conditions do reveal considerable risks in opening fresh longs at current level, with the relative strength index (RSI) on the daily chart hovering at its highest level since September 2020. The 4,740 level may stand as immediate resistance to overcome for the index, serving as a strong hurdle on previous three occasions. Having broken out of a falling channel pattern back in mid-November this year, the 4,740 level also marked the eventual price projection of the channel breakout. That said, the broader upward trend remains intact with the series of higher highs and higher lows in place since October 2022, with any retracement likely to be a temporary move.
     
     
    Source: IG charts
     
    In terms of market breadth, the percentage of S&P 500 stocks above their 50-day moving averages (MA) are currently hovering at extreme overbought levels (88% versus previous peaks of 90-92%). Similarly, the percentage of S&P 500 stocks above their 100-day MA are also touching previous peaks of around 80-82%, which may suggest that the risk-reward may be less ideal at current stage. The Fear & Greed Index are also back to ‘extreme greed’ levels for the first time since August 2023, while the VIX has somewhat stabilised at current levels over the past few trading days.
     
     
    Source: TradingView
     
    Ahead this week, we will have the last piece of US inflation data for the year – the US core Personal Consumption Expenditure (PCE) price data, which will be closely watched for validation that the US disinflation trend is continuing. In contrast to the Fed's projection of three rate cuts next year, the interest rate market still expects six rate cuts in 2024, with the first cut as early as March 2024. Therefore, a quicker moderation in inflation back to the 2% target will be much-needed to confirm such dovish expectations.
    The consensus expectation is for November core PCE to ease to 3.3% from previous 3.5%, which will be the lowest rate since May 2021. Likewise, the headline PCE is expected to moderate to 2.8% from previous 3.0%.
     
     
    Sector performance
    In terms of sector performance last week, market participants clearly leaned towards taking on higher risks post-FOMC as defensive sectors (consumer staples, healthcare, utilities) underperformed. Nevertheless, risk-on sentiments remain broad-based, with ten out of 11 S&P 500 sectors in the green last week, aiding the S&P 500 to deliver its seventh week of gains. The ‘Magnificent Seven’ stocks were all higher for the week, but with more notable performance coming from Nvidia (+7.4%), Meta Platforms (+6.0%),Amazon (+5.6%) and Tesla (+5.2%). The rate-sensitive real estate sector was the top performing sector, continuing its catch-up traction on the Fed’s dovish rhetoric. The sector has been the top performer over the past month as well. On the other hand, the energy sector managed to pull off some gains as oil prices recover from its lowest level since July 2023, but the bulk of 2023 has largely seen the sector consolidate in a range. Year-to-date, the sector remained in the red (-4.3%), alongside the defensive sectors.
     
     
    Source: Refinitiv
     
    Source: Refinitiv
     
    Source: Refinitiv
    *Note: The data is from 12th – 18th December 2023.
     
    Source: Refinitiv
    *Note: The data is from 12th – 18th December 2023.
     
    Source: Refinitiv
    *Note: The data is from 12th – 18th December 2023.

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  16. MongiIG
    These Artificial Intelligence ETFs could be the five best to watch next month. These ETFs have been selected for their large market valuations.
    Source: Bloomberg   Shares ETF Artificial intelligence Nvidia Robotics Automation  
     Charles Archer | Financial Writer, London What's on this page?
    1. ROBO Global Robotics and Automation Index ETF2. Global X Robotics & Artificial Intelligence ETF3. Wisdom Tree Artificial Intelligence UCITS ETF4. iShares Robotics and Artificial Intelligence ETF5. L&G Artificial Intelligence UCITS ETF   Artificial Intelligence (AI) has arguably been the Exchange Traded Fund theme of choice in 2023. The ‘magnificent seven’ US tech shares have delivered the vast majority of the returns within the S&P 500 this year — driven by AI enthusiasm.
    Indeed, the popular ‘picks and shovel’ AI stock — Nvidia — has seen its market capitalisation rise by 236% year-to-date to circa $1.2 trillion. Q3 results saw Nvidia’s revenue rise by a whopping 206% year-over-year $18.12 billion, with CEO Jensen Huang nothing 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.’
    The 2023 AI boom was arguably started by the launch of OpenAI’s chatbot, ChatGPT, but artificial intelligence has long been used across sectors including entertainment, social media, art, retail, security, sport analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
    For perspective, ChatGPT garnered over 1 million users in just five days — and now boasts over 100 million weekly active users. By contrast, it took Netflix three and a half years to hit the same milestone.
    As with every technological step forward, there are some risks to consider. To start with, AI development is costly, and is therefore mostly driven by the blue chips. Further, many AI experiments fail, and many investors consider that diversifying their risk through an AI-themed ETF could be an attractive choice.
    Of course, past performance is not an indicator of future returns. And no investment is risk free.
    Best AI ETFs to watch
    ROBO Global Robotics and Automation Index ETF
    The ROBO Global Robotics and Automation Index ETF was the first ETF of its kind to hit the market in the US. Launched in 2013, it has 78 holdings and boasts $1.4 billion in assets under management. The fund is focused on businesses driving ‘transformative innovations in robotics, automation, and artificial intelligence.’
    With holdings across both developed and emerging economics, the ETF contains companies ranging from fabless manufacturing company Keyence, warehouse robotics expert Symbotic, and robotic surgery specialist Intuitive Surgical.
    It’s worth noting the higher-than-average expense ratio of 0.95%, though the fund has performed well in 2023.
    Global X Robotics & Artificial Intelligence ETF
    The Global X Robotics & Artificial Intelligence Thematic ETF, established back in 2016, aims to ‘invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence.’
    The ETF holds 44 stocks, including semiconductor champion Nvidia, but also Swiss industrial manufacturer ABB and Japanese robotics company Fanuc, alongside Keyence and Intuitive Surgical. These two are also in the ROBO ETF above — which isn’t too surprising when the specialisation of both companies is considered.
    The ETF is up by 35% over the past year and 70% over the past five years, but also has an elevated expense ratio of 0.68%. For perspective, a typical NASDAQ 100 index tracker might have an expense ratio of as little as 0.14%.
    Wisdom Tree Artificial Intelligence UCITS ETF
    The WisdomTree Artificial Intelligence UCITS ETF tracks the performance of the NASDAQ CTA Artificial Intelligence Index. The fund is run by Irish Life Investment Managers and provides access to a dedicated selection of companies working within the AI space.
    Top holdings include Upstart, Nvidia, Blackberry, and the promising C3.ai — with the vast majority of the ETF invested in the information technology sector, and heavily concentrated in the US. The fund is ISA, SIPP and UCITS eligible with a middling expense ratio of 0.4%. This could appear good value given the strong performance over the past few years.
    iShares Robotics and Artificial Intelligence ETF
    The iShares Automation and Robotics UCITS ETF is a popular Blackrock offering, which invests in developed and emerging companies generating significant sales from robotics and automation. It tracks the STOXX Global Automation and Robotics Index.
    The fund is worth more than $3 billion, and is UCITS, SIPP and ISA eligible. Like Wisdom Tree’s offering, it offers a reasonable expense ratio of 0.4%. With 86 holdings, its top 10 investments include Lattice Semiconductor Corp, Sage Group, Nvidia, Advantest, and Bentley Systems.
    In common with most AI ETFs, the fund performed poorly in 2022 though rebounded sharply in 2023. This recovery may be set to continue given falling inflation and analyst hopes of a soft landing.
    L&G Artificial Intelligence UCITS ETF
    The L&G Artificial Intelligence UCITS ETF is run by a management team which believes that AI is a long-term trend that is ‘radically changing the way we live and work.’
    The actively managed ETF picks stocks via a team of AI experts and is UCITS compliant. Significant holdings include the NASDAQ blue chips and ‘magnificent seven’ companies Alphabet, Nvidia, Microsoft and Amazon.
    While the ETF has done very well since its launch in 2019, Legal & General considers its risk profile to be a 7, on a scale where 1 is the lowest and 7 is the highest risk. Further, it has a mildly expensive expense ratio of 0.49%.
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).

        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.
  17. MongiIG

    Best AI stocks to watch in January 2024

    By MongiIG,


    Market News
    Microsoft, Alphabet, Nvidia, Meta Platforms and Tesla could be the five best AI stocks to watch next month. These stocks are the five largest AI companies listed in the US.
    Source: Bloomberg   Shares Artificial intelligence Nvidia Meta Platforms ChatGPT Tesla, Inc.
     Charles Archer | Financial Writer, London What's on this page?
    1. Microsoft2. Alphabet3. Nvidia4. Meta Platforms5. Tesla   Artificial Intelligence (AI) has been the investing theme of 2023. Indeed, almost all of the S&P 500’s gains in 2023 have come from just seven companies — the so-called ‘magnificent seven’ — all of whom are potentially riding the AI wave to some degree.
    While this may be yet another bubble, Artificial Intelligence is arguably different to similar tech manias. It’s 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 while consumers have always understood — even peripherally — that AI was taking over more and more of the heavy lifting; the sector’s investment catalyst finally arrived earlier this year.
    This catalyst is of course ChatGPT, the OpenAI-developed chatbot which garnered over 1 million users in just five days. It took Facebook 10 months, and Netflix three and a half years to hit the same milestone. ChatGPT now boasts over 100 million weekly active users, and investors are now considering whether the innovation could make careers across the spectrum entirely redundant.
    From an investment perspective, interest rates are relatively high, and quantitative easing appears all but over for the foreseeable future. AI development is exceptionally expensive, and for every ChatGPT breakthrough, there are hundreds of costly failures.
    Therefore, the best AI stocks to watch could be predominantly the larger blue chips — which also helps to diversify any investment in the event that their AI projects fail. However, it’s also worth noting that some commentators consider the large US stocks are inside an AI bubble that will eventually pop.
    And remember, past performance is not an indicator of future returns. While the following are the largest AI-focused companies stateside, Apple and several others are excluded because analysts disagree on whether they qualify as AI companies.
    Best AI stocks to watch
    Microsoft (NASDAQ: MSFT)
    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. The company already had a strong relationship with OpenAI prior to the ChatGPT launch and has invested $13 billion into the company since 2019.
    This remains a symbiotic relationship — Microsoft is allowing OpenAI access to its cloud centres to increase ChatGPT’s computing power, while native search engine Bing has incorporated the chatbot into its functions in an attempt to steal Google’s overwhelmingly dominant market share.
    With OpenAI still reportedly planning a $86 billion IPO after the return of CEO Sam Altman, Microsoft could also soon see a direct return on its investment.
    In Q1 results, revenue rose by 13% to $56.5 billion. CEO Satya Nadella enthused that ‘with copilots, we are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.’
    Market Capitalisation: $2.77 trillion
    Alphabet (NASDAQ: GOOGL)
    Google parent Alphabet may control 84% of the global search market share — but Yahoo was once king of search too. While Alphabet laid off thousands of employees in 2023, it’s launched its own rival chatbot, Bard.
    Bard runs on Google’s LaMDA programming, which has been in development since 2021. While there have been accusations of rushing Bard out to compete with ChatGPT, the titan should soon smooth out the issues.
    It’s worth noting that 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 Q3 results, CEO Sundar Pichai noted the ‘product momentum this quarter, with AI-driven innovations across Search, YouTube, Cloud, our Pixel devices and more.’ Revenue increased by 11% year-over-year to $77 billion.
    Nvidia (NASDAQ: NVDA)
    Nvidia is well-known as one of the world’s most valuable chipmakers, used in electronics ranging from smartphones, to cars, to high-end computing. Nvidia shares have risen by 235% year-to-date to $480, leaving the company with a sky-high price-to-equity ratio of 63 — and yet recent quarterly earnings saw yet another beat.
    And Nvidia’s most advanced deep learning chips might mean that the NASDAQ company is still undervalued. They’re already in use at clients such as Alphabet and Facebook owner Meta to power both internal and user facing AI applications.
    As AI becomes ever more mainstream, demand for these chips is surging, and importantly, there is a high economic barrier to entry — Nvidia has a wide economic moat surrounding its market position as the ‘bricks and mortar’ AI choice. Indeed, its chips are so advanced that they are subject to export controls in some instances from the US.
    Q3 results saw Nvidia’s revenue rise by a whopping 206% year-over-year and 34% quarter-on-quarter to $18.12 billion — with CEO Jensen Huang nothing 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.’
    Market Capitalisation: $1.24 trillion
    Meta Platforms (NASDAQ: META)
    Meta Platforms, owner of Facebook, WhatsApp and Instagram, has enjoyed an excellent resurgence in 2023 — rising by 176% year-to-date to come close to its all-time high.
    This ‘family of apps’ saw monthly active users rise by 7% year-over-year to 3.96 billion people during Q3, representing more than 50% of the world’s population. The tech titan has strongly benefitted from CEO Mark Zuckerberg’s ‘year of efficiency,’ with headcount decreasing by 24% over the past year to 66,185 people on 30 September 2023.
    For context, Meta has been hit by a wave of headwinds; rising rates, falling advertising spending, TikTok competition, and Apple’s 2021 operating system update — alongside huge spending on the Metaverse which has yet to translate into profits. And for balance, the company still faces lawsuits alleging its products are both addictive and harmful to children. Further, virtual reality remains a niche market despite the heavy spending on the sector.
    In Q3 results, Meta saw revenue rise by an impressive 23% year-over-year to $34.15 billion, while costs and expenses fell by 7% to $20.4 billion.
    Market Capitalisation: $886 billion
    Tesla (NASDAQ: TSLA)
    Tesla is the original EV trailblazer, and despite the legal and media troubles of CEO Elon Musk, its advancements in artificial intelligence could see the auto company rise once again to the giddy highs of late 2021.
    Indeed, its share price has already recovered by 133% year-to-date as it eyes possible expansions in India and Europe — though the recent catalyst is the long-awaited Cybertruck launch, which could drive significant further growth through 2024.
    Fully autonomous driving is the long-term goal, with the company planning to launch a robot taxi service soon. It’s also developing Optimus — a humanoid robot which Musk thinks could become more valuable than Tesla’s auto operations in time. However, economic slowdown in China could cause short-term profitability issues in 2024.
    Market Capitalisation: $801 billion
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).

        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.
  18. MongiIG
    Persimmon, easyJet, Halfords, Baltic Classifieds and Currys could be the five best FTSE 250 shares to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares FTSE 100 EasyJet Tax Dividend    Charles Archer | Financial Writer, London What's on this page?
    1. Persimmon2. easyJet3. Halfords4. Baltic Classifieds5. Currys   Heading into the new year, the UK’s macroeconomic environment is perhaps more encouraging than has been the case for most of 2023. CPI inflation has fallen to 4.6% and appears on a downwards trajectory — and while the base rate remains at a relatively elevated 5.25%, many analysts consider that monetary policy will start to ease in 2024.
    However, UK GDP fell unexpectedly in October — by 0.3% in the month, after a 0.2% growth in September. Meanwhile last month, The Financial Times reported on Insolvency Service data indicating that company insolvencies are at their highest level since 2009.
    Analysts remain divided on whether the UK will experience a recession in 2024, or scrape through to a relatively soft landing. Indeed, whether equities, commodities or real estate, there appears to be no shortage of fence sitting — making considering the best FTSE 250 shares to watch next month somewhat of a challenge.
    For perspective, the index is essentially flat for the year, reflecting this ambiguity. The FTSE 250 started out at 19,134 points, rose sharply to 20,615 points in early February, fell to 16,783 points by late October and is now at 19,221 points.
    However, where’s there’s uncertainty, there’s also often opportunity. But of course, past performance is not an indicator of future returns.
    Top FTSE 250 Shares to watch
    Persimmon (LON: PSN)
    Persimmon shares sunk dramatically over the course of 2023 to just 960p as recently as late October — and was ejected from the FTSE 100. But the housebuilder has since recovered sharply to 1,343p as investors digest whether the selloff was perhaps an overreaction.
    For context, mortgage rates now appear to be cooling, with some fixed deals currently falling below 4%. And while new home completions were 37% lower year-over-year in Q3 2023, Halifax is predicting that UK house prices will fall by just 2-4% in 2024.
    Of course, Persimmon’s market capitalisation remains at less than 50% of its mid-2021 value, reflecting weaker results and a poor outlook. But housing is well-known as a cyclical industry; and long-term investors with an eye on value may take note. Any significant upside in 2024 could well see the housebuilder readmitted to the FTSE 100.
    easyJet (LON: EZJ)
    easyJet shares enjoyed a volatile 2023 — and were worth just 360p in mid-October but have recovered to 499p today. The airline recently reported a record H2 2023 financial performance and now maintains a ‘positive outlook’ for FY 2024.
    For perspective, the FTSE 250 airline saw FY23 headline profit before tax of £455 million — a £633 million year-on-year improvement — while easyJet holidays jumped by 221%, delivering £122 million in profit before tax. Total revenue rose by 42% to £8.17 billion, driven by pricing power, increased capacity, improved load factors and the aforesaid growth of easyJet holidays.
    On the other hand, costs rose by 30%, but easyJet remains on track to restart dividends, with 4.5p per share worth £34 million to be paid out in early 2024. And it even expects this payout to ‘increase to 20% of headline PAT on FY24's result’ with the ‘potential to increase level of future returns to be assessed over the coming years.’
    With substantial fleet expansion promised, the long-term ambition is to deliver more than £1 billion of profit before tax.
    Halfords (LON: HFD)
    Halfords shares sunk late last month after issuing tightened guidance to the lower end of previous expectations. The auto and bicycle retailer now expects FY24 underlying pre-tax profits to come in at between £48 million and £53 million, down from £48 million to £58 million.
    The FTSE 250 company attributed this fall to weaker demand for discretionary expensive purchases, but also noted that needs based and B2B sales displayed strong growth. And despite the ‘challenging macro environment,’ the retailer still saw revenue in the 26 weeks to 29 September rise by 13.9% to £873.5 million.
    Further, it remains confident in its mid-term target of £90 million to £110 million underlying pre-tax profit — and is going into the typically higher-demand Christmas period.
    Baltic Classifieds
    Baltic Classifieds shares have risen by 60% year-to-date as the Lithuanian company — which specialises in classifieds portals — rebounded after a weak 2022 to 232p.
    In recent half-year results, the group saw operating profit rise by 36% to £19.4 million and increased annual revenue growth guidance to between 18% and 19%. At the time, CEO Justinas Šimkus enthused that ‘we have seen record numbers of advertisers, as well as an improved competitive position and increased yields across our entire portfolio.’
    Peel Hunt has upgraded its price target to 245p, arguing that the business model is now proven and further, that there are significant opportunities for growth through 2024. Accordingly, the interim dividend is up by 25%, and the company has also delivered €7 million in share buybacks.
    Currys (LON: CURY)
    Currys shares spent some time in 2023 suffering in the doldrums — but enjoyed a good day after releasing a half-year trading update described by CEO Alex Baldock as ‘a really good self-help job.’
    The FTSE 250 company is maintaining profit guidance for the year, but has also advised that group sales have fallen by 4% year-over-year to £4.2 billion in the six months to October. However, there are some silver linings; the Nordic business has seen profit margins recover to similar levels experienced two years ago, and the company has also seen some cash inflow as a result of its decision to sell its Greek and Cypriot divisions for £172 million.
    Encouragingly, while this cash is earmarked for paying down debt and funding the pension scheme, Currys is also exploring ‘the potential to return any surplus capital to shareholders.’ And it’s also worth noting that the current half of the retailer’s trading year may be more profitable as it contains Black Friday alongside the crucial Christmas trading period.
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).
          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.
  19. MongiIG

    Are these the top stocks to watch in 2024?

    By MongiIG,


    Market News
    Rolls-Royce, Marks & Spencer, 3i Group, Centrica and AB Foods could be the five top stocks to watch in 2024. These are the shares which have seen the largest capital growth on the FTSE 100 over the past year.
    Source: Bloomberg   Indices Shares Investment FTSE 100 Dividend Centrica  
     Charles Archer | Financial Writer, London What's on this page?
    1. Rolls-Royce2. Marks & Spencer3. 3i Group4. Centrica5. AB Foods   UK investors tend to turn to the FTSE 100 for the relative safety provided by the dividend stocks — while the index typically pays out circa 4% per annum, there are many popular choices which have been sustainably paying out more than this over many years.
    While past performance is not an indicator of future returns, but the common trope is that investors in FTSE 100 dividend shares are eschewing the increased capital gains on offer elsewhere — for example, the S&P 500 — in return for reduced risk.
    However, several FTSE 100 companies have delivered extraordinary returns in 2023, and while there is an element of subjectivity to ‘top stocks’ to watch in 2024, the following five could be on investor radars.
    Top stocks to watch
    Rolls-Royce (LON: RR)
    Up 205% year-to-date to over 300p, CEO Tufan Erginbilgic has seen Rolls-Royce become the star performer of the FTSE 100, with the executive delivering a magnificent turnaround during his first year at the helm.
    For balance, he came on board at a fortuitous time; soaring post-pandemic travel demand has increased flying hours and therefore demand for civil aviation work. Meanwhile, the Russia-Ukraine war has seen defence spending rise sharply. And the rising political importance of energy independence is also a helpful tailwind, given the investment into small modular nuclear reactors.
    But the growth could be set to continue. With a slew of banking giants, including Citi, UBS and Deutsche Bank upgrading their targets in recent days, Fitch Ratings has upgraded Rolls to BB+. This represents a significant step towards regaining its all-important BBB investment grade status, lost during the pandemic.
    For context, the FTSE 100 stalwart plans to deliver operating profit of as much as £2.8 billion and free cash flow of up to £3.1 billion by 2027.
    Share price growth over the past year: 205%
    Marks & Spencer (LON: MKS)
    Other than being London-listed, possibly the only factor that connects Rolls-Royce and Marks & Spencer is that a new CEO has come in and delivered a solid turnaround strategy. Stuart Machin’s strategy is clearly delivering results, with the retailer returning to the FTSE 100 earlier this year.
    In H1 2023 results, revenue increased by 11% year-over-year to £6.13 billion, while net income rose by 25% to £208 million. Meanwhile, the profit margin — usually razor-thin in retail — improved from 3% to 3.4%.
    Much of this growth can be attributed to its strategic pivot. Underperforming shops were closed down, while those with untapped potential were refreshed — and the retailer invested huge sums into its web presence and online platform, targeting younger consumers.
    Christmas is generally a good time to be in retail, and further growth next year may be incoming.
    Share price growth over the past year: 115%
    3i Group (LON: III)
    3i Group is a popular FTSE 100 investment due to its status as a private equity and venture capital specialist. While Scottish Mortgage Investment Trust also offers some exposure toe privately held companies, 3i is one of the few simple ways for the average retail investor to gain access to this segment of the market.
    In H1 2023 results, and even despite the difficult macroeconomic environment, the company achieved a £1.67 billion total return, representing a 10% return on opening shareholders’ funds. For context, this compares to a 14% return worth £1.77 billion in the same half in the previous year — but the drop appears encouraging given the current environment.
    A highlight was portfolio company Action, a discount retailer focused on the Benelux region (Belgium, Netherlands, Luxembourg), which is now the fastest growing non-food discount retailer in Europe.

    Share price growth over the past year: 76%
    Centrica (LON: CNA)
    While Centrica has fallen from its peak in September — partially due to analyst commentary — the company has made significant strides in 2023 that could see it in good stead in 2024.
    The electricity and gas supplier’s interim results saw adjusted operating profit rise to £2.1 billion compared to £1.3 billion in 2022, generating a £6.5 billion statutory operating profit compared to the £1.1 billion loss of a year prior. Its closing adjusted net cash was a strong £3.1 billion, allowing the company to up the dividend by 33% to 1.33p per share extended the share buyback programme to £450 million.
    Centrica is delivering its green-focused investment strategy with annualised investment building to between £600m and £800m until 2028, with an aim to deliver average portfolio post-tax unlevered returns of between 7% and 10%+. And it expects to maintain Return on Average Capital Employed (ROCE) of at least 20% through this investment horizon.
    Share price growth over the past year: 62%
    AB Foods (LON: ABF)
    AB Foods — owner of a variety of food brands alongside Primark — saw full-year pre-tax profit for its last financial year rise by 25% to £1.34 billion, driven by a 16% increase in revenue to £17 billion, £9 billion of which was derived from Primark.
    Accordingly, the FTSE 100 company delivered a full-year dividend of 60p per share, up from 43.7p — and still delivered one of the best capital returns on the index this year.
    It’s worth noting that AB Foods was facing, in the words of CEO George Weston — ‘very significant economic challenges caused in part by major geopolitical events. Looking back on the year, it is clear to me that the group performed extremely well and is as a result now well positioned for the year ahead.’
    The company may be an attractive proposition in 2024 given Primark’s market position amid a cost-of-living crisis, alongside its diversification into multiple retail sectors.
    Share price growth over the past year: 50%
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).

        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.
  20. MongiIG
    Vodafone, Phoenix Group, British American Tobacco, M and G, and Imperial Brands could be the five best FTSE 100 dividend shares to watch next month. These shares are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares FTSE 100 Dividend Dividend yield Share  
     Charles Archer | Financial Writer, London What's on this page?
    1. Vodafone2. Phoenix Group3. British American Tobacco4. M&G5. Imperial Brands   The FTSE 100 has experienced somewhat of a volatile 2023 — falling to a recent low of 7,291 points on 27 October before recovering to 7,686 points today, up 1.75% year-to-date, and that excludes the £78.7 billion in dividends expected to be paid out this year.
    Of course, this volatility reflects wider macroeconomic concerns; while predictions are ten a penny, analysts are seemingly on the fence over whether the UK will enter recession, see a soft landing, or experience growth in 2024.
    But yesterday, the US Federal Reserve kept rates steady, maintaining the target range of between 5.25% and 5.5% — and policymakers have now forecast three rate cuts in 2024. While the S&P 500 responded positively, it’s worth noting that rate cuts do not always correspond with increased growth. This matters to the FTSE 100, because the UK’s largest companies derive the majority of their revenue from overseas — and the Bank of England has also voted to maintain the current 5.25% base rate.
    On the fiscal side, some analysts consider a spring election a distinct possibility — Capital Economics consider the Chancellor may have an extra £11 billion for tax cuts as a result of falling rates, but UK GDP fell by 0.3% in October and significant fiscal movement may not be possible after the recent NI cut.
    This leaves 2024 perhaps as uncertain as 2023, both for the FTSE 100, and for the currently highest yielding stocks on the index. As an example, housebuilder Persimmon was consistently one of the highest-yielding FTSE 100 stocks for several years and has now been demoted to the FTSE 250 in the face of the weaker housing market. Past performance is not an indicator of future returns.
    Top FTSE 100 dividend stocks to watch
    Vodafone (LON: VOD)
    Vodafone shares have fallen by 58% over the past five years, leaving the FTSE 100 telecoms operator with a double-digit dividend yield alongside a price-to-earnings ratio of just 2. While this may appear to be remarkable value at first glance, it’s worth noting this figure is based on asset sales in its last financial year which included the €8.61 billion generated from the sale of Vantage Towers.
    In recent half-year results, CEO Margherita Della Valle enthused that ‘during the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter.’
    German growth could be particularly encouraging because Vodafone relies on the country for a significant chunk of its revenue — and 2021 legislation saw housing associations banned from bundling TV services with rental contracts, hurting Vodafone’s prospects.
    However, while the dividend remained unchanged, net debt increased by €2.9 billion to €36.2 billion, raising questions over the dividend’s sustainability.
    Dividend Yield: 11.9%
    Phoenix Group (LON: PHNX)
    This popular FTSE 100 insurance company may be tempting to value investors eyeing its sharp recovery since mid-October. For context, the company paid out 50.8p to investors last year — and the average analyst expectation is that this will increase to 52.6p in 2023.
    In H1 results, the FTSE 100 business reported cash generation of £898 million, above analyst predictions, allowing the company to boost its interim dividend by 5% to 26p per share.
    Given that Phoenix Group is now on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend could now be safe — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    However, there are risks. Its bonds are likely falling sharply in value as rates continue to rise, and Phoenix also has a debt pile to manage. JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    Dividend Yield: 10.5%
    British American Tobacco (LON: BATS)
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine.
    However, the company continues to face regulatory problems; the UK is planning to ban single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products. It also faces the wider fall in smoking worldwide, and a large debt pile as rates rise.
    However, the 29% share price dip year-to-date may be attractive to income investors. The company is investing heavily in alternative products including vapes, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%.
    However, the company recently wrote off £25 billion in value due to falling outlook for its brands as cigarette sales struggle in the US.
    Dividend Yield: 10.1%
    M&G (LON: MNG)
    M&G is becoming a well-known FTSE 100 dividend share. The company plans to generate operating capital amounting to £2.5 billion by the end of 2024 and has now 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.
    And 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 enthuses 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.’
    Dividend Yield: 9.2%
    Imperial Brands (LON: IMB)
    Imperial Brands is the second FTSE 100 tobacco stock — and faces many of the same issues as BATS: regulatory clampdowns and changing consumer habits.
    However in recent results, BATS saw adjusted operating profit grow in line with its five year plan, including 10 basis points aggregate market share growth in its top-five priority combustible tobacco markets.
    Further, next generation product net revenue rose by 26% — and increased by a whopping 40% in Europe. Accordingly, the dividend was hiked by 4% alongside a 10% increase in share buybacks, leaving investors with total FY24 returns of £2.4 billion.
    Dividend Yield: 8.2%
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).
          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.
  21. MongiIG

    S&P 500 outlook for 2024

    By MongiIG,


    Market News
    Fundamental and technical outlook on the S&P 500
    Source: Bloomberg   Indices Shares Commodities Recession S&P 500 Yield curve
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 19 December 2023 14:56 Taking stock of 2023
    Despite warnings of a recession in the US by the International Monetary Fund (IMF), the US Federal Reserve (Fed) and several major investment banks at the beginning of the year, the US economy and the country’s stock market(s) have done tremendously well.
    US inflation halved from 6.4% in January to 3.2% in October, even if core inflation proved to be stickier at 4.0%, while seasonally-adjusted unemployment rose slightly from 3.4% to 3.9% and gross domestic product (GDP) came in at a respectable 2.1% year-on-year.
    At the same time the S&P 500 has so far risen by close to 25% year-to-date, a positive performance which none of the major investment banks had forecast.
    2024 outlook
    The S&P 500 is expected to continue its recent advance and might still do well at the beginning of the first quarter (Q1) of next year but then a possible slow down in the US economy may lead to a significant reversal in the trend.
    Since earlier in the year the tables have turned with the Fed no longer expecting a recession due to the robustness of the US economy.
    The danger, as is often the case when data keeps on coming in better-than-expected and earnings - such as those seen in the Q3 - are pointing to a better outlook for US companies than many had feared, is that investors become complacent.
    A potential sign of this complacency is the Chicago Board Option Exchange’s (CBOE) Volatility Index (VIX) which dipped to its lowest level since January 2020 amid seven straight weeks of gains in US equity indices. In that time the Dow Jones Industrial Average and S&P 500 rallied by around 15%, the Nasdaq 100 by just under and the Russell 2000 (small cap index) by over 20%. The VIX can remain at extremely low levels for several weeks, though, before equity markets top out.
    The remarkable recovery in risk appetite, driven by a falling dollar, declining US Treasury yields to between five and seven month lows and Fed rate cut expectations being brought forward to March of next year, is likely to have legs, at least into the first few weeks of 2024. This scenario remains the most probable even if a short-term sell-off at the beginning of next year were to be seen.
    Bullish factors are that over 55% of S&P 500 stocks now trade above their 200-day simple moving averages (SMA), the National Association of Active Investment Managers (NAAIM) Sentiment Index has been trading above 75 this past month and seasonality usually leads to end-of year gains.
    Stocks trading above their 200-day SMA are considered to be long-term bullish. Now that over half the S&P 500’s stocks are trading above their 200-day SMAs the bull market looks to be more solid than it was in the first half of this year.
    When the NAAIM Sentiment Index crosses 75 for the first time in 21 weeks, the three- and six-month forward returns have all been bullish, some in double digits, between mid-2006 and now. The only exception has been the three-month period following such as signal in February 2012 but even then a positive 3.32% performance was seen after six-months.
    NAAIM Sentiment Index Chart and data table
    Source: NAAIM Exposure Index / Nautilus Investment Research Then there is the ‘Santa Claus Rally’: according to StockTradersAlmanac.com, since 1950, the S&P 500 is up 79.45% of the time from the Tuesday before Thanksgiving to the 2nd trading day of the year with an average gain of 2.57%.
    There is an important caveat to the “Santa Claus Rally” though, coined by its 1972 inventor Yale Hirsch’s phrase: “If Santa Claus should fail to call, bears may come to Broad and Wall.”
    Risks for 2024
    The same risks the Fed and others feared at the beginning of the year are still bubbling under the surface.
    These are:
    rapidly rising short-end interest rates a spike in inflation inversions of the yield curve and oil price shocks Even if these occurrences haven’t as yet led to a recession in the US in 2023, they may well do so in 2024.
    A Deutsche Bank team led by Jim Reid, head of global economics and thematic research, in November highlighted these four key macroeconomic triggers that have caused recessions in the past and analysed 34 US recessions dating back to 1854, looking for patterns in economic history.
    For each trigger, the Deutsche Bank team calculated a historical “hit ratio”—or the percentage of times when these events occurred that led to a recession.
    Even though they found that no single macroeconomic trigger can accurately predict a recession, all four together – as is the case at present - greatly increase the odds of a US recession rearing its head.
    The rapid rise in interest rates since the Q1 of 2022 from 0% to 0.25% to the current Fed funds at 5.25% to 5.50% - by more than 5% - is bound to weigh on economic growth by raising the cost of borrowing for businesses and consumers but may take time to work its way through the economy.
    According to Deutsche Bank’s study, since 1854, when US short-term interest rates have risen by 2.5 percentage points over a 24-month period, there has been a recession within three years around 69% of the time.
    Also since 1854, a three percentage point rise in inflation over a 24-month period has caused a recession within three years 77% of the time.
    The fact that US inflation soared to a four-decade high to 9.1% in June of 2022, even if it has since retreated to a much milder 3.2%, points to a probable recession since historically the US economy hasn’t managed inflationary spikes very well.
    An inverted yield curve - when short-term bonds end up yielding more than long-term bonds - has caused a US recession in 74%, but since the 1953 recession, in nearly 80% of cases, the Deutsche Bank study shows.
    US Treasuries have been inverted since July 2022 but may normalise in 2024. Historically when the yield curve un-inverts, as investors take more risk when loaning out their money on longer-term time frames and thus want to be compensated for this by a higher yield, a recession tends to follow.
    US 10-year minus 2-year yield curve slope and US recessions chart
    LSEG Datastream / Axel Rudolph Last but not least an oil price shock has led to a US recession 45% of the time, according to the Deutsche Bank research team.
    West Texas Intermediate (WTI) crude oil prices have risen by nearly 40% from June to September, to close to $95 per barrel, leading many economists to fear inflation could prove to be more sticky than the Fed might have imagined. This fear might be mitigated by the sharp over 20% drop in the oil price from its late-September peak to current levels.
    The Deutsche Bank study aside, there is another factor that might need considering and it is that since the 1950s nearly each time the first US rate cut was made after a hiking cycle, a US recession followed in the coming year(s). Since the first Fed fund rate cut is currently expected to be seen in March of next year, a recession might be on the table for the latter half of 2024.
    S&P 500 technical analysis forecast
    Since the strong November gains occurred after the S&P 500 broke out of a ‘bull flag’ technical chart pattern at 4,356, it is to be expected that during the first half of 2024 the index is not only likely to exceed its January 2022 all-time record high at 4,818.62 but may also reach the psychological 5,000 zone before a possible significant correction or bear market unfolds.
    The reason is that the near 800-point ‘flagpole’ in that ‘bull flag’ pattern - the March-to-July advance – is projected from the pattern breakout point at 4,356, giving technical analysts a potential upside target of 4,536 plus 800 = 5,336.
    S&P 500 Weekly Candlestick Chart
    Source: TradingView
       
    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.
  22. MongiIG
    Conformist buy-breakout strategies outperformed on the technical front but require ongoing follow-through to consistently outperform.
      Source: Bloomberg
      Federal Reserve Personal consumption expenditures price index Inflation Futures contract Commitments of Traders Real versus nominal value
     Monte Safieddine | Market Analyst, Dubai | Publication date: Monday 18 December 2023 08:02 Hawkish Fed member speak fails to halt post-FOMC rally
    Late last week, several significant indicators emerged from the US, with preliminary Purchasing Managers’ Index (PMIs) for this month from S&P Global revealing a deterioration in manufacturing to 48.2, remaining in contraction, and Empire’s reading dropping from 9.1 to -14.5. However, the more crucial services sector improved to 51.3, staying in expansionary territory.
    Key US stock indices were in for notable weekly gains and a record high for the Dow (and close for the Nasdaq), with much of it occurring after the Federal Open Market Committee (FOMC) dovish tilt. In the bond market, treasuries week-on-week (w/w) in for big declines, and in real terms averaging about 20bp (basis points) lower for the 5Y-30Y, with market pricing (CME’s FedWatch) on the first rate cut in March despite Federal Reserve's William’s comments regarding not “really talking about rate cuts right now” and Bostic on cutting “sometime in the third quarter”, and net far more optimistic on the total amount of cuts to expect next year when compared to the Fed’s latest dot plot.
    Week ahead: PCE, housing data, and more
    As for the week ahead, we’ll have to go in reverse for those wanting more impacting data out of the US Personal Consumption Expenditures (PCE) price index for the month of November, releasing on Friday, and is expected to show year-on-year (y/y) growth of 2.8% falling from 3% prior, with its core (which excludes food and energy) a notch lower to 3.4%. The revised figures out of University of Michigan (UoM) will also be released that day, and this is definitely one of those times where market participants will be hoping the plummet in its preliminary readings for consumer inflation expectations (from 4.5% to 3.1%) can stick.
    Final Gross Domestic Product (GDP) for the third quarter will be released on Thursday, though none are worried after what have been stellar advance and preliminary figures (this quarter’s growth expected to be much less but still decent enough with the Atlanta Fed’s GDPNow estimate at 2.6%).
    CB’s consumer confidence will be on Wednesday, and while it has managed to beat estimates a couple times in a row, it’s been a story of four consecutive drops and quite a distance from pre-pandemic levels.
    There will be plenty out of the housing sector, NAHB tonight expected to show an ongoing sub-50 reading (signifying a negative outlook), both building permits and housing starts for the month of November tomorrow after enjoying upside surprises prior, though the same couldn't be said for existing and new home sales last time around with fresh readings available from both this week as well.
    Dow technical analysis, overview, strategies, and levels
    We got a move past its previous weekly first and second resistance levels, giving conformist buy-breakout strategies and an easy win and lacking a trigger for contrarian buy-after-reversals on the move past the first resistance. On the daily time frame late last week, we got a close above Thursday's first resistance level and a move that briefly got past its second resistance, there too conformist buy-breakouts winning out, but more clearly when combined with Friday's intraday highs, contrarian sell-after-reversals at times looking to capitalize on pullbacks, but eventually getting stopped out. In all, the technical overview remains ‘bull average’ with much of the action within a narrow bull channel, though easily taken for a ‘stalling bull’ given the trending ADX (Average Directional Movement Index).
      Source: IG
    IG client* and CoT** sentiment for the Dow
    CoT speculators have shifted from the middle to majority short territory, though due to a larger drop in shorts (by 3,428 lots) than longs (by 285). As for retail traders, they have fallen out of extreme sell territory, but only just, and this is despite the price gains suggesting older shorts are getting severely tested, while some traders shift to momentum from previous range-trading strategies.
      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 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.
    CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved
  23. MongiIG
    Heading into the meeting, the key focus had been on whether US policymakers’ views will be more aligned on the series of rate cuts priced in 2024 and the Fed has clearly delivered.
    Source: Bloomberg   Forex Indices Commodities United States Federal Reserve Stock market index    Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 14 December 2023 03:51 FOMC takeaways
    As broadly expected, the Federal Reserve (Fed) has kept rates unchanged at 5.25%-5.5% for the third straight meeting overnight. In the policy statement, acknowledgement of slowing economic growth and easing inflation in the third quarter, alongside a wording change to indicate a softer tightening bias, further confirmed views that the Fed’s hiking cycle has reached its end.
    Heading into the meeting, the key focus had been on whether US policymakers’ views will be more aligned on the series of rate cuts priced in 2024 and the Fed has clearly delivered. The median dot plot has priced out any additional hike and now sees 75 basis point (bp) worth of rate cuts in 2024, versus the 50 bp cut in September. While that is still less aggressive than the 100-125 bp cuts priced by markets before the meeting, market participants viewed the shift in stance as sufficiently dovish and the lack of a pushback on rate cuts may caught some by surprise, given the hawkish tone coming from policymakers just last month.
    In the economic projections, the core Personal Consumption Expenditures (PCE) inflation forecasts were revised downwards through 2025. Unemployment rate were kept unchanged from the September projection (4.1% in 2024 and 2025), while gross domestic product (GDP) forecasts saw a slight revision to 1.4% in 2024 from previous 1.5%. Overall, the soft-landing narrative is still broadly intact and along with rate-cuts validation from the Fed, there seems to be little in the way to stop the risk rally.
    US dollar pared all month-to-date gains on Fed’s dovish rhetoric
    Having earlier formed an inverse head-and-shoulder formation on the four-hour chart, the dovish rhetoric from the Fed has not been supportive for a neckline breakout at the 103.86 level. The US dollar index has since pared back all of its month-to-date gains, crashing back below its key 200-day moving average (MA) on the daily chart. Its daily relative strength index (RSI) has also failed to cross above the 50 level lately, leaving its near-term downward trend intact.
    Further downside will leave the 102.00 level on watch, which marks its November 2023 low. Failure for the level to hold could see the 100.50 level next. On the upside, buyers may face an arduous task with several resistance overhead in place, which includes its 200-day MA and the 103.86 level.
     
    Source: IG charts  
    Gold prices eyeing for a move back to retest key resistance
    After failing to sustain a breakout above the US$2,074 level back on 4 December 2023, the yellow metal has found new signs of life overnight, with the green light on the rate-cuts narrative from the Fed. The overnight upmove has pared all of this week’s losses, with prices seemingly setting its sight for another retest of the US$2,074 level of resistance, which marked a crucial overhead resistance on multiple previous occasions (May 2023, March 2022 and August 2020).
    For now, the broader upward trend remains intact, with prices trading after its Ichimoku cloud zone on the daily chart after an upward break in October 2023, alongside various MAs. A successful move above the US$2,074 level may pave the way towards the all-time high at the US$2,146 level next. On the downside, the daily Ichimoku cloud zone will serve as an area of support for buyers to defend.
     
    Source: IG charts  
    Can Russell 2000 deliver a breakout from its broad ranging pattern?
    Small-cap stocks have been playing catch-up lately, with the Russell 2000 surging 8.3% over the past month, outperforming the Nasdaq’s and S&P 500’s 4.7%. A reclaim of its 200-day MA in early-December this year has been encouraging, with the index standing just less than 3% away from a crucial resistance at the key psychological 2,000 level.
    Having largely traded in a broad ranging pattern since May 2022, the 2,000 level marked the upper bound of the range, which has weighed on the index on multiple occasions. Any successful breakout above the range will be significant, potentially paving the way towards the 2,108 level next. On the downside, immediate support may stand at the 1,900 level.
     
    Source: IG charts  
    Wednesday: DJIA +1.40%; S&P 500 +1.37%; Nasdaq +1.38%, DAX -0.15%, FTSE +0.08%
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    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.
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  24. MongiIG
    Gains help keep the technical overview bullish in both daily and weekly time frames, while over in sentiment, retail traders hold onto extreme sell bias.
      Source: Bloomberg
      Shares Federal Open Market Committee Pricing Inflation /business/market_index Mortgage loan    Monte Safieddine | Market Analyst, Dubai | Publication date: Thursday 14 December 2023 07:47 FOMC hold with a dovish twist
    The holdout of the Federal Open Market Committee (FOMC) came as no surprise, with market pricing anticipating that the federal funds rate wouldn't budge from the current 5.25-5.5% range. However, market participants were more interested in the dot plot. It revealed three rate cuts in ’24, up from the previous two. Given the adjustment from a lower level compared to September's forecasts (as the last rate hike never occurred), it lowered the forecast to 4.6% from 5.1%.
    Market pricing (CME’s FedWatch) has become even more optimistic about rate cuts in terms of both timing and extent. The majority expects the first cut in March, aiming for five, with a sixth almost a coin toss by December of next year. Other elements of the event were also dovish. The statement was tweaked to incorporate an easing of inflation, combined with the addition of "any" to signal a cautious approach to further tightening. During the subsequent press conference, Fed Chairman Powell commented on the "very good news" of inflation easing "without a significant increase in unemployment."
    Treasury yields finished notably lower, both nominally and in real terms, providing a boost for equities, particularly with bond proxies outperforming.
    US data an added plus
    Regarding the release of US economic data yesterday, the Producer Price Index (PPI) for November was lighter than anticipated, providing a positive development on the pricing front with no month-on-month change for both headline and core figures. Additionally, mortgage applications were up by 7.4% and are expected to rise further as mortgage rates decline. Retail sales, claims, and trade pricing data are up next, and tomorrow we will receive preliminary Purchasing Managers’ Index (PMI) and industrial production figures.
    Dow Technical analysis, overview, strategies, and levels
    Price gains that were both strong and notable given the moves took it past 37,000, easily getting past Wednesday’s first and second resistance levels, favoring conformist buy-breakout strategies heavily (and already hovering above today's first resistance as of writing this morning). It’s also near this week’s weekly second resistance level, there too conformist buy-breakouts winning out in the longer-term time frame given the technical overview there matches as ‘bull average’.
      Source: IG
    IG client* and CoT** sentiment for the Dow
    As for sentiment, retail traders haven’t raised their sell bias from the current extreme short of 81%, following the latest price gains, opting not to initiate as much with recent IG client sentiment data showing fresh buys winning out. CoT speculator data is from last Friday, where they shifted from heavy sell 68% to the middle prior.
      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 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 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.
    CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
  25. MongiIG
    The BoJ is set to hold their monetary meeting across 18 – 19 December 2023, as market participants will be seeking for further clarity as to whether the BoJ Governor’s earlier comments may have been misunderstood.
    Source: Bloomberg   Forex Indices Bank of Japan Japanese yen Bond Japan
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 13 December 2023 11:52 What to expect at the upcoming Bank of Japan (BoJ) meeting?
    The BoJ is set to hold their monetary meeting across 18 – 19 December 2023, with wide consensus for its short-term interest rate target to be kept unchanged at -0.1% and for the 10-year bond yield around 0%. However, similar to previous meetings, key focus will revolve around any tweak in policy wordings from the central bank or any adjustment to its yield curve control (YCC) policy, as the BoJ continues to take intermittent steps towards policy normalisation.
    To recall, the BoJ has jolted markets same time last year by loosening the shackles on its 10-year yield target, allowing a 50 basis point (bp) band on either side of its 0% target. Since then, the central bank has further raised the band to 1% in July this year. And in October this year, the BoJ guided for more policy flexibility by shifting its language to refer to the 1% bound as purely a ‘reference’.
    While the above steps suggest that an eventual policy pivot remains a matter of when and not if, communications of its timeline from BoJ officials have been muddled. That leaves sentiments highly sensitive to any words from policymakers, with market participants latching on to any slightest verbal cues of policy normalisation from BoJ officials to call for an earlier policy pivot.
    Just last week, BoJ Governor Kazuo Ueda comments of a “more challenging” policy management from the year-end into next year have triggered a flood of hawkish bets, only for policymakers to deliver some pushback in the days after. With that, market participants will be seeking for further clarity at the upcoming meeting as to whether the comments may have been misunderstood. For now, broad market expectations are priced for Japan to scrap its negative rates only in the second quarter of 2024.
     
    Source: Refinitiv, as of 13 December 2023.  
    Markets pare earlier hawkish bets to price for little surprise at the upcoming meeting
    After an initial surge on BoJ Governor Kazuo Ueda’s earlier comments, Japanese 10-year bond yields are back towards the downside, paring earlier gains on expectations that previous hawkish bets may have been overblown. The implied volatility for the 10-year government bonds futures has also witnessed less of a surge as compared to previous pre-meeting lead-up, which may suggest broad expectations that the upcoming meeting may deliver little surprise.
     
    Source: TradingView  
    The weakness in the US dollar and recent plunge in oil prices may still offer room for the BoJ to exercise patience in its policy settings for further wait-and-see into year-end. A crucial policy-pivot criteria that Japanese policymakers are watching is wage growth, where it deemed any sustained, broad-based wage increase as necessary to durably achieve its 2% inflation target. Japan’s cash earnings stood at 1.5% year-on-year growth in October 2023, and while that has been minor strengthening, the central bank will likely remain on the lookout for more indications of an improving wage trend to provide conviction for a policy shift.
     
    Source: Refinitiv  
    USD/JPY: Can the upward trend continue?
    The USD/JPY had a stellar run through the bulk of this year, driven by the widening US-Japan bond yield differentials as a result of monetary policies’ divergence. But with a peaking Federal Reserve (Fed)'s hiking cycle, alongside the BoJ talking up the need for policy normalisation, the policy-divergence story may be set to reverse in 2024.
    In terms of sentiments, the Commodity Futures Trading Commission (CFTC) data revealed that speculative net-short positioning in the Japanese yen continues to hover near its extreme last week, briefly touching its highest net-short levels in five years during mid-November this year. The extreme-bearish take among speculators may offer room for potential short-squeeze opportunities if hawkish expectations for the BoJ were to be validated.
     
    Source: TradingView Source: Refinitiv  
    On the technical front, the USD/JPY has managed to find some support from its 200-day moving average (MA) last week but there is not much conviction that buyers are in control just yet. An ascending channel pattern in place since the start of the year has given way last week, while the pair is also trading below its Ichimoku cloud support (daily) for the first time since April 2023, which raises the odds of a wider trend reversal. Greater conviction for buyers may have to come from a move back above its 7 December high to pave the way to retest the 149.20 level next. On the downside, the 144.00 level may serve as immediate support to hold.
     
    Source: IG charts  
    Nikkei 225: Still looking for a break above its year-to-date high
    The Nikkei 225 index tends to track the S&P 500 movement closely and given that the S&P 500 has registered a new year-to-date high this week, eyes are on whether the Nikkei 225 can deliver as well. Thus far, an earlier attempt to break its June 2023 high at the 34,000 level did not find much success, with momentum oscillators losing some ground as a sign of easing upward momentum in the near term.
    Nevertheless, the broader upward trend for the index remains intact. Any attempt to retest the 34,000 level of resistance will be on watch, with any successful break to a new multi-year high potentially setting its 1989 high in sight next. On the other hand, a deeper retracement may leave the 32,000 level on watch as crucial support to hold, where the lower edge of the Ichimoku cloud on the daily chart stand alongside a key Fibonacci retracement level.
     
    Source: IG charts
       
    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.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.

CFD accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd and share dealing and stocks and shares ISA accounts provided by IG Trading and Investments Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957), IG Index Ltd (a company registered in England and Wales under number 01190902) and IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Index Ltd (Register number 114059) and IG Trading and Investments Ltd (Register number 944492) are authorised and regulated by the Financial Conduct Authority.

The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

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