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  1. 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.
  2. 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
  3. 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.
    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.
  4. 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.
  5. 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.
  6. MongiIG
    After last week’s market reaction, Anglo shares have now fallen by more than 40% over the past year. Is a buyout on the cards?
    Source: Bloomberg   Shares Commodities Anglo American plc United Kingdom Demand Glencore  
     Charles Archer | Financial Writer, London | Publication date: Monday 11 December 2023  Anglo American (LON: AAL) shares hit another 52-week low last Friday, falling to just 1,630p. Even having recovered to 1,825p today, the FTSE 100 miner has still lost more than 40% of its market value over the past year — leading to speculation that it could join the growing list of London-listed companies with a buyout target on its back.
    For context, Anglo shares were last changing hands at these levels in mid-2020 when it was recovering from the pandemic-mini-crash. And the miner hit 4,170p as recently as April 2022.
    Anglo American Performance Update
    Anglo American’s trading update — released late last week — saw the company announce that capital expenditure will be cut by a significant $1.8 billion to 2025 as part of what CEO Duncan Wanblad called ‘improving our resilience’ within the tighter macroeconomic environment.
    The FTSE 100 miner’s capex target for 2023 has been cut from $6 billion to $5.8 billion, with steeper cuts due in 2024. Despite the market reaction, it’s worth noting that Anglo is still investing in core projects, including the Woodsmith natural fertiliser mine in Yorkshire in addition to the Quellaveco copper mine in Peru.
    However, further funding for Woodsmith after next year will be contingent on board approval — expected to be decided in early 2025. And looking to 2025, Anglo is planning capex of just $5.7 billion, compared to the previous $5.8 billion to $6.3 billion expectation.
    While these cuts could see lower cash flow and perhaps smaller dividends in the future, arguably this cost discipline may stand the company in good stead through this higher rate environment. And it may be the first of many to cut back expenditure which was previously budgeted for in a lower rate, higher growth environment.
    More positively, Wanblad also notes that ‘looking ahead, the fundamental supply and demand picture for many metals and minerals is ever more attractive. Many of the world's major economies are focusing their resources on meeting global decarbonisation timelines and, as the global population grows, continues to urbanise and demands higher living standards, we expect unprecedented demand for responsibly produced raw materials.’
    In commodity terms, Anglo does have a more diversified asset base than its FTSE 100 compatriots. The company derives around a third of earnings from platinum group metals, and an additional 10% from diamonds. But both categories have been hit hard in 2023.
    And perhaps the bigger problem is the cut to copper production guidance — especially when the metal is expected to see demand rise through the 2020s. In August, Anglo said it was planning on generating at least 910,000 tonnes of copper next year — but this could now be as low as 730,000 tonnes. And predicted output in 2025 will now be even lower than 2024 at between 690,000 and 750,000 tonnes.
    FTSE 100 buyout target?
    While a buyout may be some time off, Anglo American has seen circa £30 billion wiped from its market capitalisation since Wanblad took the reins in April 2022.
    It’s underperformed other FTSE 100 miners for years and is set to face yet more problems this week as a South African court prepares to rule on whether a class action lawsuit concerning historical lead poisoning claims in Zambia can be brought against it.
    It’s worth noting that consolidation in the face of rising costs has been a significant theme of 2023 — Allkem and Livent, BHP and Oz Minerals, Newmont and Newcrest, Glencore and Teck — and Jefferies analysts consider that if Anglo’s share price ‘continues to lag’ it could become part of the ‘broader trend of industry consolidation.’
    The analysts note that Glencore-backed Xstrata (now fully part of Glencore) approached Anglo about a merger in the aftermath of the Global Financial Crisis, and argue that a merger today could be even more compelling than in the past due to ‘operating synergies, even greater marketing benefits, and a cost of capital arbitrage.’
    And with the share price in the doldrums, this leaves Anglo American as a potential buyout target in 2024.
    Past performance is not an indicator of future returns.

       
    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.
  7. MongiIG
    Technicals remain bullish ahead of the fundamental events, while in sentiment CoT speculators have shifted to the middle from a previous heavy sell.
      Source: Bloomberg
      Shares Federal Open Market Committee Consumer price index Unemployment Day trading Commitments of Traders  Monte Safieddine | Market Analyst, Dubai | Publication date: Monday 11 December 2023 07:46 Digesting stronger US labor data
    Plenty of noteworthy data emerged from the US labour market late last week, and it generally exceeded expectations. Key highlights include Non-Farm Payrolls for November, surpassing estimates with a 199K increase. The unemployment rate saw a significant drop to 3.7%, accompanied by a parallel decrease in the underemployment rate to 7%.
    Wage growth, higher than anticipated at 0.4% month-on-month, held steady at 4% year-on-year. The labour force participation rate rose to 62.8%, while the employment-population rate increased from 60.2% to 60.5%. Additionally, weekly claims reported figures beneath estimates for both initial and continuous claims.
    A notable positive was the University of Michigan's preliminary readings on consumer sentiment, surging to 69.4. Particularly noteworthy was the drop in inflation expectations, with the 12-month figure plummeting from 4.5% to 3.1% and the five-year from 3.2% to 2.8%.
    Despite successive weeks of gains, key indices exhibited a mixed performance. In the bond market, Treasury yields experienced another week of losses at the furthest end, and similarly in real terms, while the 10-year remained relatively unchanged.
    Week ahead: key data releases, auctions, and FOMC decision insight
    As for the week ahead, it’s an impacting one and on a few fronts for the US. In terms of data, expect Consumer Price Index (CPI) readings for November to take the attention early on, where expectations are its y/y headline print will drop a notch to 3.1%, but remain stickier when it comes to its core. Producer prices will be the day after, with y/y figures that have been trending in the right direction, and trade pricing on Thursday after negative prints for both exports and imports (m/m and y/y) last time around.
    Releasing at the same time will be retail sales after the small dent for October that managed to best estimates even if in contracting territory. Friday includes preliminary Purchasing Managers’ Index (PMI) for this month, where manufacturing was a miss, falling back into contraction, while services improved to remain in expansionary territory.
    There will be a few auctions, and for tonight, it includes the 10-year, with the 30-year tomorrow night to see how well demand manages to keep up with supply. And while all that could sway what policymakers could do, we will find out what they will actually do this Wednesday with the Federal Open Market Committee (FOMC) policy decision. Expectations are they will hold (CME’s FedWatch), and while market participants will note any tweaks in its statement (after they included tighter financial conditions last time around when yields were significantly higher) and the tone from Federal Reserve (Fed) Chairman Powell in his press conference thereafter, expect heavy attention on their projections and dot plot and the type of divergence from what market pricing suggests.
    Dow Technical analysis, overview, strategies, and levels
    Lack of a play on the weekly time frame with the intraweek highs, and lows, within its previous weekly first levels, though the little change by the close and near the highs keeping plenty of technical boxes in the green in this time frame. It's greener on the daily time frame, though the intraday action also lacked a play for Thursday's first levels, even when factoring Friday's intraday highs, the technical overview in the shorter-term time frame also matching this one but an ADX (Average Directional Movement Index) in trending territory capable of tilting it to a stalling bull instead.
     
      Source: IG
    IG client* and CoT** sentiment for the Dow
    As for sentiment, a notable shift amongst CoT speculators from heavy sell 68% to the middle in just one week (longs up 3,718, sizable drop in shorts by 21,645), ending months of majority sell bias, though interesting to see if it can move, and stay in majority buy territory for a longer period than it did last time. IG clients are still in extreme sell territory with little change week-on-week, but intraweek moves show fresh shorts looking to unwind swiftly.
      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.
  8. MongiIG
    With bets that the Fed’s hiking cycle has peaked, alongside a series of rate cuts priced through 2024, the USD/JPY has touched its two-month low this week.
    Source: Bloomberg   Forex Bank of Japan United States dollar USD/JPY Federal Reserve Japanese yen
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 07 December 2023 11:17 Fed-BoJ policy divergence may be set to reverse in 2024
    The USD/JPY had a stellar run through the bulk of this year, with the pair taking its cue from the widening US-Japan bond yield differentials, as a result of monetary policies’ divergence between both central banks. But with recent bets that the Federal Reserve (Fed)'s hiking cycle has peaked, alongside 125 basis point (bp) worth of rate cuts priced through 2024, the 10-year bond yield differentials have since narrowed significantly from its peak of 4.148% to the current 3.412%, paving the way for USD/JPY to touch its two-month low this week.
     
    Source: TradingView  
    As we head into 2024, the policy-divergence story may be set to reverse further if inflation in the US continues to move in line with its current trend – a gradual moderation in pricing pressures. US economic conditions have also turned in softer in recent months, revealing a lesser extent of outperformance compared to months earlier, which provides validation to the dovish market views on the Fed’s policy outlook.
    On the other hand, the Bank of Japan (BoJ) has been heading the other way, taking intermittent (though, minor) steps towards policy normalisation this year while talking up the need to shift away from its current ultra-accommodative policies. While the recent plunge in oil prices and still-subdued wage growth may allow the BoJ room to exercise more patience in its policy pivot, an exit from its negative interest rate policy (NIRP) seems to remain a matter of when and not if. Current market rate pricing has anchored it down to be by the second quarter (2Q) of 2024.
     
    Source: Refinitiv  
    Still extreme bearish yen-positioning may offer room for unwinding
    From the Commodity Futures Trading Commission (CFTC) data, 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 into 2024, if hawkish expectations for the BoJ were to be validated.
     
    Source: Refinitiv  
    Technical analysis: USD/JPY eyeing a break of critical support
    For the USD/JPY, multiple retests of the 152.00 level in November this year have failed to find the conviction to push to a new decades-high. The pair has retraced 3.7% from its recent top to a crucial level of support at the 146.74 level, where a well-respected lower channel trendline support since the start of the year stands in place. The bears may attempt to strive for a breakdown of this level next, which may unlock further downside towards the 145.00 level, where its 200-day moving average (MA) lies.
    Recent downside has also marked a breakdown of its Ichimoku cloud support on the daily chart for the first time since April 2023, while its daily relative strength index (RSI) has dipped below the key 50 level for the first time in four months as well, both reflecting some near-term bearish momentum at play. Should the bulls manage to defend the lower channel support trendline, they may face immediate resistance at the 149.20 level, where its 100-day MA stands alongside the lower edge of its daily Ichimoku cloud.
     
    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.
  9. MongiIG

    ​​Disney struggles to sell its story

    By MongiIG,


    Market News
    Investors remain unconvinced that Disney is a promising long-term play, even though the stock looks cheap on an earnings basis.
    Source: Bloomberg   Shares The Walt Disney Company Price Share price Stock Candlestick
     Chris Beauchamp | Chief Market Analyst, London | Publication date: Thursday 07 December 2023 14:46 Disney struggles to sell its story
    Despite efforts to recover from the impact of the pandemic, shareholders of Disney continue to express disappointment. One key concern is that the company's net income has not yet returned to pre-pandemic levels. This lack of recovery has been a cause for concern among investors.
    Furthermore, the losses incurred by Disney+ and Hulu have only added to the negative sentiment surrounding the company. These streaming platforms, which were expected to be growth drivers for Disney, have not performed as well as anticipated.
    However, there is a glimmer of hope as Disney recently announced the restoration of its dividend, albeit at a small scale. This move is seen as a step in the right direction and may help improve investor sentiment.
    Despite these challenges, the stock price of Disney remains relatively cheap, trading at around 19 times earnings, which is similar to its valuation in 2020. This could present an opportunity for investors looking for a bargain.
    Nevertheless, what the company lacks is a positive catalyst that could drive the stock price higher. Without a clear growth strategy or a significant development, it may be difficult for Disney to regain the confidence of shareholders in the near term.
    Analyst ratings for Disney
    Source: Refinitiv Refinitiv data shows a consensus analyst rating of between ‘buy’ for Disney – 8 strong buy, 16 buy, 6 hold and 2 sell - with the mean of estimates suggesting a long-term price target of $104 for the share, 14% above its current value as of 7 December 2023.
    Technical outlook on the Disney’s share price
    The Disney share price, which has risen by less than 3% year-to-date, remains in a long-term downtrend and currently trades around its 55-week simple moving average (SMA) at $92.33.
    Disney Weekly Candlestick Chart
    Source: TradingView The good news for the bulls is that in line with rapidly rising US stocks in November the Disney share price has risen by around 22% from its October low at $78.73.
    For the recent bullish reversal to gain traction, a rise above the 2021-to-2023 downtrend line at $95.26 and, more importantly, the November peak at $95.61 would need to be seen on a daily chart closing basis. Such a move would confirm a medium-term bullish reversal.
    Disney Daily Candlestick Chart
    Source: TradingView In this scenario, the May earnings price gap to the 10 May low at $100.40 should get filled and the May peak at $103.91 be reached.
    At present the 200-day SMA at $90.27 is being revisited, though, around which the Disney share price may linger for a few days. Below it good support can be spotted at the positive November earnings price gap seen between $86.94 and $84.92. This area also incorporates the July and early August lows as well as the September and October highs, making it technically significant.

       
    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

    Hang Seng 2024 outlook

    By MongiIG,


    Market News
    It has been quite an unexpectedly turbulent year for the Hang Seng index, which is on track to mark its fourth consecutive year of decline, a stark contrast to other global markets.
    Source: Bloomberg   Indices Hang Seng Index China Hong Kong Economy of China Recession
    Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 07 December 2023 08:25 It has been quite an unexpectedly turbulent year for the Hang Seng index, which is on track to mark its fourth consecutive year of decline, a stark contrast to other global markets.

    Hang Seng 2023 review

    China’s exit from its Covid-zero restriction in the final month of 2022 led many to believe that 2023 would be a year of recovery for the beleaguered Chinese and Hong Kong investment markets. Thus, the optimism following China's reopening initiated a positive uptrend for Hong Kong stocks in the first month of 2023. However, it turned out that the beginning of the year was also its peak.

    Since then, worrying signs started emerging across all corners of the Chinese economy, from a sharp downturn in the property sector, deflationary domestic consumption to a slumping export market. All these factors snowballed into a widespread systemic and confidence crisis for the world’s second largest economy and its investment markets. Consequently, the Hang Seng index had fallen more than 20% and entered bear market territory in August and reached its yearly low in December.
       
    Jan
     
     
    Feb
     
    March
     
    Apr
     
    May
     
    June
     
    July
     
    Aug
     
    Sep
     
    Oct
     
    Nov
     
    Monthly%
     
     
    +10.4%
     
    -9.4%
     
    +3.1%
     
    -2.5%
     
    -8.3%
     
    +3.7%
     
    +6.1%
     
    -8.5%
     
    -3.1%
     
    -3.9%
     
    -0.6%
    Source: Hang Seng Index
    In terms of each sector’s performance, as of the end of November, the energy and telecommunications sectors were the only two to register gains, rising by 17.97% and 15.25%, respectively. In contrast, the property and consumer sectors endured significant losses, by more than 20%, primarily attributed to the intensified property crisis in mainland China and a contracting domestic consumption market.
    Source: Hang Seng Index (up to November 2023)  
    Hang Seng 2024 outlook

    Looking ahead, it’s likely that the Hang Seng Index may continue to grapple with the repercussions of years of decline and underperformance in the upcoming year. The index has been left far behind with an average 11% loss in the past four years while its peer markets like US and Japanese stocks moving substantially higher. The gap, unfortunately, may continue to widen as the fleet of global capital liquidity due to the lack of confidence for a speedy recovery. In October 2023, Hang Seng’s trading volume was down 20% year over year following a 10% down in the previous month.

    In October 2023, the Hang Seng's trading volume declined by 20% year over year, following a 10% decrease in the previous month. This further underscores the challenges and uncertainties faced by the index and the prevailing cautious sentiment among investors.

    Hang Seng index/US stocks/Japan stocks five-year performances
    Source:Tradingeconomics Additionally, despite China’s GDP is expected to grow by 5.4% this year (2023) according to IMF, there’s a prevailing expectation that a much slower economic growth will become the “new norm” for China. The continued weakness in the property sector, together with subdued internal and external demand could restrict the growth of Chinese economy to fall below 5%, the lowest level in over two decades.

    If there's any reason for optimism, one of the main sources to look forward to could be the large-scaled fiscal stimulus support from Beijing. Since the second quarter of 2023, the Chinese government has explored various ways to reinvigorate the investment market, including the issuance of an additional $137 billion in sovereign debt and a rare mid-year increase in the fiscal deficit. While the impacts of these measures seemed to be mostly short-lived in the stock market, these top-down supports could potentially lay the groundwork for a rebound in economic activities in the year to come.

    Furthermore, following a year of disappointment, it's also possible that global investors' lofty expectations will be adjusted, thereby lowering the bar for Hong Kong stocks to shine.

    Hang Seng Index technical analysis

    From a technical perspective, the Hang Seng index appears to be following a downward trajectory since the peak in January and is on track to revisit the floor level since 2009. However, over the short term, the downtrend may stabilize near the crucial psychological level at 16000 with the oversold signals suggesting a rebound could be in sight.

    On the upside, a renewed push higher above 17,800 could pave the way to challenge the November high, with the potential to reach the 20-week moving average (MA) above 17,900.

    Hang Seng Index weekly chart

       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  11. MongiIG
    Gold prices have been resilient through 2023, briefly pushing to an all-time high this week. How will 2024 be for the yellow metal?
    Source: Bloomberg   Forex Commodities Gold Federal Reserve United States Gold as an investment
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 06 December 2023 03:52 Central banks’ buying and safe-haven flows supported gold prices in 2023
    Gold prices have been resilient through 2023, briefly pushing to an all-time high of US$2,135 per ounce this week, despite the US interest rate registering its highest level in more than 22 years. The staggering performance could come amid strong central banks' demand and safe-haven flows from geopolitical tensions in the Middle East, which aid to offset the downward pressures that were incurred from the surge in Treasury yields and US dollar’s strength.
    Data from the World Gold Council revealed that on a year-to-date basis (as of 3Q 2023), the net 800 trillion tonnes of purchases from central banks are 14% higher than the previous year. The onset of the Israel-Hamas war in October has also triggered some safe-haven flows for the yellow metal, which saw prices reclaim its key psychological US$2,000 level. The likelihood for the conflict to drag on for longer may continue to underpin safe-haven demand into 2024, alongside the shift in rhetoric from the Federal Reserve (Fed) on its policy outlook.
     
    Source: Metals Focus, World Gold Council  
    Landscape for gold may remain supportive into 2024
    As we head into 2024, the macro backdrop for the yellow metal may turn for the better as Fed’s rhetoric continues to head in a less hawkish direction, while the narrative for rate outlook has taken on a different course from this year. Following the Fed’s most aggressive series of rate hikes in 40 years, markets are now looking for 125 basis point (bp) worth of rate cuts through 2024, with firm belief that we have already seen the peak in the Fed’s hiking cycle.
    Thus far, moderating inflation in the US and the sharp dip in the US economic surprise index to its six-month low have been supportive of such dovish pricing, with the trend of softer economic conditions likely to persist into next year as a reaction to tight monetary policies. Rising economic risks will remain a key theme in 2024, with any renewed recession calls potentially supportive of the safe-haven gold due to its historical track record of delivering positive returns in six out of the past eight recessions. Any failure for the US dollar to reclaim its 200-day moving average (MA) ahead may also be supportive of the yellow metal, based on their general inverse relationship.
     
    Source: Refinitiv  
    Still-neutral broad positioning may allow room for catch-up buying
    Commodity Futures Trading Commission (CFTC) data revealed that money managers have increased their net-long positioning in gold to its highest level since May 2023 (144,410 lots as of 28 November 2023), but remained a fair distance away from its peak positioning in 2016 and 2019 (~280,000 lots).
    Despite the resilient performance in gold prices, exchange-traded funds (ETFs) backed by physical gold have instead witnessed five straight months of outflows in October 2023. The still-subdued appetite for gold may potentially offer room for some catch-up buying if the yellow metal were to gain traction on further rate-cut talks, which may help to provide some support for prices.
    Technical analysis: Break above ranging pattern to remain on watch into 2024
    Gold prices have been trading on a broad consolidation pattern since June 2020, with recent attempt for an upward break of the upper resistance range eventually failing to sustain into the close. While this suggests that the bears are not ready to give up on defending the key resistance at the US$2,074 level just yet, any further retest of the US$2,074 will remain on watch into next year as the general trend remains upward bias.
    For now, its weekly relative strength index (RSI) continues to hang above the key 50 level as a sign of bullish momentum in place, while its weekly moving average convergence/divergence (MACD) has also defended its zero-line lately. On the downside, the psychological US$2,000 level will serve as immediate support to hold, followed by the US$1,950, where its 200-day MA may stand.
     
    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.
  12. MongiIG
    Rolls-Royce, Diageo, Halfords, Deliveroo and On The Beach could be the five best UK stocks to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares FTSE 100 Diageo Stock United Kingdom
     Charles Archer | Financial Writer, London As the UK gears up for Christmas — and traders pin their hopes on the semi-mythical Santa rally — it’s time to take a look at what could be some of the best shares to watch at the start of the new year.
    For context, the base rate could now have peaked at 5.25%, but is expected to remain relatively elevated for some time. CPI inflation may be heading in the right direction, but at 4.6%, the crucial measure remains more than double the official Bank of England target. And 2024 will likely be an election year, with all that entails for the investing environment.
    But many of the best UK shares may remain undervalued — for example, mid cap chocolatier Hotel Chocolat was bought out in November by Mars at a huge premium, for £534 million. Several analysts have leapt on the deal as symbolic of wider UK corporate under valuations — however, picking stocks ripe for a buyout has always been more of an art than a science.
    On the blue-chip end, the FTSE 100 is currently slightly down for the year, though investors will be up overall due to the dividends. Given the S&P 500’s 19.5% increase over 2023 thus far, this could well be called an underperformance — but it’s worth noting that 2022 saw the US index fall into a bear market while the FTSE increased slightly.
    Past performance is not an indicator of future returns.
    Best UK shares to watch
    1. Rolls-Royce
    Rolls-Royce (LON: RR) shares have been one of the top performers of 2023, rising by 189% year-to-date. The engineer unveiled plans at its Capital Markets Day to quadruple operating profit over the next four years — and managed to convince JP Morgan analysts to upgrade their ‘neutral’ rating to ‘overweight,’ hiking their price target from 235p to 400p.
    Analyst David Perry argues that a higher percentage of Roll’s long-term service agreements (LTSAs) will convert into cash than previously assumed due to ‘radical moves’ enacted by CEO Tufan Erginbilgic who joined the FTSE 100 business in January 2023 with a promise to transform the company.
    Rolls also has further catalysts to consider in 2024, including further small modular nuclear reactor developments, and further possible recoveries in the civil aviation and defence divisions.
    2. Diageo
    Diageo (LON: DGE) shares fell sharply after recent results saw weaker performance in the key Caribbean and Latin American markets — with operating income now only expected to grow by between 5% and 7% compared to between 6% and 9% previously.
    With the stock down by 27% over the past year, value investors may feel there is an opportunity. The FTSE 100 company controls a valuable, premium brand portfolio including Johnnie Walker and Dom Perignon, and boasts a relatively strong track record over the past two decades.
    CEO Debra Crew has also blamed wider macroeconomic issues, including a weaker global economy and diminished consumer confidence — which has seen customers downgrade to cheaper drink offerings. But no downturn lasts forever, and Christmas is traditionally a time for more luxury purchases.
    3. Halfords
    Halfords (LON: HFD) shares also plunged in late November after issuing tightened guidance to the lower end of previous expectations — it 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 company attributed this 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.
    Like Diageo, Halfords stock may rise sharply when the recovery arrives.
    4. Deliveroo
    Deliveroo (LON: ROO) shares are up 53% year-to-date and could have further to go after CEO and founder Will Shu announced that the company plans to expand its offering to non-food retail at its first Capital Markets Day. This will include florists, pharmacies, and electronics.
    Management plans to achieve growth in the ‘mid-teens’ in the medium term, and an adjusted earnings margin of over 4% as soon as 2026.
    While some non-food retailers are already on the app, Jefferies analysts rate the stock as a ‘buy’ with a 145.3p price target — arguing that ‘the guidance for medium-term GTV growth has finally been updated to reflect this higher cost of capital environment; despite the lower headline numbers, it still represents material upwards pressure to current consensus growth expectations.’
    Of course, Deliveroo operates in a fiercely competitive market.
    5. On The Beach Group
    On the Beach (LON: OTB) has just reported record trading for its 2023 financial year, including record Group Total Transaction Value, as trading resumed normal patterns after pandemic-era disruption.
    Group revenue rose from £143 million in the last financial year to £170 million in 2023, while passenger numbers rose by 13% in summer 2023 compared to summer 2022.
    It seems strategic investments during the weaker period of trading are paying off, including substantial redevelopment of its website and the launch of a new mobile app. Further, winter bookings are up by 34% — and the company plans to reinstate its dividend during FY24.
    Of course, oil remains elevated as do wider geopolitical tensions. But pent-up travel demand appears far from spent.

        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
    Nasdaq 100 edged up on falling US yields; gold dipped despite rate pullback. Attention now turns to US nonfarm payrolls.
      Source: Bloomberg
      Forex Indices Commodities Gold Nasdaq United States
     Diego Colman | Market Analyst, New York | Publication date: Wednesday 06 December 2023 05:52 The Nasdaq 100 rebounded modestly on Tuesday following a subdued performance at the start of the week, supported by a significant drop in US treasury yields in the wake of unfavorable economic data. When it was all said and done, the equity index climbed 0.25%, settling above the 15,900 mark and approaching its 2023 highs.
    To provide background information, bond rates fell across the board after October's US job openings figures, reported in the JOLTS survey, surprised to the downside by a wide margin. The disappointing results raised fears that the once indestructible labor market is beginning to crumble under the weight of aggressive monetary policy, which, in turn, boosted Fed easing wagers for 2024.
    US JOLTS chart
      Source: DailyFX
    Gold struggles, Nasdaq cautious: eyes on key US employment numbers
    Although the pullback in yields benefited the tech index, gold struggled to leverage the situation, with prices falling for the second day in a row. While the precious metal maintains a constructive outlook, bulls are not yet ready to re-engage long positions after getting caught on the wrong side of the trade on Monday, when the Asian session’s breakout quickly transformed into a large sell-off.
    Looking ahead, we may see measured moves in gold and the Nasdaq 100 over the next couple of days as investors avoid making large directional bets ahead of the release of the November US employment numbers on Friday. The upcoming jobs report will provide valuable insight into the health of the economy and, therefore, may help guide the Fed's next steps.
    Nasdaq 100 technical analysis
    The Nasdaq 100 dropped sharply on Monday but selling pressure abated when the tech index failed to break below support at 15,700. From those levels, prices have mounted a moderate rebound, consolidating above the 15,900 mark. If gains accelerate in the coming days, resistance is visible in the 16,080 to 16,200 band. On continued strength, the focus shifts to the all-time high near 16,800.
    Conversely, if sentiment swings back in favor of sellers and prices head south, the first important floor to watch is located around 15,700. Although this region might provide stability on a retracement, a breakdown could set the stage for a drop toward trendline support at 15,500. Moving lower, the next downside target would be the 100-day simple moving average.
    Nasdaq 100 technical chart
      Source: TradingView
    Gold prices technical analysis
    Gold surpassed its previous record, and briefly hit a fresh all-time high on Monday, but was quickly slammed lower, signaling that the long-awaited bullish breakout was nothing more than a fakeout.
    Although the bulls may have thrown in the towel for now, bullion retains a constructive technical outlook. This means that the path of least resistance remains to the upside. That said, if the precious metal resumes its advance, the first barrier to watch looms at $2,050, and $2,070/$2,075 thereafter. Beyond this zone, attention turns to $2,150.
    On the flip side, if losses intensify in the near term, initial support is positioned around $2,010. This area could act as a floor in case of additional losses, but a drop below it may be a signal that a deeper pullback is in gestation, with the next downside target situated near $1,990.
    Gold price technical chart
      Source: TradingView
     

       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  14. MongiIG
    easyJet shares may have risen sharply in 2023, but they remain far from their pre-pandemic value. Could further rises be in store in 2024?
    Source: Bloomberg   Indices Shares EasyJet Airline Tax Share  
     Charles Archer | Financial Writer, London | Publication date: Monday 04 December 2023 14:39 easyJet (LON: EZJ) shares have risen by 43% year-to-date, but this overall performance masks a more volatile reality. The FTSE 250 airline stock started the year out at 330p, increased to 515p by late January and then fell to as low as 360p during October.
    Shares were changing hands for 405p during pre-market trading on results day — 28 November — and have since shot up to 470p. And investors might be hoping that a Santa rally could see a return to the year’s high of 528p.
    easyJet share price: full-year results
    easyJet enjoyed a record H2 2023 financial performance and maintains a ‘positive outlook’ for FY 2024. Despite the challenging external macroeconomic environment, the airline saw FY23 headline profit before tax of £455 million — a £633 million year-on-year improvement and in line with prior guidance.
    And most encouragingly, easyJet holidays soared by a whopping 221%, delivering £122 million in profit before tax. Total revenue increased by 42% to £8.17 billion, predominantly due to pricing power, increased capacity, improved load factors and the aforementioned growth of easyJet holidays.
    Capacity rose by 14% year-on-year to 92.6 million seats, with passenger numbers up by 19% to 82.8 million people. However, headline costs also rose by 30% to £7.72 billion, driven by increased volumes, higher fuel costs and generic inflationary pressures.
    But the FTSE 250 company remains financially resilient — with £41 million in net cash and £4.7 billion in liquidity. And the company also holds resilient BBB/Baa3 credit ratings.
    Accordingly, easyJet remains on track to restart dividends, with 4.5p per share — or £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.’
    CEO Johan Lundgren enthuses that the ‘record summer performance demonstrates the success of our strategy and that demand for easyJet remains strong…we see a positive outlook for this year with airline and holidays bookings both ahead year on year and recent consumer research highlights that around three quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending.’
    Where next for easyJet shares?
    The FTSE 250’s medium-term targets is to achieve a group profit before tax per seat of between £7 and £10 — by reducing winter losses, growing easyJet holidays to £250 million of profit before tax and through cost savings from its Airbus order book that could deliver fleet efficiency and upguaging (an industry term for increasing capacity by adding seats or replacing smaller planes with larger ones).
    The ambition is to deliver more than £1 billion of profit before tax.
    Lundgren remains ‘confident about the future and the opportunity ahead, focusing on capital discipline and driving our low cost model to achieve our ambitious medium term targets’ — and on the earnings call made clear he feels that strong travel demand will continue into next summer. Encouragingly, the airline has hedged 76% of its jet fuel requirements for H1 2024.
    Financially, the company remains ‘on track’ to deliver growth of circa 9% in FY24. The current financial year has started positively, with early bookings ahead in Q2 compared to last year — but the airline is being impacted by reduced or even paused flights to various countries in the middle east, meaning it doesn’t expect its Q1 loss to improve year-on-year.
    Longer-term, easyJet has a balancing act to conduct. It’s promising significant fleet expansion and upgrading, alongside dividends — in a time where oil remains elevated and may continue to stay high. This may be difficult to pull off in an increasingly tight monetary environment.
    But the FTSE 250 stock remains far below its pre-pandemic price point, and long-term investors may see further gains through FY24.

       
    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

    Best shares to watch in December 2023

    By MongiIG,


    Market News
    What are the best stocks to watch in December 2023?
    Source: Bloomberg   Shares United Kingdom Tesla, Inc. United States Economy of the United Kingdom Interest  
    Piper Terrett | Financial writer, London While the UK economy has avoided a recession this year and interest rate hikes have eased, it isn’t all plane sailing. Recent research from Paris-based organisation the OECD warns that central banks in the UK and Europe will have to keep interest rates high next year to avoid entering a recession. It said it expects the European Central Bank and the Bank of England to hold rates at their current highs until 2025 because of inflationary pressure – much longer than financial markets have priced in, according to the Financial Times.
    The picture painted also looks gloomier than that in the US, where the US Federal Reserve is expected to cut interest rates in the second half of 2024. The OECD forecasts the UK economy to grow by 0.7% next year and 1.2% in 2025, while the US is expected to grow by 1.5% next year and by 1.7% in 2025.
    With the UK economy continuing to look sluggish, what are the best stocks to watch in December 2023? We think these shares could be worth a second look.
    Serco – benefiting from outsourcing trends
    With large corporates and governments busy trying to cut costs as the tough economic times continue, outsourcers should continue to benefit. Serco could be one such beneficiary. The company works with governments around the world to deliver public services, such as running prisons, defence services and international immigration services. It also has a stake in the space sector.
    At the half-year results in August the company reported a 13% increase in revenues to £2.5 billion, including 6% organic growth, and upgraded its cash generation forecast for the full year. Half-year cash flow came in at £98 million. Meanwhile, Serco posted a 14% increase in underlying profits to £148 million. The company also recently completed its £90 million share buyback programme.
    While it may not be popular, Serco also looks set to benefit from rising immigration as it provides immigration services on an international basis. It houses asylum seekers and provides ‘citizen services’, such as helping jobseekers in Ontario find work.
    The shares are down 7% over the past 12 months to 158p – some way off their three-year highs of 190p and are worth keeping an eye on. Analysts at broker Royal Bank of Canada currently have a price target of 190p on the stock.
    Source: Bloomberg AstraZeneca – a safe port in the storm
    AstraZeneca recently reported solid third quarter results and the drug giant is recovering well following the collapse of sales of its Covid testing products. Third quarter sales rose by 5% to $11 billion, while operating profits improved by 4% to $2 billion during the period. Sales from the company’s portfolio of cancer drugs also increased by 20%, while revenues from products for rare diseases were up by 12%.
    The drug giant also has a possible blockbuster in its – albeit, early stage – product pipeline; an obesity drug which works in a similar way to Novo Nordisk’s product Wevgovy. Wevgovy delivered $1.4 billion in sales between July and September this year alone. Recent early stage results from AstraZeneca’s drug have showed it is well tolerated by patients and has helped them lose weight. If successful, it is expected to be used in combination with other therapies, which could also boost sales.
    The pharmaceutical sector tends to remain a solid bet in tough times because patients will always need medicines, regardless of what the economy holds. The shares have fallen 7% this year to £101.80 and are worth watching, given they are trading below their three-year highs. Analysts at broker Barclays currently have a buy recommendation and a price target on the stock of £135.
    British American Tobacco – attractive to income seekers
    Another industry that is traditionally considered a good option in tough times is the tobacco sector. While not popular with everyone, its sales tend to be reliable, given that customers will continue to purchase its products regardless of the state of the economy. British American Tobacco tends to throw off a lot of cash and return money to shareholders on a regular basis. It is also busy getting its vaping business off the ground and this is now beginning to break-even on it.
    BATs is due to publish its pre-close trading update on Wednesday 6 December. The shares are down 26% this year to 2,512p and trade on a price earnings ratio of just 6.4%. They are worth keeping an eye on, especially given their healthy dividend yield of 9%.
    Tesla – further upside?
    Tesla shares have come back some way since sliding earlier this year, and are up 23% to $240. However, shares in the electric car manufacturer led by Elon Musk have not rebounded as strongly from the tech slump as other tech stocks, such as Alphabet, Amazon and Apple. However, there could still be some upside in the shares, which, while highly rated, are still trading some way off their three-year highs of $414.50.
    Growth in the electric car market continues and the company’s gigafactories in Europe mean that Teslas are now a common sight in the UK and mainland Europe. The company remains on target to produce 1.8 million cars this year and recently debuted its Cybertruck at an event in Austin, Texas.
    However, a labour dispute with Swedish Tesla workers and Musk’s activities at Twitter are weighing on the shares. Analysts at broker Wedbush have an outperform rating on the stock and think they could reach $310. Nevertheless, other brokers are more pessimistic, with analysts at Jefferies lowering their target to $210 with a hold rating.
    Burberry – recovery play?
    A riskier option, which could be worth watching over time, is the luxury retailer Burberry, which is facing tough times. The shares have slumped by 27% this year and dipped 9% earlier this month after the company warned that it may miss its revenue targets for the year. High end clients are feeling the pinch of the cost of living crisis, and other luxury goods brands, such as Gucci and LVMH, have reported similar issues.
    There is no rush to buy the shares as things may get worse before they get better. However, they could offer interest as a possible long-term recovery play or even perhaps as a takeover target.
    Past performance is not a guide to future performance

      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.
  16. MongiIG
    By the end of November, the price of the yellow metal had increased by more than 10% year-to-date, as market participants anticipate that the current tightening cycle might be approaching its conclusion.
    Source: Bloomberg   Forex Commodities Gold Price Option ETF
    Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 30 November 2023 10:42 Why invest in gold?
    Gold has long held a unique status as a powerful tool for preserving value, gradually ingraining its perceived worth in society over thousands of years. In ancient times, precious metals served as a universally recognized unit of exchange, forming the basis for the world's initial currencies for centuries.
    Up until 1971, the US dollar was tied to the value of gold, and with most currencies hitched to the dollar, essentially gold played a pivotal role as the cornerstone of the global forex market.
    Today, gold is still the go-to 'safe haven' for investors, preserving its value when other assets hit roadblocks. Beyond that, central banks are hoarding gold reserves, recognizing its global value to be wielded in times of crucial need.
    Who is the main gold producer and buyer in the world?
    In the past, countries such as South Africa were renowned for hosting some of the world's largest gold reserves. However, over the years, nations like China, Russia, Australia, and the United States have surpassed them in this regard.
    China, the leading global gold producer, contributes to 11% of the world's total production. Meanwhile, China is also the largest purchaser of gold. Gold reserves in China have averaged 1161.79 Tonnes from 2000 until 2023, reaching a record high of 2191.53 Tonnes in the third quarter of 2023.
     
    Source: World Gold Council The different ways to invest in gold markets
    There are various options to invest in gold markets, including spot gold, gold futures, gold options and gold stocks.
    •Spot gold: Spot gold involves the immediate purchase or sale of the precious metal, with the exchange occurring at the precise moment the trade is settled, or ‘on the spot’ price. When engaging in spot gold trading, investors transact buying and selling at the current market rate, commonly referred to as the spot price.
    •Gold futures: Futures contracts allow investors to trade gold at a predetermined price on a future date. These contracts are standardized in terms of quantity and quality, with only their price influenced by market forces.
    •Gold options: Options contracts operate similarly to futures, but there is no obligation to execute the trade upon purchase. Options grant investors the right to exchange gold at a predetermined price on a specified date.
    •Gold ETFs: Exchange-traded funds (ETFs) can help investors track the performance of shares in a collection of publicly traded gold mining, refining, and production companies. Engaging in ETF trading extends investors' exposure and hence helps to diversify their portfolios.
    •Gold stocks: Trading gold stocks is another way to invest in gold. This will enable investors to diversify their portfolio within the gold industry, going long or short on companies involved in mining and production of gold.
    How will the precious metal perform in 2024?
    Gold prices stayed resilient for most of 2023, reaching a two-year high above $2050 in May. By the end of November, the price of the yellow metal had increased by more than 10% year-to-date, as market participants anticipate that the current tightening cycle might be approaching its conclusion. The escalating demand for a safe-haven refuge was further fuelled by ongoing geopolitical tensions in both the Middle East and Ukraine.
    By the end of November, Gold prices have posted an impressive 10% gain in the fourth quarter, surpassing the key $2000 per ounce level. The precious metal has been trading within an ascending wedge since June 2022. This pattern could propel the price towards the May high above $2075should the momentum continues. On the other hand, the level at $1998 would act as a crucial support level if the price of the shining metal pulls back.
    Looking forward, the outlook for gold in 2024 is expected to remain positive, as the factors driving the growing appetite for the precious metal seem to stay intact. Furthermore, as gold is often seen as a reliable means of safeguarding wealth during challenging economic periods, the widely projected economic slowdown in 2024 should serveas an additional catalyst for gold to preserve its prime.

       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  17. MongiIG

    Best AI stocks to watch in December 2023

    By MongiIG,


    Market News
    Microsoft, Alphabet, Nvidia, Tesla and IBM 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 ChatGPT Nvidia Google Microsoft  
     Charles Archer | Financial Writer, London Artificial Intelligence (AI) has been the investing theme of 2023. The tech world has seemingly had enough of disruptive tech, cryptocurrency, Web3, Blockchain, and the Metaverse — and is ready to set its hopes on the next big thing.
    While these former concepts may be on the backburner as the days of ultraloose monetary policy have ended, AI is becoming the clear driving force for big tech. Indeed, almost all of the S&P 500’s gains in 2023 have come from just seven companies, all of whom are potentially riding the AI wave to some degree.
    There may be a difference between AI and the rest though. Artificial Intelligence is already in use across a wide variety of real-world applications, including in entertainment, social media, art, retail, security, sport analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
    Every Netflix recommendation, every supermarket rewards purchase, and every football match is analysed ever more relentlessly in order to provide more and better data. And while consumers have always understood — even peripherally — that AI was taking over more and more of the heavy lifting; the sector’s investment catalyst has finally arrived.
    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.
    Taking the world by storm, it now boasts over 100 million users, and investors are now considering whether the innovation could make entire careers in areas such as copywriting, accounting, personal training, and even software development entirely redundant. Of course, OpenAI’s board has recently gone through some turmoil — with many analysts suspecting differences of ethics as models become ever more powerful.
    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 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
    1. Microsoft
    Microsoft is the original global computing power, so it makes sense that the US behemoth tops the list of the best AI stocks to watch. 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.
    Market Capitalisation: $2.84 trillion
    2. Alphabet
    Google parent Alphabet Inc 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 — only to generate an embarrassing mistake at launch.
    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.
    Market Capitalisation: $1.72 trillion
    3. Nvidia
    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.
    Market Capitalisation: $1.19 trillion
    4. Tesla
    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 124% year-to-date as it eyes possible expansions in India and Europe — though the recent catalyst is the 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 this year.
    Market Capitalisation: $758 billion
    5. IBM
    IBM specialises in both hardware and software, providing AI-based services ranging from mainframe computing to nanotechnology. It’s also the largest industrial research firm in the world with 19 facilities — generating the most annual US patents every year between 1993 and 2021.
    The company recently completed the installation of a 127-qubit quantum computing system at the University of Tokyo — the first ‘utility-scale’ quantum system in the region. And German biotech giant Boehringer Ingelheim has announced that it will harness IBM AI technology to supercharge its drug discovery efforts.
    Further applications could be in the offing.
    Market Capitalisation: $142 billion
     
     
     
     
    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
    Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These are the five largest semiconductor stocks in the world by market capitalisation.
    Source: Bloomberg   Shares Semiconductor Integrated circuit ASML Holding Nvidia Artificial intelligence  
     Charles Archer | Financial Writer, London Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
    Semiconductors — or microchips — are essential to the functioning of electronic devices and have seen particular investor interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, or a hundred other applications, all of which are essential to 21st century living.
    OpenAI’s revolutionary ChatGPT chatbot, the growing political importance of AI development, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
    For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022.
    It’s also worth noting that China and the US are both attempting to harm each other’s ability to use advanced semiconductors to develop AI technology; the US through export bans of certain semiconductors and China through export bans of certain critical minerals.
    Finally, while the five stocks listed below are considered to be the largest in the world by market capitaliaton right now, analysts disagree on what exactly constitutes a semiconductor stock, and further, these may not be the best value opportunities. And remember, past performance is not an indicator of future returns.
    Best semiconductor stocks to watch
    Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
    For example, the Vaneck Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
    1. Nvidia
    Nvidia shares have been on a dizzying rally this year to a $1.2 trillion valuation. The microchip behemoth is arguably the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
    Q3 results were remarkable; revenue came in at $18.12 billion compared to the LSEG analyst consensus of $16.18 billion, a rise of 206% year-over-year. The al-important data-centre revenue rose by a whopping 279% to $15.51 billion — with half of this cash coming from cloud infrastructure providers including Amazon.
    And Nvidia also expects to generate 231% revenue growth in Q4 — equivalent to $20 billion. On the other hand, it has a huge price-to-earnings ratio, alongside significant exposure to a faltering Chinese economy and rising Sino-US export tensions.
    2. Taiwan Semiconductor Manufacturing Co
    While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to TSMC. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
    TSMC shares have done well in 2023 given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
    However, Taiwan’s complex political status, including its relationship with China remains a long-term
    risk.
    3. Broadcom
    Broadcom may not be the most fashionable name in the semiconductor world, but the company’s designs and manufacturing acumen underpins masses of data centre, networking, software, broadband, wireless, storage, and industrial markets.
    In Q3 results, the company saw revenue rise by 5% year-over-year to $8.88 billion, and it issued Q4 guidance for a 4% year-over-year increase to $9.27 billion. CEO Hock Tan enthused that the results were ‘driven by demand for next generation networking technologies as hyperscale customers scale out and network their AI clusters within data centers.’
    With Broadcom shares up 71% year-to-date, further growth in 2024 seems possible.
    4. Samsung
    Samsung is a South Korean titan that is well-known as one of the world’s largest producers of electronic devices — ranging from appliances to digital media devices, semiconductors, memory chips, and integrated systems.
    Recent results saw titan’s total consolidated revenue rise by 12% to KRW67.4 trillion, driven by new smartphone releases and higher sales of premium display products.
    Operating profit rose to KRW2.43 trillion, based on strong sales of flagship mobile phone models and strong demand for displays. Samsung also signed a supply deal with Nvidia in September, and further collaboration remains a key opportunity in the new year.
    5. ASML
    ASML is a world leader in chip-making equipment. It’s a common misconception that the company actually makes semiconductors; it does not. It designs and manufactures the lithography machines that are an essential component in microchip manufacture and is therefore indispensable within the wider supply chain.
    You could argue that ASML is an even more crucial to the manufacturing line than TSMC, but the stock has only risen by a comparatively smaller 23% year-to-date.

    In recent Q2 results, Q2 net sales came in at €6.9 billion, with a gross margin of 51.3% and net income of €1.9 billion. And it expects Q3 2023 net sales to be between €6.5 billion and €7.0 billion alongside a gross margin of around 50%.
    ASML shares have risen by 23% year-to-date yet remains some distance from previous highs — leaving possible room for further rises in 2024.

        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
    Fundamental and technical outlook on the Rolls-Royce share price.
    Source: Bloomberg   Shares Price Roll-Royce Candlestick Share price Income  Chris Beauchamp | Chief Market Analyst, London | Publication date: Wednesday 29 November 2023 13:09 Rolls-Royce surges to a three year high on ambitious plans
    Engineer Rolls-Royce has already seen its shares surge 80% this year, but the firm’s plans for the future could provide further upside impetus.
    Rolls-Royce, the renowned British engineering company, has reached a new three-year high following its recent update. The firm has outlined its plans to enhance operating profit and margins, aiming to fortify its position as a stronger and more resilient entity. This strategic move is undoubtedly attracting attention from investors who value stability and growth.
    One notable aspect of Rolls-Royce's recovery is the steady rebound of its total revenues from the adverse effects of the pandemic. As the global economy gradually recovers, the company's financials are reflecting this positive trend. This is a testament to the resilience and adaptability of the firm, as it navigates the challenges posed by the ongoing crisis.
    Furthermore, income investors are eagerly awaiting the return of dividends from Rolls-Royce, which is expected to occur next year. The prospect of receiving a share of the company's profits is undoubtedly enticing for those seeking a reliable income stream. This development not only signals the company's confidence in its future prospects but also serves as a positive signal for the broader market.
    Investors have certainly shown optimism in the past six months, driving up the stock of Rolls-Royce by 80 percent. This surge has been driven by hopes the management team can hit their ambitious targets.
    However, despite this impressive rally, Rolls-Royce still lags behind its rival Safran in terms of valuation. The market currently values Rolls-Royce at a one-quarter discount to Safran based on projected earnings for the year 2025. This discrepancy suggests that investors are not fully convinced that Rolls-Royce will be able to deliver on its targets and close the gap with its competitor, though if it can make progress the shares could make further strides higher.
    Analyst ratings for Rolls-Royce
    Refinitiv data shows a consensus analyst rating of ‘buy’ for Rolls-Royce – 4 strong buy, 6 buy and 8 hold - with the mean of estimates suggesting a long-term price target of 255.76 pence for the share, 2% below where it is trading at the moment (29 November 2023).
    Source: Refinitiv Technical outlook on the Rolls-Royce’s share price
    The Rolls-Royce share price is on track to reach the 61.8% Fibonacci retracement of the 2014-to-2020 decline at 287.6p, above which lies the July 2016 peak at 300.4p.
    Rolls-Royce Monthly Candlestick Chart
    Source: TradingView The acceleration to the upside seen since Tuesday in an already steep uptrend points to further upside being seen in the near future as momentum usually takes a while to fade.
    While last week’s reaction low at 234.5p underpins on a daily chart closing basis, the short-term uptrend will remain intact. The longer-term uptrend will stay valid as long as the Rolls-Royce share price trades above its 196.45p late-October low.
    Rolls-Royce Daily 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.
  20. MongiIG
    Fundamental and technical outlook on the easyJet share price ahead of Tuesday’s full-year earnings.
    Source: Bloomberg   Shares EasyJet Price Airline Ryanair Price–earnings ratio
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 27 November 2023 17:42 What to expect from easyJet’s full-year earnings
    The recent financial performance of easyJet has been a mixed bag. While the airline reported a "record summer" and forecasted a strong pre-tax profit for fourth quarter (Q4), the full-year profit outlook fell short of expectations. Factors such as strike actions and increased competition have contributed to this disparity. Additionally, rising global fuel prices, triggered by the Hamas attack in October, have negatively impacted passenger numbers.
    However, there are signs of improvement in the industry. Ryanair, one of easyJet's major competitors, has forecasted a record annual profit, citing a significant increase in airfares during the warmer months. This positive outlook for Ryanair reflects an overall recovery in the air travel sector.
    On Tuesday, easyJet will confirm its annual profit before tax within the previously provided range. This announcement will be crucial for shareholders, as the airline's board has committed to distributing 10% of profits after tax to them. However, analysts and investors will likely be more interested in easyJet's forecasts for 2024, considering the impact of rising fuel prices and the war in Palestine on the airline's performance and demand for winter sun destinations.
    EasyJet's hedging strategy will also play a vital role in navigating the challenges posed by rising fuel prices. The company has already secured hedging for a significant portion of its fuel needs for the first and second halves of fiscal year 2024.
    The recovery of easyJet is a complex endeavour, given the fierce competition in the short-haul market and the difficulty of passing on rising costs to passengers. However, the airline's management has been proactive in maintaining a competitive edge. Strategic moves, such as upgrading the fleet through a substantial Airbus order and expanding the easyJet holidays operation, demonstrate their commitment to success.
    It is worth noting, though, that easyJet has posted three consecutive years of losses, although these losses have been narrowing from £1.03bn in 2021 to £208m in 2022. The company's anticipated pre-tax profits of between £440m and £460m for the current year mark another step in the right direction. From a valuation perspective, easyJet's shares appear to be good value, with relatively low forward price-to-earnings (P/E) ratios of 8.6 times earnings and 7.2 times for 2024 as well as an expected yield of over 3% for 2024. After all, easyJet was posting steadily rising profits before the pandemic struck.
    Looking at easyJet's competitors, both Ryanair and Wizz Air have reported an increase in passenger numbers, indicating a rebound in air traffic. Ryanair, in particular, has shown resilience in its financial performance and passenger volumes. Its robust traffic growth and improved load factor have contributed to a significant increase in profit after tax.
    easyJet analyst ratings
    Data from Reuters Refinitiv shows that of the 20 analysts who currently cover easyJet, two have a ‘strong buy’, nine a ‘buy’, seven a ‘hold’, one a ‘sell’ and one a ‘strong sell’ rating. The average analyst recommendation thus sits between a ‘buy’ and a ‘hold’ with a mean target price at 639.74 pence, approximately 56% higher than the current price (as of 27 November 2023). 
    Source: Refinitiv easyJet technical analysis
    The easyJet share price, which has risen by around 24% year-to-date, not only greatly outperforms the FTSE 100 but also British Airways’ owner International Consolidated Airlines Group (IAG) and budget airline Wizzair but lags its direct competitor Ryanair with its 40% year-to-date gains.
    Source: Google Analytics When looking at a monthly candlestick chart the easyJet share price is trading around its 2020 pandemic lows but so far remains above its October 2022 decade low at 276.9 pence.
    For a long-term bullish reversal to occur, a rise and ideally a monthly close above the current November peak at 445.6p would need to occur. In this case the 2020-to-2023 downtrend line would be broken through as well with the May peak at 534.8p being back in sight.
    easyJet Monthly Candlestick Chart
    Source: TradingView For the shorter-term October-to-November uptrend to remain valid, the easyJet share price needs to hold above its mid-November low at 390.5p on a daily chart closing basis. Failure there could lead to the October trough at 350.0p being revisited.
    EasyJet Daily Candlestick Chart
    Source: TradingView Immediate resistance between the October and current November highs at 445.6p to 450.7p will need to be overcome, and ideally the August-to-September peaks at 462p to 464.4p for a bullish reversal to become longer-term plausible.

       
    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

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
      Week commencing 27 November
    Axel Rudolph's insight
    This week sees the release of US new and pending home sales, consumer confidence, quarter 3 gross domestic product growth (second estimate), personal income, ISM manufacturing PMI and the Federal Reserve’s (Fed) Beige Book and preferred Personal Consumption Expenditure (PCE) price index. In Europe, German consumer confidence, unemployment and retail sales as well as inflation data will be key and in the Eurozone economic sentiment. Japan industrial production, retail sales, unemployment and consumer confidence will be worth monitoring as will China’s manufacturing data. On the earnings front Topps Tiles, EasyJet, Halfords and Mulberry will report in the UK and HP, Dollar Tree and Dell in the US.
      Economic reports
    Weekly view Monday
    3pm – US new home sales (October): sales rose 12.3% in September. Markets to watch: USD crosses

    Tuesday
    7am – German GfK consumer confidence (December): confidence index expected to rise to -26 from -28.1. Markets to watch: EUR crosses
    3pm – US consumer confidence (November): previous reading 102.6. Markets to watch: USD crosses

    Wednesday
    1pm – Germany inflation (November, preliminary): prices expected to rise 3.7% YoY from 3.8% and 0.1% from 0% MoM. Markets to watch: EUR crosses
    1.30pm – US GDP (Q2, 2nd estimate): expected to be 4.9% QoQ. Markets to watch: USD crosses
    3.30pm – US EIA crude oil inventories (w/e 24 November): stockpiles rose by 8.7 million barrels last week. Markets to watch: Brent, WTI

    Thursday
    1.30am – China PMI (November): manufacturing PMI to rise to 49.9 from 49.5, and non-manufacturing expected to rise to 51.5 from 50.6. Markets to watch: China indices, CNH crosses
    7.45am – French CPI (November): price growth expected to slow to 3.8% from 4%. Markets to watch: EUR crosses
    8.55am – German unemployment rate (November): forecast to hold at 5.8%. Markets to watch: EUR crosses
    10am – eurozone inflation (November): previous reading 2.9%. Markets to watch: EUR crosses
    1.30pm – US initial jobless claims (w/e 25 November), PCE price index: claims to rise by 213K versus 209K previously; PCE price index to rise 0.2% MoM and 3.1% YoY, down from 0.4% and 3.4% respectively. Markets to watch: US indices, USD crosses
    1.30pm – Canada GDP (Q3): expected to be flat quarter-on-quarter. Markets to watch: CAD crosses
    2.45pm – Chicago PMI (November): index to rise to 45. Markets to watch: USD crosses
    3pm – US pending home sales (October): sales rose 1.1% MoM in September. Markets to watch: USD crosses

    Friday
    1.45am – China Caixin manufacturing PMI (November): forecast to rebound into expansion territory, at 50.2, from 49.5. Markets to watch: China indices, CNH crosses
    1.30pm – Canada employment report (November): unemployment rate expected to rise to 5.8%. Markets to watch: CAD crosses
    3pm – US ISM manufacturing PMI (November): previous reading 46.7 Markets to watch: USD crosses
      Company announcements
     
    Monday
    27 November
    Tuesday
    28 November
    Wednesday
    29 November
    Thursday
    30 November
    Friday
    01 December
    Full-year earnings
      Topps Tiles,
    easyjet       Half/ Quarterly earnings
      Pets at home,
    Hewlett Packard,
    Dollar Tree,
    Workday Halfords,
    Pennon,
    Snowflake,
    Foot Locker Dr Martens,
    Mulberry,
    Remy Cointreau,
    Dell,
    Kroger,
    Salesforce   Trading update*
      Safestore        
        Dividends
    FTSE 100: 3i, Severn Trent
    FTSE 250: Hill & Smith, Diversified Energy Co, Bellway, Alliance Trust, AVI Global, Oxford Instruments, Telecom Plus, Johnson Matthey, FirstGroup
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
    Index adjustments
     
    Monday
    27 November Tuesday
    28 November Wednesday
    29 November Thursday
    30 November Friday
    01 December Monday
    04 December FTSE 100     2.11       Australia 200   0.8 0.9   0.4   Wall Street   36.5 14.0 14.8     US 500 0.02 0.79 1.38 0.39 0.01 0.22 Nasdaq 0.07 1.42 3.99 0.55 0.15 0.39 Netherlands 25             EU Stocks 50         2.0   China H-Shares 0.6   0.5       Singapore Blue Chip             Hong Kong HS50 1.0 1.6 0.9   2.1   South Africa 40   23.0         Italy 40             Japan 225            
  22. MongiIG
    RBA minutes paint a more hawkish outlook as Governor Bullock hints that inflation fight is far from over; AUD/USD eyes retracement after printing higher. What is GBP/AUD’s and Aussie’s outlook?
      Source: Bloomberg
      Forex Shares Inflation Australian dollar AUD/USD GBP/AUD   IG Analyst | Publication date: Thursday 23 November 2023 05:41 Australian dollar fundamental backdrop
    The Reserve Bank of Australia (RBA) recently published the minutes from its latest meeting, during which the central bank implemented a 25 basis points hike. Surprisingly, the Australian dollar experienced a sell-off in the wake of the rate increase, a development that, upon scrutinizing the minutes, proves somewhat unexpected. The disclosed minutes highlighted that the hike aimed to mitigate the risk of a "larger monetary policy response," given the persistently high inflation and robust economy.
    Inflation risks amidst peaks and challenges
    Furthermore, the minutes underscored that inflation risks continue to lean towards the upside, despite recent remarks by RBA Governor Michele Bullock indicating that inflation may have peaked. However, the Governor acknowledged that bringing inflation within the target range will present an ongoing challenge for the economy and could extend over a two-year period.
    This aligns with my consistent belief that inflation seldom recedes sufficiently, with certain items retaining elevated prices while others may become more affordable. I anticipate that some of the recent global inflationary pressures may become entrenched, making the forthcoming months particularly intriguing for central banks.
    Resilient Australian dollar
    Despite the initial sell-off following the rate hike, the Australian dollar has maintained relative strength. I anticipate this trend to persist, as hinted by Governor Bullock, attributing the economy's resilience to robust demand. According to Governor Bullock, the labor market is expected to remain robust, which, in turn, could sustain demand and pose upside risks to inflation.
    Interest rate dynamics: RBA's strategic positioning
    Considering an interest rate comparison, the RBA remains well-positioned to implement another rate hike if deemed necessary. As illustrated in the chart below, the RBA currently enjoys the lowest rates compared to the UK, EU, and the United States.
    RBA's rates compared to the UK, EU, and the United States chart
      Source: TradingView
    We did have some data a short while ago, as well with the release of the Judo Bank Manufacturing and Services PMI Flash numbers. Manufacturing and Services both declined slightly from the October print, but seemed to have little immediate impact on the Australian dollar.
    Economic Calender
      Source: DailyFX
    AUD/USD technical analysis
    AUD/USD has been on an impressive rally since the central bank raised rates; and we had an initial selloff to retest support at the 0.6350 mark. Since then, AUD/USD has exploded, printing a fresh higher and keeping the overall bullish structure going.
    AUD/USD also remains with a long-term descending channel but may find it hard to push on from here without some form of retracement. Resistance has been provided by the 200-day MA at the 0.6600 level. The issue for sellers is that there remains a lot of downside support as well, which could hamper a sustained move lower. It would also appear that a golden cross pattern may be developing as the 20-day MA eyes a cross above the 100-day MA, which would be a nod to potential bullish continuation.
    Personally, I would prefer some form of retracement here before potentially joining the trend, as we have just printed a higher high. I will be keeping a close eye on support at 0.6484, 0.6440 and 0.6400 for potential long opportunities. A break and daily candle close below the 0.6350 mark will be needed for a change in structure, and this would then invalidate the bullish setup.
    Key levels to keep an eye on
    Support levels:
    0.6484 0.6445 0.6400 Resistance levels:
    0.6594 0.6650 0.6691
    AUD/USD daily chart
      Source: TradingView
    GBP/AUD technical analysis
    GBP/AUD has been rangebound for the best part of two months. For many pairs a 400-pip range is quite large, but in the case of an exotic like GBP/AUD it is not. As things stand, there is a clearly defined range and some key areas of support and resistance which may be used for potential opportunities in the interim. Support on the downside rests at the 1.9000 handle, and just below at the 1.8950 mark. A move lower also brings the possibility that we may spike slightly lower to tap into the 200-day MA at 1.8911.
    Key levels that may provide resistance for potential shorts will be the 1.9211 area and then the 1.9278 before the range high at 1.9338 comes into focus. All these levels may provide an opportunity for potential shorts, as even a breakout will only serve to improve the risk to reward ratio.
    GBP/AUD daily chart
      Source: TradingView
     
         
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  23. MongiIG
    A look at the “Santa Claus Rally” and which gains it has historically produced.
    Source: Bloomberg   Shares Stock Santa Claus rally Stock market index Market trend United States  
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 21 November 2023 12:43 Now is the time to buy US stocks
    According to Jeff Hirsch’s Stock Trader’s Almanac now is the time to buy US stock indices as we enter a bullish seasonal pattern today.
    By analysing data going back to 1950 Mr Hirsch shows that the November-to-January time frame is the year’s best consecutive three-month span to hold stocks.
    Thanksgiving kicks off this seasonal stock outperformance, followed by the “Santa Claus Rally” which covers the last five trading days of the year and the first two of the New Year, and the “January Effect” of small caps outperforming large caps in January, which begins in mid-December.
    Mr Hirsch and his friend Larry McMillan of the Options Strategist have combined “these seasonal occurrences into a single trade: buy the Tuesday before Thanksgiving and hold until the 2nd trading day of the New Year.” Apparently when trading this strategy with options the best day to do so is on the day before Thanksgiving.
    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%. The Russell 2000 is up 77.27% of the time since 1979 with an average gain of 3.19%.
    Thanksgiving - Santa Claus Rally Trading statistics
    Source: Hirsch Holdings Inc. & StockTradersAlmanac.com 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.”
    The “Santa Claus Rally” in the current market context
    When looking at the above strategy in the current context one shouldn’t be surprised if equity indices on both sides of the pond may at least short-term consolidate as liquidity dries up around the prolonged Thanksgiving weekend.
    After all, with US indices having strongly risen from their late-October lows - by between 8% and 14% in little over three weeks – and looking technically overbought, a minor correction over the coming days shouldn’t come as a surprise.
    Having said that, such a counter-trend move might represent an even better stock buying opportunity for the above mentioned strategy, especially since the last few days of November tend to lead to stock market gains.
    Best month of the year chart
    Source: Carson Investment Research, FactSet 20/11/2023 @ryandetrick
       
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  24. MongiIG
    Technicals turning positive though yet to shift the overview, and both retail traders and CoT speculators heavy sell but not shorting into recent price gains.
      Source: Bloomberg
      Federal Reserve Inflation /business/market_index Federal Open Market Committee Bond market Consumer price index
     Monte Safieddine | Market Analyst, Dubai | Publication date: Monday 20 November 2023 07:11 More Fed members speak; and mostly worsening data
    More members of the Federal Reserve (Fed) spoke late last week. Goolsbee discussed the "golden path" to 2%, avoiding a recession, but emphasised keeping a vigilant eye on housing inflation. Cook expressed the possibility of a soft landing, albeit uncertain. Collins advocated for patience currently but stressed the need for monetary policy to maintain a restrictive stance for some time.
    On the data front, the housing sector reported building permits and housing starts for October, surpassing forecasts and previous readings. However, a weakening print from the NAHB took it to lows unseen in nearly a year. Trade pricing data fell below forecasts, industrial production reversed, and there was an increase in claims.
    Market dynamics and financial trends: a week of positive closures and bond market shifts
    Key stock indices closed the week positively, with gains attributed to lighter US Consumer Price Index (CPI) readings. Notably, large-cap stocks didn't outperform this time. Another positive note was the avoidance of a government shutdown. Energy prices experienced a week-on-week drop, aligning with generally weaker economic data within the 'bad news is good news' narrative.
    In the bond market, Treasury yields retreated week-on-week, with the 10-year closing below 4.5%. In real terms, the 5Y through 30Y averaged closer to 2.2%, down from 2.3% at the start of the previous week. Breakeven inflation rates experienced a dip. According to CME's FedWatch, market pricing indicates the majority expects the first rate cut from current levels in May of next year.
    Week ahead: key data releases, including FOMC minutes
    As for the week ahead, the holiday on Thursday in the US is set to bring a few things forward and postpone an item. Minutes from the latest FOMC (Federal Open Market Committee) meeting will be released tomorrow instead of Wednesday, following its most recent hold that came with a slightly dovish tweak but at times hawkish speak thereafter, pushing back against market pricing looking to dent its 'higher for longer' narrative.
    Housing sector and economic indicators: navigating a story of pullback
    A couple of items from the housing sector, with existing home sales on the same day for the month of October, tell a story thus far of a pullback, and mortgage applications the following day. Weekly claims will be on Wednesday after their unexpected increase last time around for both initial and continuous. Durable goods for October will also be released after a strong September print, along with the revised figures out of UoM (University of Michigan) following the uptick in consumer inflation expectations in both the 12-month and five-year preliminary readings and a clear upset in consumer sentiment.
    Navigating manufacturing stability: focus on preliminary PMIs
    Preliminary PMIs (Purchasing Managers’ Index) out of S&P Global will be on Friday, with a focus on whether the manufacturing sector can avoid falling back into contraction. Anxious bond market traders will be processing a couple of auctions today and tomorrow. In earnings, Zoom is today, but far more important with AI fund flow implications (even if preoccupied with the OpenAI drama over the weekend) is the last of the ‘magnificent seven’, Nvidia, expected to report tomorrow. Both aren’t components of this index.
    Dow technical analysis, overview, strategies, and levels
    It was last Tuesday's action, following lighter pricing data, that took price across its previous weekly first resistance level - lacking a trigger for cautious conformists and favoring contrarian buy-breakouts with a move past it. However, still within its second resistance, and another key technical indicator on the weekly time frame, tilting into the green. It's more interesting on the daily time frame ,that isn’t far off a shift to 'bull average' when ignoring price-indicator proximity. Last Thursday's first support managing to hold but lacking a trigger for cautious conformist buy-after-significant reversals.
      Source: IG
    IG client* and CoT** sentiment for the Dow
    As for sentiment, an increase in price usually causing sell bias to rise, as shorts initiate, and longs are enticed into closing out. Retail traders have opted to reduce their heavy sell sentiment, from 67% at the start of last week to 65% at the start of this week instead. CoT speculators are also little changed w/w and still in heavy sell territory, a drop in longs (by 1,816 lots) and shorts (by -2,379) taking the sell bias in percentage terms a notch higher to 73%.
      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 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.
  25. MongiIG

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
      Week commencing 20 November
    Chris Beauchamp's insight
    Next week is sparser in terms of key data, though eurozone watchers will keep an eye on the German IFO data. Consumer Price Index (CPI) in Canada will also be of interest, along with minutes from the Reserve Bank of Australia (RBA) and the Federal Reserve bank (Fed), covering their latest decisions to raise rates and leave them unchanged, respectively. Earnings season in the US is winding down, but NVIDIA and HP will be key names in the first half of the week. In the UK, AO World and Kingfisher could prove the most interesting for UK traders. The US Thanksgiving holiday takes place at the end of the week, resulting in a quiet second half of the week as US markets are closed on Thursday and have a half day on Friday.
      Economic reports
      Weekly view Monday
    None

    Tuesday
    12.30am – RBA meeting minutes. Markets to watch: AUD crosses
    1.30pm – Canada CPI (October): price growth to be -0.1% Month on month (or MoM) and 3.8% Year-over-year (YoY,) from 0.2% and 3.3% respectively. Core CPI to be 2.8% YoY from 2.6%. Markets to watch: CAD crosses
    1.30pm – US Chicago Fed index (October): index to rise to 0.02. Markets to watch: USD crosses
    3pm – US existing home sales (October): sales to fall 1% MoM. Markets to watch: USD crosses
    7pm – Fed minutes: these will look at the latest decision to leave unchanged rates unchanged. Markets to watch: US indices, USD crosses

    Wednesday
    12.30pm – UK autumn statement: the chancellor, Jeremy Hunt, will unveil the government’s spending plans for the next six months. Markets to watch: GBP crosses
    1.30pm – US durable goods orders (October), initial jobless claims (w/e 18 November): orders to rise 4.7% MoM. Claims to fall to 225K from 231K. Markets to watch: US indices, USD crosses
    3.30pm – US EIA crude oil inventories (w/e 17 November): stockpiles rose by 3.59 million barrels last week. Markets to watch: Brent, WTI

    Thursday
    Thanksgiving – US markets closed
    Workers’ Day – Tokyo Stock Exchange closed
    8.30am – German manufacturing Purchasing Managers Index (PMI) (November, flash): previous reading 40.8. Markets to watch: EUR crosses
    9.30am – UK services & manufacturing PMI (November, flash): services to hold at 49.5 and manufacturing to rise to 45.1. Markets to watch: GBP crosses
    11.30pm – Japan CPI (October): prices to rise 3.2% YoY from 3% and core CPI to rise 2.9% YoY from 2.8%. Markets to watch: JPY crosses

    Friday
    9am – German IFO index (November): previous reading 86.9. Markets to watch: EUR crosses
    2.45pm – US manufacturing & services PMI (November, flash): manufacturing to hold at 50 and services to drop to 50.5 from 50.6. Markets to watch: USD crosses
      Company announcements
     
    Monday
    20 November
    Tuesday
    21 November
    Wednesday
    22 November
    Thursday
    23 November
    Friday
    24 November
    Full-year earnings
    Compass   Sage,
    Grainger,
    Britvic     Half/ Quarterly earnings
    Zoom AO World,
    Cranswick,
    NVIDIA,
    Best Buy,
    HP Johnson Matthey,
    Severn Trent MITIE,
    FirstGroup
      Trading update*
        Kingfisher  
       
        Dividends
    FTSE 100: Scottish Mortgage Inv Trust, RS Group, National Grid, Vodafone, Imperial Brands, DCC
    FTSE 250: 3i Infrastructure, Witan Inv Trust, Tate & Lyle, Urban Logistics, Kainos Group, British Land, Babcock, HICL Inf Fund, Liontrust Asset Management
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.

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