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MongiIG

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  1. 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 23 October
    Chris Beauchamp's insight
    Earnings season is in full flow this week, and UK companies also join in, most notably with earnings from the banking sector for quarter three (Q3). Earnings and the ongoing conflict in the Middle East will be the main drivers, along with the European Central Bank (ECB) rate decision and US Q3 gross domestic product (GDP). It promises to be a busy week, with volatility at multi-week highs as well.
    Economic reports
    Weekly view Monday
    1.30pm – US Chicago Fed index (September): index expected to rise to 0.05. Markets to watch: US indices, USD crosses

    Tuesday
    1.30am – Japan PMI (September, flash): manufacturing to rise to 49 from 48.5 and services to fall to 52.9 from 53.8. Markets to watch: JPY crosses
    7am – UK unemployment rate (August): unemployment rate expected to hold at 4.3%. Markets to watch: GBP crosses
    8.30am – German PMI (September, flash): manufacturing PMI to rise to 41.5 from 39.6. Markets to watch: eurozone indices, EUR crosses
    9.30am – UK PMI (September, flash): manufacturing PMI to rise to 45 and services PMI to rise to 49.8 from 49.3. Markets to watch: GBP crosses
    2.45pm – US PMI (September, flash): manufacturing to fall to 49.5 from 49.8 and services to fall from 50.1 to 49.8. Markets to watch: USD crosses

    Wednesday
    1.30am – Australia CPI (Q3): prices to rise 5.1% YoY and 0.9% QoQ, from 6% and 0.8%. Markets to watch: AUD crosses
    9am – German IFO index (October): business climate index expected to rise to 86.9 from 85.7. Markets to watch: EUR crosses
    3pm – Bank of Canada rate decision: rates expected to rise to 5.25% from 5%. Markets to watch: CAD crosses
    3.30pm – US EIA crude oil inventories (w/e 20 October): stockpiles fell by 4.5 million barrels in the previous week. Markets to watch: Brent, WTI

    Thursday
    1.15pm – ECB rate decision: rates expected to remain at 4.5%. Markets to watch: eurozone indices, EUR crosses
    1.30pm – US durable goods orders (September), GDP (Q3, advance reading), initial jobless claims (w/e 21 October): goods orders expected to rise 0.6% MoM, and GDP to rebound to 4.1% from 2.1% QoQ. Markets to watch: US indices, USD crosses
    3pm – US pending home sales (September): expected to rise 0.9% MoM. Markets to watch: USD crosses

    Friday
    6.30am – French GDP (Q3, preliminary): growth to drop to 0.1% from 0.5% QoQ. Markets to watch: EUR crosses
    1.30pm – US PCE index (September): prices forecast to rise 0.3% MoM. Core PCE to rise 0.3%. Markets to watch: USD crosses
      Company announcements
     
    Monday 23 October
    Tuesday 24 October
    Wednesday 25 October
    Thursday 26 October
    Friday 27 October
    Full-year earnings
       
    ASOS
     
     
    Half/ Quarterly earnings
      Barclays,
    Spotify,
    General Motors,
    Coca-Cola,
    Visa,
    Microsoft,
    Alphabet,
    General Electric,
    Snap
    Lloyds,
    IBM,
    Meta,
    Boeing
    Standard Chartered,
    BNP Paribas,
    TotalEnergies,
    Ford,
    Intel,
    Amazon,
    Merck
    NatWest,
    IAG,
    Air France-KLM,
    Exxon Mobil,
    Chevron
    Trading update*
      Bunzl
     
    Unilever
     
     
        Dividends
    FTSE 100: None
    FTSE 250: Morgan Advanced Materials, Balfour Beatty, Dunelm, City of London Inv Trust, Bankers Inv Trust
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
    Index adjustments
     
    Monday
    23 October Tuesday
    24 October Wednesday
    25 October Thursday
    26 October Friday
    27 October Monday
    30 October FTSE 100     0.15       Australia 200     0.5     0.1 Wall Street             US 500 0.10 0.02 0.06 0.08 0.38 0.28 Nasdaq   0.26     1.51   Netherlands 25       0.07     EU Stocks 50           2.8 China H-Shares             Singapore Blue Chip             Hong Kong HS50             South Africa 40             Italy 40             Japan 225            
  2. MongiIG

    Singapore banks Q3 2023 earnings

    By MongiIG,


    Market News
    Resilience in net interest income, but forward-looking guidance remains in focus
    Source: Bloomberg   Indices Shares Loan Interest Interest rates Bank
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 20 October 2023 05:48  
    The three local banks are set to report their Q3 2023 earnings over coming weeks. Year-to-date performance reveals OCBC (+6.3%) as the only one out of the trio in positive territory, while DBS (-1.7%) and UOB (-8.5%) lag. This is generally in line with the subdued showing in the broader Straits Times Index (STI), which is down 3.5% year-to-date.
    Overall, the average year-to-date performance of our three local banks (-3.8%) lagged slightly behind the MSCI AC Asia Pacific Financials Index (-0.8%), but far outperforms the US KBW Bank Index (-24.5%).
     
    Source: Refinitiv Source:Refinitiv  
    Net interest income to do the heavy-lifting for earnings, as rates expected to stay elevated for higher
    Despite an impending end to the US Federal Reserve (Fed)’s hiking cycle, market participants have been accustomed to the fact that rates will stay high for longer, with validation found from the resilience in US economic conditions. Therefore, while upside for the Singapore Overnight Rate Average (SORA) and other benchmark lending rates may have stalled over the past months, expectations are anchored that rates may remain at elevated levels for the foreseeable future.
    Thus far, the banks’ net interest margins (NIMs) have likely peaked but have been tapering at a gradual pace over the past quarters, despite having the largest tailwind from the interest rate upcycle behind us. Additional repricing of loan may continue to provide support for the banks’ net interest income portion at the upcoming results, but some focus will revolve around any guidance as to how long the trend may last. Previous comments from DBS CEO Piyush Gupta suggest ‘a couple of basis points (bp) upside’ in NIM from current levels, citing US interest rate increases in the second half of 2023.
     
    Source: Monetary Authority of Singapore (MAS)  
    Risks: Short-lived bounce in lending activities, higher allowances
    On the other hand, the risks may continue to revolve around the uncertain economic risks, as loan volume in Singapore for the second quarter seems to be resuming its downward trend after a short-lived bounce. Monthly business loans as of August 2023 has touched a new low since the start of the year, although consumer loans have largely held steady.
    Nevertheless, more subdued lending conditions could potentially linger for longer. The latest home prices data from the Urban Redevelopment Authority (URA) revealed only a marginal increase in the third quarter of 2023 (+0.5%), while new private home sales have dipped in August. Headwinds from higher interest rates, three rounds of property cooling measures and lingering economic growth risks have been driving buyers’ fatigue lately, which may be set to continue into next year.
    Aside, the local banks continue to build up their provision for loan losses in 2Q 2023, more notably in OCBC and UOB, although their non-performing loan ratio has remained resilient. This portion could be harder to grasp in the upcoming results, given that economic conditions have largely held up but downside risks to growth persist.
     
    Source: Refinitiv  
    Lacklustre market conditions in third quarter to be pitted against resilient card spending
    Air traffic statistics continues to point to robust travel momentum in the third quarter, with Singapore’s airport passenger movements up close to 60% from a year ago, which could continue to underpin card spending at the upcoming quarter. In the previous quarter, DBS’ card fees grew 17% in to S$237 million.
    That said, wealth management fees could be more of a black box, with market conditions proving to be volatile during the third quarter. The VIX touching its three-month high during the period while global equity markets largely faced a correction, which could dampen some appetite towards wealth management products. Nevertheless, market participants will be looking out for any positive surprises, largely from the management’s outlook.
    SGX institutional fund flow data revealed rising net inflows over past months
    The Singapore Exchange (SGX) fund flow data has revealed net institutional inflows for the financial sector over the past months, amounting to S$750 million since August 2023, when the Fed stuck to its hawkish rhetoric. But one may note that this follows after months of consistently paring down exposure in the financial sector since its peak in February 2022. This data is more backward-looking, but for now, there is not too much of a clue on whether recent inflows marked a longer-term reversal, given that previous build-up in August-November 2022 failed to sustain.
     
    Source: SGX, IG  
    DBS share price: Technical analysis
    The share price movement for DBS has been stuck in some indecision lately, with investors still seeking for a strong catalyst to induce an upward break of its near-term ranging pattern. Trading above the Ichimoku cloud support on its daily chart may still reflect some control for buyers for now, with one to watch for any successful break above key resistance at the S$34.55 level, which marked its August and September 2023 peaks. A move above the S$34.55 level may potentially pave the way to retest the S$36.00 level next.
     
    Source: IG charts  
    OCBC share price: Technical analysis
    OCBC share price has been drifting higher on a broader scale, with a series of higher lows formed since July 2022. A near-term bearish crossover on its daily Moving Average Convergence/Divergence (MACD) may point to some exhaustion for now, but the broader upward trend may remain intact with its monthly relative strength index (RSI) trading firmly above the key 50 level since December 2020. An ascending channel pattern has been in place for now, leaving the lower channel trendline support at the S$12.64 level on watch in the event of further downside.
     
    Source: IG charts  
    UOB share price: Technical analysis
    For UOB, momentum for its share price has been stalling lately as reflected in the flat-lined MACD on the daily chart, while its daily RSI fluctuates around the 50 level with the lack of a clear direction. On the downside, the S$27.70 level may prove to be a crucial support to hold, having supported prices on at least three previous occasions. Any breakdown of the support could potentially pave the way to retest the S$26.07 level next. On the upside, the S$29.20 level may be a key obstacle for buyers to overcome, which marked its recent tops while nearing a downward trendline resistance formed since the start of this year.
     
    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.
  3. MongiIG
    Nvidia’s made-for-China chips, which were designed to circumvent the chip export restrictions imposed by the US government in 2022, are now hitting the wall.
    Source: Bloomberg   Shares Nvidia United States China Price Export
    Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 19 October 2023 07:11 Nvidia’s made-for-China chips, which were designed to circumvent the chip export restrictions imposed by the US government in 2022, are now hitting the wall. The Biden administration has escalated its efforts to curb the chip exports to China, closing the door for Nvidia’s processors—A800 and H800 chips that tailored specifically for the Chinese market.
    Following the official announcement on Tuesday, the share price of the leading AI chip maker plummeted by nearly 5%. Nvidia responded to the new regulation and cautioned that the stricter rules "may impact the company’s ability to complete the development of products in a timely manner and support existing customers of covered products."
    In fact, it's not just Nvidia's two chips that have been targeted, any chips falling outside the restricted threshold are now required to be reported to the US government before they can be sold to China. Additionally, countries such as Saudi Arabia, the United Arab Emirates, and Vietnam are also included in the list of nations subject to additional licensing requirements if US companies wish to sell their chips to them. This measure is aimed at closing the loopholes that third parties in these countries might exploit to resell high-end chips to China.
    In 2022, Nvidia made over 7 billion US dollars from chip sales to the Chinese market, which includes mainland China and Hong Kong, surpassing their revenue generated in the United States.
    Source: https://www.statista.com/statistics/988037/nvidia-revenue-by-country-region/ Nvidia stock price technical analysis
    Based on the daily chart, Nvidia's stock price is currently on the verge of breaking the impressive uptrend that began in January 2023, resulting in a remarkable increase of over 200% so far. However, since reaching its peak in August, briefly touching above $500, it has experienced a nearly 15% downturn over the past two months.
    If the price continues to fall below the range of $425-$436, there is a growing probability that it may keep sliding to around $400-$407, a level that would complete the head-and-shoulders pattern and potentially open the floor if the price breaches this level. On the flip side, the near-term resistance is situated at around $450.

       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  4. MongiIG
    Meta's Q3 2023 results are expected to show a year-over-year revenue increase of 21.11% and an EPS increase of 221.34%.
    Source: Bloomberg   Shares Meta Platforms Artificial intelligence Price Advertising Social media
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 18 October 2023 17:09 Meta results Q3 2023 earnings preview, what does ‘The Street’ expect?
    A consensus of estimates from Refinitiv arrives at the following expectations for the third quarter (Q3) 2023 Meta results which are due on 25 October:
    Revenue $33.566bn (+21.11% y/y)
    Earnings per share (EPS) of $3.63 (+221.34% y/y)
    The technology sector has experienced a strong Q3 in 2023, driven by favourable macroeconomic conditions, reduced inflation, and the widespread adoption of AI and machine learning. However, the enthusiasm surrounding AI has waned somewhat due to the hawkish stance of the US Federal Reserve (Fed).
    The technology sector has benefited from the ongoing digitalization trend, with cloud computing, big data, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain, and 5G technology all contributing to its growth. Increased spending in software, IT services, and communications services has also been a boon for the sector.
    Technology companies such as Meta are set to report their earnings results in the coming weeks, and many are expected to exceed earnings estimates due to their strong product portfolios and the growing usage of AI.
    Meta Platforms dominates the social media landscape with its app family, including Facebook, Instagram, WhatsApp, and the newly launched Threads. The company generates most of its revenue from selling ads to brands that target its vast user base.
    According to Statista's Market Insights, ad spending on social media is projected to increase from $146 billion to $262 billion by 2028, representing a 79% growth over the next five years. Meta Platforms is already a major player in the industry, and its dominance is expected to strengthen as competitors like X (formerly Twitter) grapple with advertiser concerns regarding content moderation and as Snap sees its revenue growth stagnate, despite increasing its user base.
    Meta Platforms is also leveraging artificial intelligence to enhance user engagement and improve advertising capabilities. For instance, the company has developed photo-realistic chatbots modelled after celebrities, such as Kendall Jenner. Advertisers are also being provided with tools to create and optimise their ads more effectively. Meta Platforms believes that these AI tools can save advertisers a significant amount of time and effort.
    With the combination of AI-driven engagement tools and a growing industry, Meta Platforms is well-positioned for long-term success. Analysts project that the company's earnings could grow by 21% annually in the coming years, making it an attractive investment opportunity.
    How to trade the Meta Q3 2023 results
    67% of IG clients with open positions on Meta (as of the 18 October 2023) expect the share price to rise in the near term, while 33% of IG clients with open positions on the company expect the price to fall. In the course of this week 53% of clients sold the share and month-to-date 54% have done so.
    Source: IG Refinitiv data shows a consensus analyst rating of ‘buy’ for Meta – 19 strong buy, 32 buy, 4 hold and 2 sell - with the median of estimates suggesting a long-term price target of $375.00 for the share, roughly 16% higher than the current price (as of 18 October 2023).
    Source: Refinitiv Technical analysis on the Meta share price
    Meta’s share price, which year-to-date has risen by 158%, has regained around 80% of its 2021-to-2022 decline and is flirting with its July $326.20 peak. Once overcome on a weekly chart closing basis, the November and December 2021 highs at $352.71 to $353.83 will be in focus, ahead of the August 2021 peak at $384.33.
    Meta Weekly Candlestick Chart
    Source: TradingView Last week the Meta share price briefly made a ten-month high at $330.54 before being dragged back down again by general risk-off sentiment with the Fed expected to keep rates higher for longer following higher-than-expected US consumer price inflation (CPI).
    Since then the Meta share price resumed its ascent, though, and is gunning for last week’s $330.54 high while it remains above its accelerated uptrend line (dashed line on the chart) at $317.40 on a daily chart closing basis.
    Meta Daily Candlestick Chart
    Source: TradingView The long-term uptrend will remain intact while the Meta share price stays above its $274.38 mid-August low. Support above this key level comes in along the 55-day simple moving average (SMA) and the December-to-October uptrend line at $303.75 to $300.40. Further down lies the late September low at $286.79.

       
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  5. MongiIG
    Broad consensus is for the upcoming results to reflect a continued recovery in both Microsoft’s top and bottom-line, in line with the trend over the past two quarters.
    Source: Bloomberg   Shares Microsoft Personal computer Net income MACD United States
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 18 October 2023 11:36 When does Microsoft Corp report earnings?
    Microsoft Corp is set to release its quarter one (Q1) financial results on 24 October 2023, after market closes.
    Microsoft’s earnings – what to expect
    Broad consensus is for the upcoming results to reflect a continued recovery in both Microsoft’s top and bottom-line, in line with the trend over the past two quarters. Current expectations are for Microsoft’s Q1 2024 revenue to increase 8.7% from a year ago to US$54.48 billion.
    Likewise, earnings per share (EPS) is expected to increase 12.8% year-on-year to US$2.65, up significantly from the US$2.35 in Q1 2023. Its earnings before interest, taxes, depreciation and amortization (EBITDA) margin is also expected to improve to 51.9% from the 48.5% a year ago.
    Historically, Microsoft tends to have a strong track record of beating market expectations. It has beaten top-line estimates on 17 out of 20 previous occasions, while earnings have only fallen short of expectations once (4Q 2022) over the past 20 quarters.
     
    Source: Refinitiv  
    Cloud segment on watch to reverse softening growth trend, along with hopes for stabilisation in PC market
    Year-on-year growth for Microsoft’s Intelligent Cloud segment has been witnessing a slowdown over the past five quarters, with momentum moderating from its initial >25% growth to 14.8% in the previous quarter. The segment has been the crown jewel for Microsoft’s businesses by being its highest-growth division and accounts for 43% of overall revenue.
    That said, for the upcoming 1Q24 results, expectations are looking for a reversion to stronger growth (estimated 15.5% versus previous 14.8%) for the segment – its first since 3Q 2022. With that, any validation from the numbers may likely fuel optimism for the start of an improving growth trend ahead, while reflecting resilience in corporates’ digital transformation efforts despite uncertain economic conditions.
    On the other hand, weak consumer demand for personal computers (PCs) may remain a weighing block for the recovery in its personal computing business, with the segment expected to turn in its fourth straight quarter of year-on-year contraction (estimated -3.7%). But with subdued expectations already in place, forward-looking statements may play a greater role in leading sentiments. The International Data Corporation (IDC) projects that global PC shipments may return to growth in 2024, which leaves any positive surprises on watch over coming quarters.
     
    Source: Refinitiv  
    Forward-looking statements on vast growth catalysts to be in focus
    Microsoft has recently received the green light for its US$69 billion acquisition of Activision Blizzard, which will significantly strengthen the company’s presence in the gaming industry. While any boost to its gaming revenue will not be reflected in the upcoming results, investors will be closely watching for any forward-looking guidance on the synergies with its Game Pass subscription service, in line with the company’s vision of focusing on player engagement over console sales.
    Further, the company’s AI-driven product portfolio will be in focus as well, as the company leverages on its first-mover advantage in generative AI with a vast investment in OpenAI this year (US$10 billion). It is currently in the midst of rolling out its Microsoft 365 AI subscription service, Copilot, with more visibility on its adoption likely to be revealed over coming quarters. The huge user base of 345 million for its Microsoft 365 suite and dominance of its 365 products in the market (>50% market share for office productivity software) may offer vast room for monetisation, which could be a matter of time before the developments make its way into the company’s top and bottom-line.
    Technical analysis – Share price setting its sight to overcome cloud resistance
    A bullish divergence displayed on Moving Average Convergence/Divergence (MACD) on the daily chart has led to a more than 8% recovery in Microsoft’s share price since the start of the month, as buyers are now attempting to defend its 100-day moving average (MA). The broader upward trend may remain intact for now, with its weekly Relative Strength Index (RSI) successfully bouncing off the key 50 level over the past month – the midline that separates the bullish and bearish territories.
    Coupled with an upward break of a near-term trendline resistance and MACD reverting back into positive territory, buyers seem to be in greater control for now. Its share price is now heading towards the upper edge of its Ichimoku cloud on the daily chart at the US$340.00 level, which may serve as immediate resistance to overcome. This level also coincides with its earlier September 2023 high, with any successful move above the cloud potentially leaving its all-time high at the US$366.01 on watch for a retest.
     
    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
    Rolls-Royce shares have enjoyed an exceptional 2023 on the FTSE 100. Rising geopolitical tensions could see its defence department make further gains.
    Source: Bloomberg   Indices Shares Roll-Royce Israel FTSE 100 Small modular reactor  
     Charles Archer | Financial Writer, London | Publication date: Wednesday 18 October 2023 01:24 Rolls-Royce (LON: RR) shares have enjoyed a stellar year in 2023, rising by 118% year-to-date to 216p. The company was arguably one of the best FTSE 100 stocks to watch this year for a variety of reasons — and CEO Tufan Erginbilgic has, in the eyes of many investors, made huge improvements to what he only recently called a ‘burning platform.’
    But for balance, much of Rolls’ improvement is also due to external factors. For example, flying hours have now recovered to close to pre-pandemic levels — and in half-year results, the civil aerospace division accounted for £3.28 billion of total £6.95 billion underlying revenue.
    But the second-most important division is the defence department — which generated £1.91 billion — and it could be up for more contracts as defence moves up the political agenda in the wake of Ukraine, Israel, and ever increasing Sino-US tensions.
    On this last point, the geopolitics is beyond complex — Putin visited his ‘dear friend’ Xi yesterday while the US simultaneously further limited Nvidia’s ability to sell chips into China. On the other hand, Apple CEO Tim Cook also made a surprise visit to the country yesterday — the leader of the largest capitalistic business in the world in the heart of the communist state.
    FTSE 100: Israel-Hamas war updates
    Covering the most recent developments, hundreds of people have been killed by a strike on the Al Ahli hospital in Gaza City — Hamas is blaming Israel for the strike while the Israeli military says a rocket barrage fired by Palestinian Islamic Jihad is to blame. In addition, the UN has noted that a school in Gaza was also hit yesterday, killing at least six people.
    These latest escalations go beyond the violence of the preceding days because both schools and hospitals are specifically protected under international law except under very specific circumstances. The Israeli military has insisted it’s not targeting civilians but that ‘when we see a Hamas target, we will go after it.’
    US President Biden is planning to visit Israel today — and according to Bloomberg sources, is considering a $100 billion funding request to include aid for both Ukraine and Israel. Much of this cash will be used to fund defences and Rolls could well be a beneficiary.
    Rolls-Royce shares: where next?
    Half-year results were positive — underlying operating profit came in at £673 million with free cash flow of £356 million reflecting ‘continued end-market growth and focus on commercial optimisation and cost efficiencies across the Group.’ Further, the FTSE 100 operator raised its 2023 guidance for underlying operating profit to between £1.2 billion and £1.4 billion, and free cash flow to £900 million to £1 billion — due to transformation efforts accelerating its ‘financial delivery.’
    Even the analysts perhaps most bearish on Rolls — JP Morgan — lifted their sell recommendation in August, admitting that ‘we had been very sceptical that Rolls-Royce would be able to raise its prices so significantly, but it appears we were mistaken.’
    Then there’s the small nuclear modular reactors to consider — the UK plans to increase its nuclear power capacity to 24 gigawatts by 2050, representing circa 25% of projected electricity demand, almost double the 14% of today. And Rolls-Royce, having already received some funding from the government which owns a golden share in the company, is the only business whose SMR tech is under review by European regulators.
    The FTSE 100 company is one of six businesses competing for government contracts — with a winner set to be announced in spring 2024. SMR division CEO Chris Cholerton notes that ‘securing a domestic contract is vitally important to unlock the enormous global export potential of our clean energy technology.’
    But it’s worth remembering that Rolls-Royce is still undergoing s cost savings review; yesterday, it announced that it plans to cut another 2,500 roles globally to create a ‘more efficient and effective company.’ For perspective, Rolls already cut 9,000 staff during the pandemic.
    Analysts suspect that German operations will be hit hardest, and especially the Power Systems operation. For context, in its results the FTSE 100 titan noted that ‘Power Systems margins were lower but are expected to improve in the second half due to our pricing actions.’
    Erginbilgic argues that he is ‘building a Rolls-Royce that is fit for the future…a more streamlined and efficient organisation that will deliver for our customers, partners and shareholders.’ The company plans to communicate its strategic review findings and set medium-term financial targets at its Capital Markets Day on 28 November.
    However, airline flying hours are recovering rapidly; Bank of America analysts think they will recover faster than Rolls has predicted. And if the company wins its SMR bid and also gets more defence sector contracts due to the ever increasing geopolitical volatility, these constant cuts could hamstring the future recovery.
    But the markets have reacted positively so far.

       
    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
    Both Tesla and Netflix will step into the spotlight this week as they unveil their third-quarter earnings on October 18th after the US market closes. What are the expectations?
    Source: Bloomberg   Shares Tesla, Inc. Netflix Stock Share price Price  
    Hebe Chen | Market Analyst, Melbourne | Publication date: Wednesday 18 October 2023 08:16 Both Tesla and Netflix will step into the spotlight this week as they unveil their third-quarter earnings on October 18th after the US market closes. What are the expectations for them, and which one is more likely to capture the hearts of investors after the earnings announcements?
    Tesla Q3 earnings expectation
    Following Tesla’s lower-than-expected third-quarter deliveries published two weeks ago, the market actually doesn't set up high expectations for its impending Q3 results. It is projected that both revenue and earnings per share will be lower than the previous quarter, while revenue is anticipated to 12% higher than the level of Q3,2022.
    Tesla Q3,2023 Expectation QOQ YOY Revenue $24.22B -3% +12% EPS $0.74 -10% -30% Source: Nasdaq
    It’s not difficult to notice that Tesla has encountered two primary challenges in the past quarter: slowing production and a shrinking margin. According to the recent update, in Q3, Tesla's total deliveries were 30,000 units less than those in Q2, and its overall production also declined by almost 50,000 units due to a planned reduction in manufacturing output.
    While the production bottleneck may be viewed as a temporary issue, Tesla's shrinking profit margins could be a long-term pain. After several rounds of price cuts, Tesla's operating margin has declined from double digits a year ago to only 9% now, which is nearing the average margin level for traditional automakers. As such, a pivotal question arises: can Tesla's stock price maintain its premium valuation if its profit margin keeps shrinking?
    Nonetheless, Tesla might have some good news to share. Investors are eagerly awaiting updates on Tesla's next generation product--the Cybertruck, as well as the development of AI-supported EV line.
    Overall, the Q3 is not expected to be a record-breaking quarter for Tesla's shareholders. However, the outlook for the EV king in the midst of prevailing headwinds is likely to be the key factor that captures investors' attention.
    Netflix Q3 earnings expectation
    2023 is a year of transformation for Netflix. After a struggling year to grow its subscriber numbers, Netflix made a strategic shift towards revenue diversification through changes in its product offerings, pricing structures, and increase advertising revenue streams.
    This new strategy has so far proven successful for Netflix. In the previous quarter, Netflix announced a remarkable increase of over 5.9 million new subscribers, far surpassing expectations of 1.82 million. Naturally, one of the vital watch points in the upcoming earnings report is whether Netflix can carry on its strong user growth momentum from Q2 to Q3. In addition, Netflix’s capability to translate the growing subscriber base into revenue and improve its margin will also be closely monitored.
    Netflix Q3 Expectation QOQ YOY Revenue $8.54B +3% +61% EPS $3.48 +21% +8% Source: Nasdaq
    Tesla and Netflix Q1&Q2 comparison
    Now, let's have a look at the actual earnings results of these two companies compared to the expectations over the past two quarters and compare how their share prices have responded on the earnings day.
    Revenue Q1,2023 Q2,2023 Tesla Miss expectation by 0.43% Beat expectation by 0.81% Netflix Miss expectation by 0.2% Miss expectation by-1.24%  
    EPS Q1,2023 Q2,2023 Tesla Meet expectation Beat expectation by 11.12% Netflix Beat expectation by 0.57% Beat expectation by 15%  
    Stock price change on earnings day Q1,2023 Q2,2023 Tesla -9.8% -5% Netflix -10% -8%  
    Tesla and Netflix technical analysis
    Despite experiencing three rounds of correction of as much as 29% so far this year, Tesla's stock price has risen by over 130% since early January.
    As shown in the daily chart, Tesla's stock price is currently on the verge of dropping out from the triangular pattern with the lower boundary formed by the lows from May. In the scenario where the earnings report fails to impress investors, there is a high likelihood that the stock price may dip below the 100-day moving average as well as the five-month-long ascending trendline. In this case, the stock price may likely retest the September low of below $240.
    Conversely, if the earnings report manages to please shareholders and propels the stock price higher, the immediate target is expected to be in the range of $269 to $275.
    Netflix's stock price has entered the sliding mode following its second-quarter earnings and has since fallen by 26%. However, Netflix is still up by 20% year to date , outperforming the S&P 500, which has gained 11% so far this year.
    Looking at the daily chart, the stock price has been trading within a descending trajectory over the past four weeks and has dropped below nearly all moving averages, indicating a bearish-dominated sentiment. Immediate support can be found around $350-$355. On the flip side, if the upcoming earnings report manages to encourage a rebound, buyers may see the opportunity to retest the February high at around $369-$378.
    Summary
    Both Tesla and Netflix have faced their fair share of challenges and opportunities. For Tesla, maintaining its growth trajectory and profit margins remains a key concern. On the other hand, Netflix has undergone a transformation in 2023, resulting in better-than-expected user growth in the previous quarter. However, this new strategy is still in its early stages, which may keep investors cautious for its long-term outlook.
    Furthermore, despite the recent pullbacks, both stocks have seen substantial gains so far this year, which could potentially set a higher bar for the earnings reports to impress their investors.

       
    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.
     
  8. MongiIG

    Best cheap shares to buy in November 2023

    By MongiIG,


    Market News
    What are the best stocks to buy in November 2023?
    Source: Bloomberg   Shares Price Stock Inflation Qinetiq Cisco  
    Piper Terrett | Financial writer, London Global financial markets have already been struggling this year thanks to the higher interest rate environment and inflationary pressures on both sides of the Atlantic. Now, with inflation previously having begun to ease, the unexpected Israel-Hamas war is weighing on markets, injecting geopolitical uncertainty and pushing up oil prices.
    Investment commentators fear that a prolonged conflict could spark further inflation, especially as the Ukraine war also continues. "The wider risk is that a sustained increase in oil prices would act as a renewed inflationary pressure and further underpin the higher rates for longer message which investors in the equity and bond markets seem to be belatedly coming to terms with,” said Russ Mould, investment director at broker AJ Bell, in a note to investors."
    On the bright side, in August the UK economy grew marginally by 0.2% instead of contracting as it did in July. So what could be the best cheap stocks to buy in November this year given this uncertain global backdrop?
    Associated British Foods – a solid buy in the cost of living crisis
    Associated British Foods, the company behind discount fashion retailer Primark and British Sugar recently unveiled an upbeat trading statement, despite the pressures of inflation and the cost of living crisis. AB Foods says that sales in its retail business are now expected to come in at around £9 billion for the full year – 15% up on figures seen the previous year. Sales in the fourth quarter were strong – up 15% - while like-for-like growth was 8% due to price increases and well-performing ranges. Its new flagship stores are also performing well and the roll out of its new click and collect service has been positive so far.
    Meanwhile, ABF’s sugar division and ingredients has also seen good growth, thanks to a strong sugar beet harvest. Inflationary cost hikes are beginning to ease and the weaker dollar has also been a boon. What’s more, profitability in its sugar business is expected to improve dramatically next year.
    At 1941.5p, the shares have risen by 51% this year but, with the cost of living crisis continuing, there is still room for growth. Primark remains a go-to brand for consumers trying to save money in the current straitened financial times.
    Analysts at broker Royal Bank of Canada currently have a price target of 2,250p on the shares. Associated British Foods posts its full year results on 7 November.
    Source: Bloomberg Qinetiq – share price dip could be a buying opportunity
    Shares in hi-tech security provider Qinetiq have dipped by 9% this year to 308p and this could present a buying opportunity. The company’s stock previously had a good run following the outbreak of the Ukraine war and, with the war continuing and security concerns elsewhere in the world, including the Israel-Hamas conflict and tensions in the Taiwan straits, the shares could be worth picking up. Qinetiq is a technological defence firm, offering protection against cyberattacks, virtual training for military personnel and technology for unmanned planes, among other activities.
    Based in Farnborough, it has contracts in place with the Royal Navy worth £260 million to produce critical systems for its submarines, the UK’s Ministry of Defence and with the US military to produce night vision technology. It is also likely to benefit from the US, UK and Australian Aukus pact, announced earlier this year.
    The company currently has an order backlog worth £3.1 billion. At the full year results in May, orders were up 41% to a record high of £1.7 billion. Meanwhile, revenues rose 20% to £1.6 billion (from £1.3 billion in 2022), while operating profits increased by 40% to £172.8 million (£123.7 million in 2022) and by 12% on an organic basis. Qinetiq recently bought Avantus in the US and Air Affairs in Australia.
    The company is targeting £3 billion in revenue by 2027, fuelled partly by acquisitions, while management believe it has an addressable market of £30 billion. Shares in the company look relatively affordable on a price earnings ratio of just 11 times earnings.
    Analysts at broker Citigroup recently upgraded their price target on the shares to 457p from 454p, while those at Numis think the shares could reach 460p.
    Cisco Systems – a lowly rated tech stock
    Cisco Systems’ shares trade on a price earnings ratio of around 17.5 – much lower than many other US technology firms, such as Alphabet and Apple, which tend to trade on PEs of around 30. The shares have risen by 32% this year to $54 but could be set to benefit further from the buzz around artificial intelligence.
    The networking and cloud computing specialist’s chief executive Chuck Robbins told investors on a recent conference call that AI will “create new growth drivers” for the company, which also provides IT security services. Cisco is currently launching new AI technologies across its collaboration and security portfolios, which Robbins claims will “boost productivity, enhance policy management, and simplify tasks.”
    Full year revenues rose 11% year-on-year to $57 billion and the company returned $2.8 billion of the $6 billion cash it generated during the period to shareholders. Earnings are forecast, however, to be flat for 2024 with full-year revenues expected to be around $57-$58 billion. Nevertheless, the shares also yield 3% and analysts at broker Tigress recently upgraded their price target on the stock to $76 from $73.
    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.
  9. MongiIG
    With US President Biden planning an Israel visit amid rising Iranian rhetoric, FTSE 100 defence stocks are rising fast.
    Source: Bloomberg   Indices Shares FTSE 100 Israel BAE Systems Hamas
     Charles Archer | Financial Writer, London | Publication date: Tuesday 17 October 2023 15:50 FTSE 100 investors may be concentrating on the oil majors BP and Shell, but that’s just one of many sectors being affected by the ongoing Israel-Hamas war. Defence stocks — including BAE Systems and QinetiQ — are rising, while the FTSE 350 Aerospace and Defence ETF is up by 2.5% over the past five days alone.
    FTSE 100: Israel-Hamas updates
    As an overview, tensions are still mounting. US President Biden will visit Israel tomorrow to hear the country’s plans for a ground offensive against Hamas, and to press Israel to ‘minimise civilian casualties.’
    Meanwhile, Iran has made yet another warning — though this one is more concrete — cautioning it could take ‘pre-emptive action’ against Israel within the next few hours. This could involve an escalation of hostilities between Israel and Iranian-backed Hezbollah in Lebanon.
    More than 1,300 people in Israel have been killed by Hamas since 7 October, while over 2,700 people have died in retaliatory Israeli strikes. And Reuters has reported that Israel Defence Forces’ Rear Admiral Daniel Hagari has called the status of the Gaza Strip after the planned assault a ‘global issue’ for discussion.
    Meanwhile, Jordan’s King Abdullah II has warned that ‘the whole region is on the brink of falling into the abyss’ and further that the threat of the crisis expanding into regional warfare is ‘real.’ Critically, he has also warned against trying to ‘push’ Palestinian refugees into Jordan or Egypt, calling that a ‘red line.’
    The situation on the ground remains dire in Gaza — food, water, fuel, and electricity are all running low, and this issue is being compounded by the movement of people from the north to the south under instructions from the Israeli military.
    FTSE 100 defence stocks
    There are five key FTSE defence sector shares being affected — BAE Systems, Rolls Royce, QinetiQ, Babcock International and Serco Group.
    BAE Systems is perhaps the most popular UK defence sector stock, and is also the largest, with a circa £33 billion market capitalisation. The company derives most of its earnings from fighter jet programmes, including the Eurofighter Typhoon and F-35 Lightning, which it sells to states including the US, UK, and Saudi Arabia.
    While Rolls-Royce is making headlines for yet more job cuts — and makes the lion’s share of revenue from civil aerospace — Rolls also has a resilient business in defence, making engines to be used in aircraft, military transport systems and navy vessels.
    Then there’s QinetiQ, which has both military and civilian exposure but is different to many other FTSE defence stocks in that is it tech-focused, with products including advanced materials and robots.
    Fourth, Babcock has a global diversified client base and specialises in constructing and decommissioning nuclear submarines and power plants. It also offers servicing for military vehicles, alongside general infrastructure maintenance and technical training.
    Finally, there’s Serco — a bit of an all-rounder. The company provides public services across the defence sector, including operations and base management, ship modernisation, aircraft maintenance, and cyber security.
    These companies are all seeing increased interest as defence spending continues to ramp up. Russia’s invasion of Ukraine and now the Israel-Hamas war have put defence back on top of the political agenda, and the FTSE 100 businesses could see significant new contracts come through soon.
    For context, BAE Systems shares have risen from circa 600p just before the Ukraine War to 1,075p today. Two weeks ago, the FTSE 100 defence company won a £3.95 billion contract to build a new generation of submarines as part of the Aukus pact between the US, UK, and Australia to provide Australia with nuclear-powered attack submarines by the late 2030s.
    The pact aims to counter China's ambitions in the Indo-Pacific region and Beijing has strongly criticised all three countries over the deal. And with Putin meeting his ‘dear friend’ Xi in China today, likely to discuss this new geopolitical twist, FTSE 100 defence stocks could continue to rise.
    While de-escalation in the Middle East is still possible, Sino-US tensions continue to tighten. The US has just restricted sales of Nvidia chips to China to limit China's ‘access to advanced semiconductors that could fuel breakthroughs in AI.’
    And in the background, Taiwan remains a long-time concern.

       
    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
    With American Airlines slated to release its Q3 earnings on 19 October, the market braces for impact. From lowered earnings estimates to climbing operational costs and market sentiment, delve into what investors should watch for.
      Source: Bloomberg
      Shares Forex Revenue American Airlines Profit Operating margin  
     Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Monday 16 October 2023 18:16 When will American Airlines announce its Q3 earnings?
    American Airlines Group (NASDAQ:AAL) is scheduled to unveil its quarterly financial results on Thursday, 19 October at 10 pm AEDT, prior to the opening bell of the stock market.
    What does 'The Street' expect from American Airlines' Q3 earnings?
    After a bullish Q2 outlook, American Airlines has dramatically scaled back its Q3 earnings per share projections from an initial range of $0.85 to $0.95 to a revised estimate of just $0.20 to $0.30.
    According to a consensus from analysts and brokers polled by Refinitiv as of October 16, 2023, the forthcoming Q3 results are anticipated to be:
    Revenue: $13.515 billion, marking a modest 0.39% YoY increase Earnings Per Share: $0.25, representing a significant 63.47% YoY decline The airline has faced operational headwinds that have led to this downgrade in earnings forecasts. Key contributing factors include escalating fuel and labour expenses, coupled with muted demand. Notably, the company incurred a $230 million cost in August, settling with the Airline Pilots Association.
      Source: Bloomberg
    What should you know?
    American Airlines is set to unveil its quarterly earnings on October 19, amid a climate of reduced expectations for Q3 performance Both the company and financial analysts have lowered their forecasts for the quarter, attributing the downgrade to a combination of escalating fuel and labor expenses, as well as revised, softer demand projections Despite holding a 'neutral' broker rating, American Airlines' shares are trading below the company's long-term average price target Currently in oversold territory, the share price of American Airlines Group faces bearish prospects in the short to medium term. Q3 2023 financial forecast overview
    Netflix Inc. has recently provided insight into its financial forecast for the third quarter of 2023. As a prominent player in the entertainment sector, key financial metrics for the company include revenue growth and operating margin, which serves as a measure of profitability.
    The company aims to accelerate revenue growth, expand operating margins, and generate increasing positive free cash flow. The market is likely to evaluate the forthcoming results against these metrics, as well as subscriber growth.
    Confidence boost: the role of paid sharing
    The company has conveyed heightened confidence in its financial outlook, owing to the successful roll-out of paid sharing. This initiative is projected to spur revenue growth in the latter half of 2023 as it is extended to nearly all remaining countries and continues to bolster the company's ad-supported plan.
    Q3 2023 financial forecast
    For Q3, the forecast indicates an expected revenue of $8.5 billion, marking a year-on-year increase of 7% on both a reported and currency-neutral basis. This represents a minor acceleration from Q2 2023's currency-neutral revenue growth rate of 6%. The revenue upswing in Q3 is anticipated to be propelled by an increase in average paid memberships.
    Challenges: ARPU and price increases
    However, the currency-neutral Average Revenue Per User (ARPU) is forecasted to remain flat or experience a slight dip year-on-year. This is attributed to the lapping of price hikes implemented in 2022 and the absence of price increases in the company's largest revenue markets since the first half of 2022. Earnings from advertising and additional member features are not yet substantial enough to counterbalance these elements.
    Subscriber growth: Q3 vs. Q2
    In terms of subscriber growth, Q3 2023 paid net additions are expected to align with Q2 2023 figures. The company anticipates a more significant acceleration in revenue growth during Q4 2023, driven by further monetisation of account sharing between households and a steady increase in advertising revenue.
    Profitability: looking beyond revenue
    On the profitability front, Netflix projects a Q3 operating income of $1.9 billion, up from $1.5 billion in Q3 2022, and an operating margin of 22%, an increase from 19% in the corresponding period last year. For the full year of 2023, the company is targeting an operating margin of between 18% and 20%, based on forex rates as of 1 January 2023, marking an uptick from 17.8% in FY 2022.
    Strategic outlook: future growth strategies
    Netflix is concentrated on fuelling growth and enhancing profitability through leveraged strategies such as paid sharing and advertising.
     
     
    How to trade the American Airlines Q3 2023 results
    Based on IG's TipRanks Smart Score, American Airlines Group is rated as a 'Hold,' featuring a long-term average price target of $16.17 per share as of October 16, 2023. While public sentiment leans bullish, it's noteworthy that hedge funds have been net sellers of the stock in the past quarter.
    American Airlines smart score chart
    Source: IG TipRanks   American Airlines echnical analysis
    From a technical analysis standpoint, the momentum for the short-to-medium term trend is currently bearish, with the stock price testing the critical support level at 11.85. Should the price close below this level, the next downside target would be 10.95. In such a scenario, traders considering a short position might look at a close above 12.85 as a key stop-loss point.
    The 10.95 mark becomes pivotal if tested, given the lack of substantial historical support until reaching the 9.05 level.
    For those traders inclined toward a long position, a bounce back from the current oversold status and a closing price above the 12.85 resistance level would be the indicators for potentially establishing new long positions.
    American Airlines daily chart
    Source: IG  
       
    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
    After former CEO Bernard Looney’s exit, BP shares could be ripe for a takeover. Here’s why.
    Source: Bloomberg   Indices Shares BP FTSE 100 Big Oil Takeover  
     Charles Archer | Financial Writer, London | Publication date: Friday 13 October 2023  BP (LON: BP) shares have fallen by 10.5% over the past five years and sunk from 568p in mid-February 2023 to 499p today. The FTSE 100 oil major is a significant component of the index but could now be a buyout target.
    As ever, there’s always a bigger fish.
    BP shares: Q2 results and Looney exit
    In Q2 earnings, BP’s profits fell sharply by 70% year-over-year to $2.6 billion — missing analyst estimates due to falling oil trading income and refining margins.
    However, this underperformance was widely mirrored by competitors faced with the same comparators (the immediate aftermath of the start of the Ukraine War). And BP was still able to boost its dividend by 10% to 7.27 cents per share — and it also promised to repurchase $1.5 billion of shares over Q3.
    But for context, in May the company slowed its quarterly buyback programme from $2.75 billion to $1.75 billion, sending BP’s share price down the most in one day since 2020.
    Former CEO Bernard Looney enthused that the company’s ‘underlying performance was resilient with good cash delivery - during a period of significant turnaround activity and weaker margins in our refining business.’
    But shortly after this mixed set of results, Looney was forced to admit that he had not been ‘fully transparent’ over intimate relationships with employees — and this was followed with allegations that he had promoted women who he had had a relationship with — leading to a shock resignation.
    January FTSE 100 speculation
    Earlier this year, Citigroup analysts speculated that Exxon Mobil or Chevron might consider a buyout offer for the FTSE 100 oil major — with a megamerger looking attractive on valuation terms. The analysts argued that the comparatively lower valuations suffered by European oil and gas sector stocks couldn’t be closed organically — that ‘markets are unlikely to close the gap themselves.’
    They added ‘we look at the strategic imperative, financial accretion and political headwinds of either of the two US IOCs (Exxon or Chevron) potentially looking to try and acquire one of their key European competitors (BP, Shell or TotalEnergies).’
    This was a view shared by M&G head of equities Michael Stiasny, who in January noted that he ‘would not be shocked to see a big name in the oil and gas or mining sectors subject to a bid, with companies like BP trading at a significant discount to their US peers.’
    Further to this, BP shares have underperformed during Looney’s tenure — even if this was due to the investment needed for the start of its green strategy.
    Indeed, Bloomberg data indicates that the FTSE 100 company’s shares rose by 15%, while Shell’s market capitalisation increased by 29% in this time. Much of this lower growth has been laid at BP’s increased focus on the green transition compared to peers — arguably solid long-term investments, but which have left the company trailing the competition.
    RBC Capital Markets analysts have previously argued that the former CEO sold oil and gas assets (including Alaskan operations) ‘at poor points in the cycle and at relatively low valuations’ in order to fund renewables projects.
    With Looney out and interim CEO Murray Auchincloss now needing to project calm — including a need to balance BP’s strategic pivot away from greener energy in February with some investor disquiet — Q4 could see the American titans consider a move. Auchincloss argued in Abu Dhabi a few days ago that ‘one person leaving does not change the strategy’ set out in February — but not everybody is convinced.
    While acquiring the £85 billion company would be difficult even for a supermajor, it’s worth noting that the entire industry is one built on gigantic mergers; BP itself bought Amoco for $48 billion in 1998.
    Of course, new 2021 takeover rules allow the government to block a buyout on national security grounds — and it’s hard to see the government keen to allow yet another important UK company to leave London without a fight.
    FTSE 100 oil major takeover?
    But the macroeconomic picture could make a BP takeover an attractive prospect for the American firms. OPEC+ members Russia and Saudi Arabia have cut production to the end of the year, and the cartel’s secretary general argues that demand could grow by ‘about 2.4 million barrels a day.’
    Al Ghais has called underinvestment in the sector ‘dangerous’ — arguing that the industry will need close to $14 trillion of investment by 2045 to support the energy transition. With Brent still trading at elevated levels of circa $84/barrel, BP shares could well be a top FTSE 100 takeover target.
    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.
  12. MongiIG
    As Israel considers the path of escalation, both BP shares and Shell shares could send the FTSE 100 higher this week.
    Source: Bloomberg   Indices Israel Hamas Iran Saudi Arabia Israel Defense Forces  
     Charles Archer | Financial Writer, London | Publication date: Monday 16 October 2023 01:11 FTSE 100 oil investors may be getting an eerie sense of déjà vu. Russia’s invasion of Ukraine — in reality an escalation of pre-existing hostilities — echo the intensifying war between Israel and Hamas. Oil and gas prices shot up in the immediate aftermath, and a similar scenario could be about to play out.
    Of course, this new escalation is nothing new. Fighting has been ongoing in this corner of the Middle East going as far back as the 1948 Arab Israeli War when Israel was found, or even a millennium further back during the crusades.
    Accordingly, the caveat with any analysis of the Middle East is that it’s almost impossible to understand every facet of any conflict. Different actors with different motivations proliferate through every country — whether Lebanon, Yemen, Syria — or the power players in the region including Israel, Saudi Arabia, and Iran.
    But the key point, where analysts concur, is that escalation is where the real danger lies. And where investors had hoped that de-escalation would happen over Sunday, the opposite seems to have occurred.
    FTSE 100: Israel-Hamas War
    It is not possible to cover all developments, but some of the key issues include:
    More than 1,400 people were killed by Hamas in Israel when fighters crossed the border, including both soldiers and civilians More than 2,450 people have been killed by Israel’s bombing of Gaza Israeli troops are massing on the Gaza border ahead of an expected ground attack Israel has told 1.1 million Palestinians in North Gaza to evacuate to the south Israel has turned the water back on in southern Gaza The UN argues that Gaza is seeing an ‘unprecedented human catastrophe’ Five US Senate members are in Tel Aviv to meet with top officials, and have been forced to shelter from Hamas rockets US Secretary of State Anthony Blinken has asked Israel to avoid harming civilians as much as possible Clearly, there are huge ethical queries over the extent to which Israel can respond to the attacks on its soil — and pressingly, whether this next step could escalate relatively localised fighting into a regional war, backed by multiple proxy agents.
    For some context, consider the Syrian war — Russia and Iran supported President Bashar al-Assad, while the west and Saudi Arabia supported various rebel groups. Then there’s Yemen, which is under continual conflict as the Saudi Arabia-backed government comes under attack from Iranian-backed Houthi rebels.
    In the milieu, Egypt is still trying to recover from the 2014 military coup, Lebanon remains in economic crisis, and then there’s Iraq, Iran, and Turkey to consider. It’s not hard to see why escalation could become a problem — with Israel also vowing to ‘destroy’ Lebanon if the war spreads.
    Over the weekend, two members of Hamas and Hezbollah told the Wall Street Journal that the attack had been planned in meetings with the Islamic Revolutionary Guards Corps of Iran — and the witnesses claim that the final go-ahead was given by Iran in Beirut last Monday. Iran has denied any involvement.
    Key actors
    At present:
    Israel — Israel Defence Forces (IDF) plan to enter the Gaza Strip, with Lt Gen Herzi Halevi arguing that the ‘responsibility now is to enter Gaza, to go to the places where Hamas is preparing, acting, planning, launching. Attack them everywhere, every commander, every operative, destroy infrastructure’ The US — The Pentagon has ordered two aircraft carrier strike groups to the eastern Mediterranean near Israel to deter Iran or Hezbollah from joining the Israel-Hamas conflict. White House national security adviser Jake Sullivan has warned that ‘there is a risk of an escalation of this conflict, the opening of a second front in the north and, of course, Iran's involvement.’ US President Biden is reportedly considering a visit to Israel Saudi Arabia — the foreign ministry has denounced Israel as ‘occupation forces’ and said that Hamas acted as a ‘result of the continued occupation and deprivation of the Palestinian people of their legitimate rights’ Iran — foreign minister Hossein Amir-Abdollahian has made several dire warnings, including that ‘if the Zionist aggressions do not stop, the hands of all parties in the region are on the trigger.’ Hamas leader Ismail Haniyeh met with the minister on Saturday in Qatar, where they ‘agreed to continue cooperation’ to achieve the group's goals, Hamas said in a statement FTSE 100 oil major implications
    There are many markets that could be affected by the war — but the most immediate are oil and gas. For context, European wholesale gas prices had already hit a seven-month high on Friday — and Brent Crude remains elevated at circa $91 per barrel.
    Blinken had noted that thawing relations between Saudi Arabia and Israel could have been a motivator behind the original Hamas attacks. For perspective, a US-backed plan for Saudi Arabia to formally recognise the state of Israel and increase its oil production, in exchange for increased US military aid and increased political support, could now be essentially sunk.
    Had Saudi, which had previously agreed to restrict its oil production alongside other OPEC cartel members, agreed to increase oil production, then the rest of the OPEC cartel could have followed. There is now an opportunity for the cartel to squeeze prices even higher.
    Further, the tentative nuclear deal being drawn up between the west and Iran may now break down, making increased oil output from the country unlikely as well.
    The bigger problem is the Strait of Hormuz — which contains eight major islands — seven of which are controlled by Iran. The EIA considers the Strait to be the world’s most important oil chokepoint, with the Strauss Center thinking that oil tankers carry 17 million barrels of oil, representing 20-30% of global daily consumption, through the Strait each day. Any disruption could see oil rise sharply.
    In addition, the Baltic-connector gas pipeline between Finland and Estonia was damaged late last week with investigators finding the rupture was caused by mechanical force. Russian President Putin has denied involvement, but Finnish officials cannot rule out state actor involvement. NATO has promised a ‘determined’ response — and the timing is clearly questionable.
    Oil prices, and the FTSE 100 oil majors BP and Shell could well rise on Monday.

       
    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
    Retail trader bias shifts from majority buy to the middle, CoT speculators not far off from extreme sell territory.
      Source: Bloomberg
      Shares Federal Reserve Revenue Interest Assets under management Interest rates
     Monte Safieddine | Market Analyst, Dubai | Publication date: Monday 16 October 2023 08:16 Upside surprise for pricing data
    Starting with the data, and it’s been mostly about pricing as of late. Last Thursday’s consumer price index (CPI) readings were hotter than anticipated for the headline while as anticipated for its core. Trade pricing data on Friday with ongoing year-on-year (y/y) negative prints are recovering and there is month-on-month (m/m) positive growth for both exports and imports.
    Preliminary figures out of the University of Michigan (UoM) show consumer inflation expectations jumping to 3.8% for the 12-month and five-year rising to 3%. Its consumer sentiment reading a clear miss falling to 63.
    Fed speak softens, yields pull back
    There was more central bank speak on offer, the Federal Reserve’s (Fed's) president Patrick Harker believing they “are at the point where we can hold rates where they are”, that policy is now restrictive and “holding rates steady will let monetary policy do its work”, though uncertain of how long rates will need to remain where they are.
    Treasury yields finally suffered a red week and so too in real terms on the flight to safety after the rise in geopolitical risk and softer comments from some Fed officials managed to offset other factors including a weak auction late last week.
    Earnings recap of the financial heavyweights
    As for earnings from the financial heavyweights last Friday, JPMorgan Chase are enjoying an increase in revenue thanks to “over-earning” on net interest income that was stronger than anticipated with credit provisions lower, and Citigroup’s core businesses “each posting revenue growth”.
    Also on the earnings front, Wells Fargo’s revenue growth thanks to net interest income and investments, and BlackRock suffering a drop in net inflows and its total assets under management (AUM) falling from the second quarter.
    Week ahead
    For the week ahead, impactful data from the US will be deferred until tomorrow when we receive retail sales figures for the month of September, following a 0.6% growth in the previous month (figures are not adjusted for inflation). However, it is the data for the final months of this year that are expected to reveal a more challenged consumer.
    Attention then shifts to the housing sector with the release of the National Association of Home Builders' (NAHB's) housing market index, which previously missed expectations with a figure indicating a negative outlook. This will be followed by building permits and housing starts for September; the August data showed a clear beat for the former and a clear miss for the latter.
    Also on the agenda are weekly mortgage applications and Thursday's existing home sales data, which have missed expectations three times consecutively. Little surprise there, as those locked into lower rates are inclined to hold. There will be numerous Federal Reserve member speeches this week, including one from Chairman Powell.
    In the earnings landscape, financial sector updates will continue with Bank of America and Goldman Sachs releasing their reports tomorrow. Tesla, the first among the 'Magnificent Seven,' will report on Wednesday. Netflix is also scheduled to release its figures on the same day, as are ASML and Lam Research, providing early insights into the performance of the semiconductor industry.
    Dow technical analysis, overview, strategies, and levels
    Starting with the weekly time frame, the asset's previous weekly 1st Resistance level did manage to hold on multiple occasions, at least once triggering cautious, conformist sell orders following significant reversals. The overall sentiment here remains one of 'cautious consolidation'.
    On the daily time frame, the asset has been struggling, exhibiting a 'bear average'. Late last week, it moved below Thursday's 1st Support level as well as its S/L (stop-loss), initially favouring daily conformist sell-breakouts. However, a subsequent recovery triggered contrarian buy-after-reversals, which on net balance had more positive outcomes.
      Source: IG
    IG client* and CoT** sentiment for the Dow
    Price gains have enticed retail traders to shift from what was majority buy 58% at the start of last week to the middle, ending what has been a relatively brief period of majority buy bias. CoT speculators were and still are heavy to the sell side, a drop in longs and a simultaneous rise in shorts taking the bias closer to extreme short territory.
      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.
  14. MongiIG
    Phoenix Group, M&G, and British American Tobacco could be the three best FTSE 100 dividend shares to watch next month. These shares are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares Dividend FTSE 100 Dividend yield British American Tobacco  
     Charles Archer | Financial Writer, London The FTSE 100 continues to remain volatile in 2023, having fallen to 7,412 points on 4 October but recovering to 7,601 points today. This mirrors similar peaks and troughs experienced throughout the year, perhaps reflecting the volatility not just in the UK, but in the international markets where most FTSE 100 corporate income is derived.
    So far this month, the best FTSE 100 dividend stocks have been affected by three key pieces of news:
    First, Metro Bank — which has been struggling for some time — was forced to agree a £925 million rescue package. Investors in FTSE 100 banks and perhaps the wider fintech sector may now be looking nervously for the next problem.
    Second, the Hamas attacks on Israel and subsequent response have driven the oil price higher for myriad complex reasons. One component is that a US-backed deal to bring Saudi Arabia and Israel closer together, which would have included increased Saudi Arabian oil output, is now unlikely to come to fruition anytime soon. Another is that Israel has been forced to suspend production at its Tamar gas field for fear of Hamas rockets.
    Third, the International Monetary Fund announced today that it now expects the UK to have the highest inflation and slowest growth within the G7 economy in 2024. While this prediction came with some caveats, and the outfit’s past predictions regarding the UK last year were perhaps off the mark, FTSE 100 investors may be concerned.
    But the best FTSE 100 dividend shares continue to pay out inflation-beating returns. As a caveat, the following three shares are simply the highest-yielding stocks and may or may not be capable of paying out these outsized returns sustainably.
    Past performance is not an indicator of future returns.
    Best FTSE 100 dividend stocks to watch
    1. Phoenix Group
    With an 11% dividend yield, Phoenix Group shares may be tempting to value investors as the FTSE 100 insurer has fallen by 23.2% year-to-date to 473p. For context, the company paid out 50.8p to investors last year — and the average analyst expectation is for 52.6p in 2023.
    In H1 results, the company saw cash generation of £898 million, above expectations, allowing the company to boost its interim dividend by 5% to 26p per share. Given that the company is on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend may appear safe for now — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    However, there are risks. Its bonds are likely falling sharply in value as rates continue to rise, and Phoenix also has its own debt pile to manage. JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    2. M&G
    M&G is fast becoming a popular FTSE 100 dividend stock among some investors. The savings and investment provider plans to generate operating capital of £2.5 billion by the end of 2024.
    Happily, the company has now achieved 53% of this three-year target 18 months in — remaining firmly on track. And its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year. Yet even having risen by 4.4% year-to-date, it still boasts a double-digit dividend yield of 10%.
    In half-year results, the company saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million. Accordingly, it also managed to increase its interim dividend by 5% to 6.5p per share.
    CEO Andrea Rossi enthuses that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March – maintaining our financial strength through capital discipline; mobilising the Transformation programme to simplify our business and improve client outcomes; and delivering growth with positive net client inflows.’
    3. British American Tobacco
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine.
    And the FTSE 100 stock offers a 9.2% dividend yield after falling by 23.8% year-to-date. Despite ESG concerns, this dip may be attractive to income investors.
    The company is investing heavily in alternative products such as vapes as governments continue to crack down on smoking, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%. Accordingly, BATS is making good progress on its long-standing target to generate £5 billion from this sector by 2025.
    New CEO Tadeu Marroco is ‘pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organisation...I remain confident that New Categories will deliver a positive contribution in 2024. However, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms.’
    However, the company continues to face regulatory problems; the UK is planning to ban single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products. It also faces the wider fall in smoking worldwide, and a large debt pile as rates rise.

        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

    Oil prices forecast: how high can it go?

    By MongiIG,


    Market News
    After oil prices plummet by more than 9%, three major factors are poised to initiate a new upward cycle for the global oil market. How high could this newly formed trend potentially drive the price of crucial energy?
    Source: Bloomberg   Price of oil Petroleum Commodities Price Interest rates United States  
    Hebe Chen | Market Analyst, Melbourne | Publication date: Wednesday 11 October 2023 08:19 Oil price three main drivers

    On the eve of the 50th anniversary of the world's first oil crisis, warfare in the Middle East has once again bolstered crucial energy prices, causing them to rebound from a sharp decline in the past week.

    While Israel's influence on global oil supply is limited, the most fearful threat lies in the potential escalation of conflict involving both the US and Iran. Iran has become a substantial source of additional crude oil this year, which has helped mitigate what would otherwise be extremely tightening markets. The uncertainty surrounding the supply outlook has driven oil prices up by nearly 4% in just two days.

    Meanwhile, another unexpected driver for oil prices surfaces this week.

    A noticeable dovish shift among Federal Reserve members is prompting investors to bet on "no more" rate hikes for the months and year ahead. For instance, Dallas Federal President Lorie Logan made a speech on Monday, October 9th, stating that: "Higher term premiums result in higher term interest rates for the same setting of the fed funds rate. Thus, if term premiums rise, they could help cool the economy to some extent, reducing the need for additional monetary policy tightening to achieve the FOMC's objectives."

    While it may still be too early to definitively declare an end to the US central bank's tightening cycle, it is a reasonable expectation that the more cautious the Fed members are, the less likely interest rates will continue to rise. This scenario is undoubtedly viewed as positive news for the economic outlook and is expected to benefit oil prices as well.

    Thirdly, despite last week's OPEC+ meeting failing to significantly boost oil prices, the consequences of months-long supply constraints have already begun to strain major oil consumption nations.

    According to the EIA Petroleum Status Report released on October 4th, crude oil stocks in the US declined by 4.21 million barrels in the week ending September 29th, marking the sixth drawdown in the last eight weeks. Furthermore, on a global scale, the International Energy Agency has issued a warning that the production cuts implemented by these two major oil suppliers could result in a 'significant supply shortfall' by the end of the year.

    In general, it appears that the disruptions and uncertainties on the supply side, along with steady demand growth, will continue to feed into the upward trajectory of the essential energy market.

    WTI Technical Analysis

    The pullback on Tuesday suggests that traders are adopting a wait-and-see stance in response to the rapidly changing geopolitical tensions, assessing how this could potentially impact the energy market on a broader scale.

    From a technical standpoint, the surge over the past weekend has prompted the price to challenge its 50-day moving average, which currently sits at $85.40, with support from the August peak at $83.82. Only a breakthrough above the $85 level will allow the price to retest its previous trendline, expected to act as a near-term resistance. On the flip side, the price range between $82.30 and $83.70 should be capable of halting or slowing any further retreat.

       
    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
    As Tesla gears up to release its Q3 results on 18 October and with estimates pointing towards an EPS of $0.74 and revenue of $24.21 billion, what strategies can traders employ ahead of the big reveal?

     Monte Safieddine | Market analyst, Dubai | Publication date: Thursday 12 October 2023 03:18 When is Tesla's results date?
    We can expect to receive the latest figures from Tesla on Wednesday, 18 October, after the market closes.
    Tesla share price: forecasts from Q3 results
    Past performance and sales drivers
    Tesla managed to outperform during its last earnings release for the second quarter in July. However, it was the incentives and discounts that primarily drove sales, resulting in a drop in operating margins to 9.6% and gross profit margins to approximately 18.2%.
    Production slowdown and targets
    During their previous earnings call, they cautioned that production would decelerate in the third quarter due to significant factory upgrades. True to their word, production has indeed slowed. Latest figures show deliveries at 435,059, falling short of expectations, and production at 430,488. Despite this, the automaker is still targeting around 1.8 million vehicles for this year.
    Pricing strategy and market competition
    There have been further price cuts for each of Tesla's models this past quarter, according to cargurus.com. These reductions amount to over a third year-on-year, maintaining the company’s approach of sacrificing margins to produce more vehicles. This strategic choice will be scrutinised by those examining short- to mid-term prospects, especially considering competition in the US and China.
    Meanwhile, optimists are looking forward to updates on key projects like Cybertruck production and AI development with the Dojo supercomputer, factors that led Morgan Stanley to significantly raise its share price target last month and upgrade its rating to 'Overweight'.
    Financial forecasts for the next quarter
    Estimates for the upcoming quarter forecast an earnings per share (EPS) of USD 0.74, a figure that has been revised downward after the disappointing delivery numbers. Revenue is expected to come in at USD 24.21 billion, not far from the USD 24.9 billion in the previous quarter but notably higher compared to the same period last year. Gross profit margins are also expected to improve but are likely to remain within the 18% range (source: Refinitiv).
    Analyst consensus and share price implications
    As for the analyst recommendations, the consensus appears similar to the previous quarter. There are six 'Strong Buy', 12 'Buy', a larger group of 20 'Hold', three 'Sell', and four 'Strong Sell', resulting in a slight net buy bias, which isn't as strong as the industry average. Moreover, the current share price exceeds the average price target of USD 238.79 (source: Refinitiv).
      Source: Bloomberg
    Trading Tesla’s Q3 results: weekly technical overview and trading strategies
    Current technical indicators
    Examining the chart below, the price is still hovering within a relatively expansive bullish trend channel. Moreover, it remains above all its primary weekly long-term moving averages (MA), even if the 100-week MA is not far away—these are bullish indicators.
    Conversely, the other weekly technical indicators are generally neutral, albeit with a tinge of slight positive technical bias. The price is near the middle band; its RSI (Relative Strength Index) is above 50 but not in overbought territory; its ADX (Average Directional Movement Index) oscillates below trending levels; and in terms of the DMI (Directional Movement Index), its +DI is above its -DI, but not by a significant margin.
    Long-term vs short-term trends
    Overall, most of the technical indicators are neutral but remain within the longer-term bullish channel, offering a technical overview that leans more towards 'bull average' than 'stalling bull.' This is consistent with the technical classification from the last time we previewed Tesla's earnings.
    While this doesn't guarantee gains, fluctuations from one end of a broad bullish trend channel to the other can influence key technical indicators. This is more apparent on the daily time frame, where the shift back towards a mid-term average renders the outlook more consolidative than bullish.
    Trading strategies: conformist vs contrarian
    Strategically speaking, this places 'buys' in the conformist camp and 'sells' in the contrarian camp. For those favouring the former, buying off the 1st Support is advisable only via a significant reversal, and for the latter, selling off the 1st Resistance via reversal is the strategy—always observing where the price resides within the channel.
    Preparing for fundamental events
    Additionally, technicals lose some of their importance as we approach a fundamental event, particularly if the actual results deviate significantly from expectations.
      Source: IG
    Tesla weekly chart with key technical indicators
      Source: IG
    Tesla weekly chart with IG client sentiment
      Source: IG
    IG client sentiment* and short interest for Tesla shares
    As for IG client sentiment, it's been characterised by a strong buy bias throughout this period (see chart above, blue-dotted line representing % long, left axis). To some extent, this reflects trading within the channel established at the start of the year. Sentiment began this week at 74%, compared to last week's 77%, which was just shy of entering extreme long territory.
    Regarding short interest, the reading for mid-September stood at 84,724,119, representing 2.67% of total shares and 3.07% of shares floating. This is lower than the approximately 96 million shares short when we conducted the second-quarter earnings preview (source: Refinitiv).
      Source: IG
    *The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of this week for the outer circle. Inner circle is from the start of last week.
       
       
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  17. MongiIG
    Netflix's Q3 2023 results are expected to show a year-over-year revenue increase of 7.69% and an EPS increase of 12.71%
    Source: Bloomberg   Shares Revenue Netflix Price Operating margin Market trend
     Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Wednesday 11 October 2023 15:05 Key takeaways
    Netflix's Q3 2023 earnings are expected to show a year-over-year revenue increase of 7.69% and an EPS increase of 12.71% Netflix has expressed confidence in its financial outlook due to the successful implementation of paid sharing, which is expected to drive accelerated revenue growth in the second half of 2023. While revenue growth is expected to be driven by growth in average paid memberships, the average revenue per user (ARM) is anticipated to be flat or slightly down year over year. Netflix expects Q3 operating income of %1.9bn up from $1.5bn in the same period last year, and an operating margin of 22%, up from 19% in Q3 2022. While public sentiment is considered bullish, there has been some net selling of the stock by hedge funds and company insiders over the last quarter. When is Netflix earnings date?
    Netflix Inc., the Nasdaq listed, world leading internet television network will report its third quarter earnings for 2023 (Q3 2023) on Wednesday the 18th of October 2023, after market close.
    Netflix results Q3 2023 earnings preview, what does ‘The Street’ expect?
    A consensus of estimates from Refinitiv arrives at the following expectations for the Q3 2021 Netflix results:
    Revenue $8.535bn (+7.69% y/y) EPS of $3.49 (+12.71% y/y) Netflix Inc. (NFLX) has recently offered a glimpse into its financial forecast for the third quarter of 2023. As a leading player in the entertainment industry, the company's primary financial metrics include revenue growth and operating margin, which measures profitability. The company's objective is to accelerate revenue growth, expand operating margins, and deliver increasing positive free cash flow. Markets are likely to judge the upcoming results against expectations of these metrics as well as subscriber numbers.
    The company has expressed increased confidence in its financial outlook due to the successful implementation of paid sharing. This is expected to lead to accelerated revenue growth in the second half of 2023 as the company expands this initiative across almost all remaining countries and continues to see steady growth in its ad-supported plan.
    The forecast for Q3 reveals an expected revenue of $8.5B, which is a year over year increase of 7% on both a reported and currency neutral basis. This is a slight acceleration from the Q2’23 currency neutral revenue growth rate of 6%. The revenue growth in Q3 is expected to be driven by growth in average paid memberships.
    However, the currency neutral ARM (average revenue per user) is expected to be flat or slightly down year over year, due to the fact that the company is lapping price increases from 2022 and hasn’t had price increases in its largest revenue markets since the first half of 2022. Revenue from advertising and extra member features are not yet material enough to offset these factors.
    In terms of net additions, Q3’23 paid net adds are anticipated to be similar to Q2’23 paid net additions. The company expects that its revenue growth will accelerate more substantially in Q4’23 as it further monetizes account sharing between households and steadily grows its advertising revenue.
    On the profitability front, Netflix expects Q3 operating income of $1.9bn up from $1.5B in Q3’22, and an operating margin of 22%, up from 19% in the same period last year. The company is targeting a full year 2023 operating margin of 18%-20%, based on F/X rates as of January 1, 2023, which is an increase from 17.8% in FY22.
    Netflix's is focused on driving growth and increasing profitability through leveraging strategies such as paid sharing and advertising.
    How to trade the Netflix Q3 2023 results
    Source: IG Tipranks IG’s TipRanks smartscore (available on the IG platform) suggests that Netflix is a ‘moderate buy’ with a long-term price target of $470.43 a share, as of the 11th of October 2023.
    Public sentiment is considered bullish although over the last quarter there has been some net selling of the stock by hedge funds and company insiders.
     
    Source: IG Eighty six percent of IG clients with open positions on Netflix (as of the 11th of October 2023) expect the share price to rise in the near term, while fourteen percent of IG clients with open positions on the company expect the price to fall.
    Source: IG The share price of Netflix is currently testing a confluence of trend line, horizontal and 200-day simple moving average (blue line) (200MA) support. Provided that the price stays above this confluence of levels the longer-term trend is considered up.
    Trend followers might prefer to see some bullish momentum in line with the longer-term uptrend before looking for long entry. A break or close above the 389.10 level, should it occur, might provide this momentum confirmation. In this scenario, 410.15 becomes the initial upside resistance target while a close below the 366.15 level might be used as a stop loss indication for the setup (should it manifest).
     

       
    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
    Some analysts speculate that the recent spike in crude oil prices may be temporary, unless supply or transport disruptions endure. Iran remains a pivotal player, facing potential constraints if entangled in the unfolding conflict.

    IG Analyst | Publication date: Wednesday 11 October 2023 02:27 Article written by Juliette Saly
    Middle East conflict
    Commodity markets have surged following military clashes between Israel and Hamas in the Middle East.
    Fears of escalating tensions sparking supply shortages led both the global benchmark crude Brent contract and the US WTI contract to surge by more than 4% each after the weekend attacks. This represented the largest one-day gain for both contracts in six months.
    Meanwhile, safe-haven gold prices also experienced a spike, alongside agricultural commodities such as sugar and wheat. The primary fallout from geopolitical conflicts often manifests as a surge in oil prices due to supply and demand concerns. In February 2022, the oil markets witnessed significant increases as Russia invaded Ukraine.
    The OPEC+ equation: how supply cuts and seasonal demand shape oil prices
    The surge in oil prices at the beginning of the week countered a previous downtrend. Crude oil prices plunged approximately 8% per barrel in just two trading sessions, marking the steepest decline for both benchmarks since May.
    This downturn emerged amidst concerns that demand is waning as the US summer driving season concludes, notwithstanding the OPEC+ agreement to sustain output cuts.
    In the short term, fluctuations in global oil prices are to be expected as hostilities persist. Such volatility is likely to be passed on to consumers at the petrol pump.
    AMP's Dr Shane Oliver predicts an increase in petrol prices due to the conflict, noting that recent market instability has negated any previous decreases in petrol costs. He forecasts that the risk now leans towards a potential 15-cent per litre increase in fuel expenses.
      Source: Bloomberg
    The Iran dilemma: geopolitical tensions and their impact on your fuel bills
    Iran remains a pivotal focus for impending market volatility. Fears are growing that supply could be disrupted if Iran becomes further embroiled in the conflict.
    A spokesperson from the White House has deemed Iran complicit in the Hamas attacks, although clarifying that the US has no intelligence or evidence suggesting direct involvement. Tehran, for its part, has refuted these claims but has expressed support for the decisions made by Hamas militants in Gaza.
    Financial analysts speculate that ongoing turmoil could prompt the US to intensify its sanctions on Iran, consequently affecting Iranian oil exports. Additionally, the hostilities could hinder US diplomatic efforts to foster a rapprochement between Saudi Arabia and Israel.
    Such an agreement had been anticipated to involve Saudi Arabia increasing oil output next year and normalising relations with Israel in exchange for a defence pact with Washington.
    What is the lasting impact?
    Some analysts argue that this week's price movement in oil markets is merely a "knee-jerk" reaction and likely to be short-lived.
    Vandana Hari, from Vandana Insights in Singapore, suggests it's a "wait-and-watch situation," characteristic of any flare-up in the Middle East.
    Vivek Dhar, CBA's Director of Mining and Energy Commodities Research, noted that "for this conflict to have a lasting and meaningful impact on oil markets, there must be a sustained reduction in oil supply or transport. Otherwise, and as history has shown, the positive oil price reaction tends to be temporary and easily trumped by other market forces."
    Analysts further observe that the conflict does not directly jeopardize any significant sources of oil supplies, given that neither party involved is a major player in the oil market.
      Source: EIA
    Israel's refineries and Tamar gas field
    Data from the US Energy Information Administration indicates that Israel houses two refineries with a combined capacity of nearly 300,000 barrels per day.
    Israel has also directed Chevron to cease operations at its Tamar gas field due to safety concerns. Situated off Israel's southern coast, this field is a significant contributor to the country's power generation and also supplies gas to Egypt. Concurrently, EIA data reveals that the Palestinian territories do not produce any oil.
      Source: EIA
    OPEC's 2023 World Oil Outlook
    Other factors influencing commodity markets are likely to continue shaping the direction of prices. Despite growing calls for climate action, the Organisation of the Petroleum Exporting Countries (OPEC) does not believe peak oil demand has been reached.
    In its 2023 World Oil Outlook report, OPEC has revised its medium- and long-term global oil demand projections upward. The organisation estimates that by 2045, the world will require 116 million barrels of oil per day, approximately 6 million barrels per day more than it predicted in 2022, with an anticipated total investment cost of $14 trillion. In the previous year, global consumption was just under 100 million barrels per day.
    OPEC attributes this expected surge in demand to economic growth in Asia, specifically China and India, as well as Africa and the Middle East.
      Source: OPEC
     
       
    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.
  19. MongiIG
    Rallies in EURUSD and GBPUSD reflect the influence of central banks, inflation and geopolitical risks.
    Source: Bloomberg   Forex Dollar European Central Bank Pound sterling foreign exchange market central bank  Sergio Ávila | Market analyst, Madrid | Publication date: Wednesday October 11, 2023 10:10 The euro has seen a rally, surpassing $1.06, moving away from its recent ten-month low of $1.0447, which has been the result of dovish messaging from central banks, particularly the Federal Reserve and the European Central Bank (ECB).
    U.S. Federal Reserve officials have hinted that rising long-term Treasury yields could discourage future interest rate hikes. In Europe, ECB Vice President Luis de Guindos has signaled the expectation of a decline in inflation, but has emphasized the need for caution due to uncertainty related to oil price movements amid the situation in the East. Half.
    On the other hand, Francois Villeroy de Galhau has stated that inflation should still converge towards the ECB's target, which is around 2%, by the end of 2025, despite the violence affecting the region of Israel.
    The currency market, always sensitive to statements from central banks, reflects these mixed perceptions and cautious messages regarding monetary policy. Investors are watching for cues from these financial leaders as they evaluate their strategies amid global volatility.
    TECHNICAL ANALYSIS: EURUSD
    Scenario 1: A 30-minute candle close above 1.06198 would increase the odds of a rally targeting 1.06321 and 1.06586 in extension*.
    Scenario 2: A 30-minute candle close below 1.05926 would increase the chances of a decline with a target of 1.05758 points.
    Source: own creation (PRT Graphics on IG) The British pound (GBP) has seen a recovery above the $1.2280 level, distancing itself from its recent near seven-month low at $1.2035. This rally has been influenced by dovish comments from top Federal Reserve officials, which have put pressure on the US dollar.
    Meanwhile, the International Monetary Fund (IMF) has revised downwards its projections for the UK's Gross Domestic Product (GDP) in 2024, putting it at 0.6%, compared to a previous estimate of 1.0% . This revision reflects the perceived need for the Bank of England to maintain high interest rates as a measure to control persistently high inflation and address the continuing consequences of the energy price increases that occurred in the previous year.
    This uncertain economic scenario poses significant challenges for UK monetary and economic policy. Investors are attentive to how the British authorities will handle the situation and how these decisions will affect the pound sterling in international markets. The British currency, in its recovery against the dollar, reflects the complexity of the economic and political factors at play today.
    TECHNICAL ANALYSIS: GBPUSD
    Scenario 2: A 30-minute candle close above 1.23157 would increase the odds of a rally targeting 1.23436 points.
    Scenario 1: A 30-minute candle close below 1.22638 would increase the chances of a decline with a target of 1.22359 points.
    Source: own creation (PRT Graphics on IG) How to take advantage of the opportunities in this market? Example of operation.
    To illustrate how to trade in the example, we are going to use EURUSD. At IG, we could operate in this market with barrier, vanilla options, Turbo24 and Multis. We are going to select the latter for the example, since it is a product listed on a regulated exchange, which allows us to adapt the leverage of our operations, with the risk restricted to the initial deposit and with unlimited profitability.
    Suppose we take a short position in EURUSD, with an initial deposit of €1000. If we choose a Multi of x5, which means that you will generate the profit or loss corresponding to a deposit of 5000 euros in the index. Before the end of the trading day, the EURUSD has decreased by 3% from its closing price of the previous day, so the daily return on your Multi amounts to 3% of €5,000. At that moment, you exit the operation, so the profit is 150 euros.
    Let us now imagine that, on the contrary, you have acquired a short Multi of x5, with a market that has evolved against you, so that the daily performance of your Multi would be -3%. Upon exiting the operation, you would have suffered a loss of -150 euros.
     

       
    Other than the legal notice below, the material on this page does not contain a record of our trading prices, nor an offer of, nor a solicitation for a transaction in any financial instrument. IG will not be responsible in any case for the use that may be made of these comments or for the consequences that may arise. No representation or warranty is made regarding the accuracy or completeness of such information, so any person who decides to use it will do so at his own risk. Any study provided does not take into account specific objectives, the financial situation or the needs of a specific subject who may have received it. It has not been prepared in accordance with legal provisions designed to promote the independence of investment reporting and as such is considered a marketing communication. Although we are not specifically constrained from trading in advance of our recommendations, we do not seek to profit from them before providing them to our clients. Ask the full non-independent analysis disclaimer and our non-independent research recommendations .
  20. MongiIG
    As violence erupts in the Middle East, markets grapple with uncertainty, and crude oil prices surge.
      Source: Bloomberg
      Commodities Petroleum Price of oil Sanctions against Iran United States Middle East
     Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 10 October 2023 03:09 Navigating market uncertainty amid Middle East turmoil
    In the wake of escalating violence in the Middle East, we join the global community in extending our heartfelt prayers and hopes for a swift end to the outbreak of horrific violence. Financial markets, meanwhile, are bracing for volatility, as investors attempt to gauge the ripple effects of the conflict on diverse asset classes.
    Our previous analysis highlighted two probable trajectories for the conflict. The first confines the hostilities within existing borders, while the second envisions a regional flare-up affecting multiple sectors of the global investment landscape.
    In either scenario, the foreseeable consequence is a surge in crude oil prices, although the magnitude will vary depending on geopolitical developments.
    US foreign policy and crude oil market dynamics
    Rewinding the clock to the Trump administration, Iranian oil exports plummeted to under 500,000 barrels per day. However, with the Biden administration's more lenient stance, Iranian oil exports rebounded to approximately 1.5 million barrels per day, providing some relief to the sky-high energy prices.
    Post-Hamas surprise offensive, Israel is likely to advocate for the United States to reimpose sanctions on Iran.
    The ripple effect? A predictable uptick in crude oil prices, both in the short-term and potentially the long-term, as sanctions cripple Iran's oil infrastructure investment and maintenance.
    Sourcing alternatives to Iranian crude
    The US may request other oil-producing nations to increase supply to counter the loss of Iranian exports. However, given that the US has strained relations with Saudi Arabia and Russia, the ability to source and offset the loss of Iranian crude oil appears limited.
    Crude oil technical analysis
    After spending almost ten months trading within a range above $63.00 and below $84.00, crude oil surged higher to $95.00 at the end of last month in response to production cuts by the Saudis and Russians. The rally was halted as the relentless rise in long-term yields and tightening financial conditions into the end of September prompted a 14% pullback to last week's low of $81.50.
    Assuming crude oil holds above last week's $81.50 low, we anticipate crude oil to move higher toward $90, with potential upside risks toward the September high of $95.03.
    Crude oil daily chart
      Source: TradingView
     
    TradingView: the figures stated are as of 10 October, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.  
       
       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  21. MongiIG
    The changing dynamics in the wake of geopolitical events have reignited interest in nuclear energy generation. Uranium's sudden resurgence in the market is marked by rising prices and growing demand.
     

    IG Analyst | Publication date: Tuesday 10 October 2023 02:34 Article written by Danielle Ecuyer
    The changing dynamics in the wake of geopolitical events
    With concerns arising about the security of gas and oil supplies following the Russian invasion of Ukraine and the challenges associated with transitioning to zero emissions, the focus on energy production and energy security has shifted. There are also concerns about the capacity for renewable energy production and storage, which has supported the argument for nuclear power generation. This stands in contrast to the previous resistance to nuclear power, especially after the Fukushima disaster.
    Not since the early days of the nuclear arms race, which began in 1945 with the Manhattan Project, has there been such a strong interest in nuclear energy generation.
    Uranium's sudden resurgence
    The uranium market differs significantly from traditional energy sources like oil and gas in terms of transparency. It's a market driven by long-term investments, or the lack thereof, in nuclear reactors, decommissioning of existing nuclear energy plants, and arms agreements related to nuclear weapons decommissioning.
    Unlike coal, gas, and oil, the energy source isn't completely depleted after a single use; it can be re-utilised.
    By the end of September, the price of uranium had reached a 12-year high, rising from US$18/lb in 2018 to US$70/lb. Canaccord Genuity is one of many experts who believe the market has reached a structural supply deficit.
    The base case, as proposed by the broker, suggests that total nuclear capacity could grow at a rate of 3.6% by 2030 and 3.25% by 2035. This equates to a 30% annual increase in uranium demand through 2030 and 24% through 2035.
      Source: Bloomberg
    What is driving growth in the uranium market?
    The forecasted demand is driven by new reactors in China and India, as well as extending the lifespan of existing reactors in the US, Canada, and Europe.
    Canaccord has increased the long-term uranium price to US$75/lb from US$65/lb.
    According to Macquarie, there are 266 new reactors proposed globally, with 59 currently under construction. The broker has raised the target price to US$70/lb, a 16% increase.
    In the report titled "The Uranium Bull: Defying Trends and Redefining Energy Markets" by Natural Resources Investing, the authors propose that additional demand has been generated by closed-end funds like the Sprott Physical Uranium Trust and similar investment trusts, which have been purchasing 25-30 million lbs per annum in 2021 and 2022.
    These authors suggest that the uranium market will face a deficit of 180 million lbs between 2020 and 2030 and that greenfield sites are not financially viable at US$60/lb.
    Uranium price history and suppy and demand forecast
      Source: Canaccord Genuity Uranium Update H2 2023
    Reviving decommissioned uranium mines
    Due to the cost of developing greenfield uranium mining sites, many decommissioned mines are coming back on stream to increase supply. Of note, these forecasts do not include small modular reactors, which are being put forward as a future energy solution but for now are at least a decade away.
    Three stocks to watch
    Paladin Energy back to production in 2024
    Paladin Energy (PDN) is a $3 billion uranium production and exploration company, with its main project being the restart of its Langer Heinrich mine in Namibia.
    Brokers forecast production to recommence at Langer Heinrich in the 1Q24, within budget. Additionally, the company has secured off-take agreements with "leading global counterparties," notes Macquarie.
    The broker recently upgraded the FY27 onwards EPS forecasts by 7%-17% due to the higher expected uranium price, and the target price was lifted by 18% to $1.30.
    Looking at some other brokers, Bell Potter recently downgraded the stock to Speculative Hold from Speculative Buy and has a $1.31 target price. FNArena has an average price target of $1.253 with meaningful EPS generation expected in FY25.
    Paladin Energy weekly chart
      Source: IG
     
    Boss Energy: Who's the Boss?
    Boss Energy (BOE) is a $1.64 billion uranium explorer, and Honeymoon Uranium is the company's primary project located 80 km northwest of Broken Hill.
    The Honeymoon project is focusing on greenfield exploration prospects, along with upgrading the "satellite Joint Ore Reserves Committee resources of the Jason's and Gould's Dam Deposits," as noted by Refinitiv.
    Macquarie expects the company to resume production at Honeymoon in the 4Q23, potentially increasing production to 2.45 million pounds per annum, thanks to recent strong production results.
    Boss Energy weekly chart
      Source: IG
    While the broker recently upgraded forecasts to account for higher uranium prices, resulting in an expected EPS increase of 7% to 20% from FY27 onwards, and raising the target price to $4.50, the rating was downgraded to "Neutral" on valuation grounds.
    FNArena has an average target price of $4.477, with Bell Potter standing out with a target price of $5.53, along with a "Speculative Hold" recommendation.
    FNArena forecast chart
     
      Source: FNArena
    Refinitiv has a mean target price of $4.51, with only 1 "Strong Buy," 4 "Holds," and 1 "Sell."
    Refinitiv forecast chart
     
      Source: Refinitiv
    Deep Yellow: A little ray of sunshine
    Deep Yellow (DYL) is a $982 million uranium explorer with two projects, one in Namibia and one in Australia.
    Deep Yellow weekly chart
      Source: IG
    Bell Potter has a Speculative Buy and a $1.84 target price. The broker notes an expected upgrade to the resource at Tumas (Australia).
    FNArena forecast chart
     
      Source: FNArena
    Refinitiv has a mean target price of $1.67 and 1 Strong Buy and 1 Buy.
    Refinitiv forecast chart
     
      Source: Refinitiv

       
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  22. 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 9 October
    Chris Beauchamp's insight
    US earnings season begins this week, providing the main driver of activity for the next month or so in equity markets. US consumer price index (CPI) is also on the calendar for the week, along with producer price inflation. Chinese inflation and UK gross domestic product (GDP) round out the week of major events.
    Economic reports
    Weekly view Monday
    None

    Tuesday
    12.30am – Australia Westpac consumer confidence (October): index expected to fall to 79.1. Markets to watch: AUSD crosses
    1.30am – Australia NAB business confidence index (September): index forecast to fall to -2. Markets to watch: AUD crosses

    Wednesday
    1.30pm – US PPI (September): prices to rise 0.5% month-on-month (MoM), down from 0.7% in August. Markets to watch: USD crosses
    7pm – Fed minutes. Markets to watch: US indices, USD crosses

    Thursday
    7am – UK GDP (August): growth expected to be -0.1% MoM. Markets to watch: GBP crosses
    1.30pm – US CPI (September), initial jobless claims (w/e 7 October): prices to rise 0.4% MoM and 3.8% year-on-year (YoY), from 0.6% and 3.7% respectively. Core CPI forecast to be 0.3% and 4.1% respectively, from 0.3% and 4.3%. Claims to rise to 208K. Markets to watch: US indices, USD crosses
    4pm – US EIA crude oil inventories (w/e 6 October): stockpiles fell by 2.2 million barrels in the preceding week. Markets to watch: Brent, WTI

    Friday
    2.30am – China CPI, PPI, trade data (September): CPI expected to be 0.4% MoM and 0.2% YoY, while PPI recovers to -1% from -3% YoY. Exports to fall 4% YoY. Markets to watch: China indices, CNH crosses
    3pm – US Michigan consumer sentiment (October): index expected to drop to 68 from 68.1. Markets to watch: USD crosses
      Company announcements
     
    Monday 9 October
    Tuesday 10 October
    Wednesday 11 October
    Thursday 12 October
    Friday 13 October
    Full-year earnings
          Dechra Pharmaceuticals   Half/ Quarterly earnings
      LVMH,
    PepsiCo   N Brown,
    Delta JPMorgan Chase,
    Wells Fargo,
    Citigroup,
    UnitedHealth Trading update*
      Reach PageGroup Hays,
    easyJet       Dividends
    FTSE 100: Howden Joinery, Taylor Wimpey, WPP, Spirax-Sarco, Kingfisher, Tesco
    FTSE 250: Senior, Persimmon, Breedon, Ruffer, Primary Health Properties, Supermarket Income REIT
    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
    9 October Tuesday
    10 October Wednesday
    11 October Thursday
    12 October Friday
    13 October Monday
    16 October FTSE 100     2.89       Australia 200 0.1     0.3     Wall Street             US 500 0.09 0.21 0.47 0.01 0.13   Nasdaq             Netherlands 25             EU Stocks 50             China H-Shares             Singapore Blue Chip     0.07       Hong Kong HS50 1.4           South Africa 40   136.3         Italy 40             Japan 225            
  23. MongiIG
    Tesco, Aviva and Superdry could constitute the three best UK shares to buy next month. These shares have been selected for recent market news.
    Source: Bloomberg   Shares United Kingdom Aviva Share Tesco Bond
     Charles Archer | Financial Writer, London As the UK enters Q4 2023, there are several positives to consider. CPI inflation, while still much higher than the target 2%, has fallen to 6.7% from a high of 11.1% in October 2022.
    The base rate stands at 5.25%, and while Bank of England officials have hinted one more rate rise is likely, the central bank paused at the last Monetary Policy Committee meeting. And further rises beyond this final one is now considered unlikely.
    Moreover, revised economic data from the Office for National Statistics shows that the UK has experienced faster growth than either France or Germany since the end of 2019. Even though growth is still relatively lacklustre, the UK’s economy has grown by 1.8% since the covid-19 pandemic began — compared to a previous estimate of a 0.2% contraction. In addition, the economy grew by 0.3% in Q1 2023, up from the previous estimate of 0.1% growth.
    While the HS2 cancellation adds further weight to the argument that the UK is becoming a less certain place to invest, it’s worth remembering that many of the country’s economic problems are global in nature.
    Regarding the best UK shares, much of the recent falls can be attributed to the rout in the bond markets — pushing up the price of the US Dollar and lowering the price of oil. And while the bond problem is global, UK 30-year borrowing costs are now at their highest since 1998, with the yield on 30-year government bonds at 5.115% according to Refinitiv.
    There are two important implications to consider: first, the bond market movements imply that inflation will be stickier and therefore rates will stay high for longer, even if they are near their peak. Second, governments in the UK and elsewhere now have much less room for tax cuts or increased spending, making generating growth even harder than previously assumed.
    Of course, this is an oversimplification, but worth bearing in mind when considering an investment. And remember, past performance is not an indicator of future returns.
    Best UK shares to watch
    1. Tesco
    Tesco shares rose sharply this week after interim results saw the UK’s largest grocer’s retail LFL sales rise by 7.8%, with ‘volume and sales mix trends ahead of expectations.’ Accordingly, retail adjusted operating profit rose by 13.5% to over £1.4 billion, with Tesco bank operating profit up 25% to £65 million, primarily driven by strong income growth.
    In statutory terms, revenue was up by 5% at actual rates to £34.1 billion, while operating profit more than doubled to nearly £1.5 billion, but this is mostly a reflection of the comparative period’s £626 million impairment charge. And it even managed to grow its market share by 30bps, with gains both online and in shops.
    Further, net debt improved by £605 million since year-end, with the net debt/EBITDA ratio now at just 2.3x. Tesco also announced an interim dividend per share of 3.85p — in line with the dividend policy. In April 2023, the FTSE 100 grocer announced a plan to buy back £750 million of shares by April 2024 — this plan is going well, with £503 million of shares purchased in H1.
    Tesco now expects to generate retail free cash flow of between £1.8 billion and £2 billion this year, ahead of its medium-term guidance range of £1.4 billion to £1.8 billion. CEO Ken Murphy highlighted ‘the strong performance in the first half of the year. Food inflation fell across the half and while external pressures remain, we expect that it will continue to do so in the second half of the year.’
    AllianceBernstein analyst William Woods noted that the results ‘should be received positively given the concerns around sector profitability amid fears of deflation, which we don’t think is a material risk.’
    2. Aviva
    Aviva shares jumped this week after Jefferies upgraded the insurer from ‘buy’ to ‘hold’ with a 480p price target — shares are now changing hands for 387p. The analysts forecasted ‘Aviva to deliver a best-in-class capital return yield, underpinned by excess capital and the strongest free cash flow amongst peers.’ Further, it noted that Aviva’s earnings should start shifting towards a capital-light business, improving its prospects as market conditions improve.
    Jefferies is forecasting a whopping £5.3 billion of capital returns between 2023 and 2026, equivalent to half of the company’s current market capitalisation. This estimate is fortified by its all-important 2023 forecast 205% Solvency II ratio. And the analysts also think that Aviva could choose to sell off its operations in China and India for circa £1 billion, which could go back to shareholders.
    In recent half-year results, Aviva’s operating profit rose by 8% to £715 million, and its interim dividend per share was upped by 8% to 11.1p after buying back £300 million of shares in H1.
    CEO Amanda Blanc’s turnaround plan has clearly worked so far — and the CEO enthused that the insurer has more possible growth areas. Indeed, private health insurance sales shot up by 58% to £86 million, and the company has signed up another 17,000 health insurance customers over the past year. Blanc notes that there ‘has been significant growth in demand for things like digital GP.’
    3. Superdry
    Unlike defensive sector-based Tesco and Aviva, Superdry shares have fallen by 65% year-to-date to just 48p. However, the stock rose this week after the company revealed it had agreed to sell its intellectual property assets in three South Asian countries.
    It expects to receive £30.4 million from the resulting new £40 million joint venture — though retains a 24% shareholding over the JV in partnership with Reliance Retail who will hold 76%. The company plans to use the proceeds to boost its liquidity and fund its turnaround plan.
    Superdry was suspended from trading at the end of August due to issues with its full-year results audit. However, it has now resumed trading after announcing a £21.7 million pre-tax adjusted full-year loss — compared to a £21.6 million profit in the prior financial year.
    It’s worth noting that CEO Julian Dunkerton is now back at the helm — and the £48 million company delivered full-year revenues of £622.5 million. Poor weather and a cost-of-living crisis may be compounding problems, but there may be an opportunity for higher risk investors.

        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
    What to expect and how to trade JPMorgan’s upcoming results.
    Source: Bloomberg   Shares Bank JPMorgan Chase Price Securitization Loan  Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Thursday 05 October 2023 15:38 When are JPMorgan ’s results expected?
    JPMorgan Chase & Co is set to release its third quarter (Q3) 2023 results on 13 October 2023. The results are for the quarter ending September 2023.
    What is ‘The Street’s’ expectation for the FY results?
    ‘The Street’ expectations for the upcoming results are as follows:
    Revenue of $39,336 billion : +25.48% year-on-year (YoY)
    Earnings per Share (EPS) : $3.87: +15.18% (YoY)
    JPMorgan - a gauge for the US economy
    JPMorgan Chase is ramping up its securitisation efforts in anticipation of proposed new US capital requirements for large banks. The bank plans to securitise and sell a higher portion of its loan portfolio, specifically focusing on products at Chase, its retail business, such as mortgages, auto lending, and credit card loans. This move would allow JPMorgan to remove these loans from its balance sheet, thereby avoiding the need to hold regulatory capital against them. However, the bank would still continue to service the loans to maintain its client relationships.
    JPMorgan, as the largest US bank by assets, had $1.3tn in loans at the end of June. By securitising more of its loans, the bank aims to reduce its risk-weighted assets and comply with the potential new capital requirements.
    It is worth noting that JPMorgan's securitisation plans come at a time when the broader securitisation market is experiencing more subdued activity. US asset-backed and mortgage-backed securitisation issuance in 2023 has been the lowest since 2016.
    JPMorgan CEO Jamie Dimon has criticised the Federal Reserve's (Fed) proposals, expressing concerns that they could render bank stocks uninvestable. There are also concerns among Wall Street bankers that the new capital rules could disincentivise them from making loans and drive more banking activity into the less regulated shadow banking sector. This trend has been ongoing for over a decade with the expansion of hedge funds and private credit firms. Banks argue that this shift in lending activity could lead to higher borrowing costs, as banks benefit from cheaper deposit funding compared to these funds and firms. Regulators, on the other hand, argue that higher capital standards are necessary to enhance the safety of banks and prevent failures.
    In other news, Ben Challice is stepping down as the global head of trading services at JPMorgan, while the head of the bank's blockchain division, Tyrone Lobban, highlighted that the majority of his conversations with clients revolve around tokenised forms of traditional financial instruments rather than cryptocurrencies. Lobban noted that there is a significant focus on bringing traditional assets onto blockchain platforms, with many global banks, broker-dealers, and asset managers exploring permissioned or public blockchains for various purposes.
    JPMorgan’s CEO recently stated that Artificial Intelligence (AI) is already an integral part of the firm. Q3 earnings may show what impact AI might have on the investment bank’s results as the US labour market remains tight and the economy relatively healthy, with trading volumes, investment banking fees, net interest margins and income from mortgage banking all expected to contribute.
    How to trade JPMorgan into the results
    Source: Refinitiv Refinitiv data shows a consensus analyst rating of ‘buy’ for JPMorgan with 6 strong buy, 12 buy and 9 hold - with the mean of estimates suggesting a long-term price target of $169.14 for the share, roughly 18% higher than the current price (as of 5 October 2023).
    Source: IG IG sentiment data shows that 78% of clients with open positions on the share (as of 5 October 2023) expect the price to rise over the near term, while 22% of clients expect the price to fall whereas trading activity over this week and month shows 63% of buys.
    JPMorgan – technical view
    JPMorgan’s share price, up around 6% year-to-date, is weighing on major support made up of the January-to-March highs, the May and mid-June highs as well as the 200-day simple moving average (SMA) at $141.06. This acted as support during the banking crisis in March and may do so again this time round.
    JPMorgan Daily Candlestick Chart
    Source: TradingView For the JPMorgan share price to re-integrate this year’s uptrend it will need to rise above its September peak at $150.25 on a daily chart closing basis. En route minor resistance can be spotted at the $145.46 August low and the $147.48 early July high.
    The July-to-October downtrend line at $148.20 could also act as resistance, together with last week’s $148.87 high.
    JPMorgan Weekly Candlestick Chart
    Source: TradingView While the JPMorgan share price remains below its $150.25 September high, the medium-term downtrend will remain intact.
    A fall and daily chart close below the 200-day (SMA) at $141.06 could lead to the 200-week (SMA) at $132.57 being hit. Failure there could provoke a sell-off to the April $131.81 to $129.04 price gap.

       
    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.
  25. MongiIG
    Despite Saudi Arabia and Russia maintain their oil production cut till the end of the year, concerns regarding the deteriorating economic environment seem to have taken precedence, resulting in a decline of over 9% in just a week.
    Source: Bloomberg   Brent Crude Price of oil Commodities Petroleum OPEC Saudi Arabia
    Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 05 October 2023 07:21 Oil price tanks despite OPEC+ maintains production cuts

    Despite Saudi Arabia and Russia announced to maintain their oil production cut until the end of the year in this week's OPEC+ meeting, concerns regarding the deteriorating economic environment seem to have taken precedence, resulting in a notable drop in energy prices to below $90 per barrel—a decline of over 9% in just one week.

    Oil prices witnessed an 8% surge in September alone and a 29% increase throughout the third quarter, primarily due to the joint efforts of Saudi Arabia and Russia, who decided to reduce their daily supplies by over 1 million barrels from mid-year, leading to the fastest depletion of global inventories in years.

    However, the market's reaction this week seemly suggests that the rally may be losing steam, with attentions shifting elsewhere. It's not unlikely that the demand side of the market is exploring alternative options in response to soaring oil prices. Meanwhile, the prevailing narrative of higher and more prolonged interest rates is bringing the possibility of a recession back in sight. Both of these scenarios would weigh on the outlook for oil demand.

    Nevertheless, it may be premature to declare the end of the rally, given the ongoing constraints on oil supply. According to the EIA Petroleum Status Report released on October 3rd, crude oil stocks in the US declined by 4.21 million barrels in the week ending September 29th, marking the sixth week of drawdown in the last eight weeks. Furthermore, on a global scale, the International Energy Agency has issued a warning that the production cuts implemented by these two major oil suppliers could lead to a "significant supply shortfall" by the year's end.

    Meanwhile, as the northern hemisphere enters its winter season, historical patterns indicate an increase in demand for heating oil, which could further intensify the tightening of global oil stocks.

    The next OPEC+ meeting is scheduled for November 26th, when all 23 OPEC+ nations will gather to discuss their outlook and plan for 2024.

    Brent crude technical analysis

    On the daily chart displayed below, the price of Brent crude has convincingly breached the trendline dating back to June and is currently trading below the 20-day moving average.

    In the short term, the level of $87.53 is expected to play as a critical resistance point, as it previously served as the peak for both April and August. Conversely, recent losses may lead the price to seek support at $85.04, and a further pullback from that point could shift attention towards the August low, around $82.69, coinciding with the current position of the 200-day moving average.

       
    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.

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