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MongiIG

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Blog Entries posted by MongiIG

  1. MongiIG
    The Federal Reserve look likely to raise rates by 25-basis points as markets seek to gauge where the terminal rate is and when we can expect a dovish pivot
    Source: Bloomberg   Forex Inflation Federal Reserve Federal Open Market Committee Consumer price index Monetary policy
    IG Analyst | Publication date: Tuesday 31 January 2023  The FOMC come back into the fold today, with the committee proving their latest monetary policy decision on Wednesday. Coming on a week that also sees the ECB and BoE rate decisions, this promises to be a highlight within a particularly busy period. The two-day FOMC meeting concludes on Wednesday 1 February 2023. This time around, the question for Jerome Powell and co appears to be just how far they would be willing to take this tightening phase before rates halt.
    Inflation continues to contract as energy weakens
    Inflation remains the key concern for the Fed, with the markets keen to understand how their outlook has adjusted as CPI heads lower. The chart below highlights how headline inflation has reversed sharply lower since reaching a 9% peak back in June 2022. The key core PCE gauge favoured by the Federal Reserve has similarly turned lower of late, falling from 5.4% to 4.4% over the past year. However, the ‘sticky CPI’ gauge does highlight ongoing concerns that some members may have, with some underlying price elements failing to reverse as more volatile aspect deteriorate.
    Fortunately the recent decline in CPI inflation has been largely in line with forecasts, with Reuters projections signalling the potential for a return to 3.5% in the second quarter of 2023. Meanwhile, year-end CPI is predicted to come in around 2.6%. As we can see from the positive correlation between inflation and the US dollar, a continuation of this decline in inflation would likely result in further weakness for the greenback.
    From an employment perspective, we are yet to see any particularly notable surge in unemployment despite concerns that rising rates will put pressure on businesses to cut investment. Non-farm payrolls have been under pressure of late, bringing a gradual decline over recent months. Nonetheless, the payrolls figure remains above the 200k figure despite the recent declines.
    What to expect from the Fed
    The Federal Reserve are widely expected to bring about a 25-basis point rate hike, bringing the smallest move since the inception of this phase back in early-2022. Market pricing signals a 95% chance of that small move, with a 5% chance that we see another 50-basis point rise. Interestingly, this month has seen the Bank of Canada bring an end to their hiking phase, with the close correlation between both central banks highlighting the fact that the Fed will also soon bring an end to their tightening phase. By and large markets are signalling an expectation for further 50bp upside from here, meaning that March may also see another final push higher for rates.
    By and large markets are signalling an expectation for further 50bp upside from here, meaning that March may also see another final push higher for rates. However, traders will be keeping a very close eye on any commentary that better informs us over where rates will stop and enter their so-called ‘terminal rate’.
    Source: Eikon That commentary part of the meeting will prove absolutely key, with the recent run higher for stocks signalling that markets believe the downturn in inflation will ultimately provide the opportunity to swiftly pivot back onto a dovish mindset. However, it is likely that the FOMC will guard against this complacency, reiterating that they stand ready to act further if price growth picks up once again.
    Dollar index technical analysis
    The dollar has been under pressure for much of the past four-months, with price falling back into an eight-month low of late. However, it is worthwhile noting the fact that price has started to pick up steam towards the upside in the lead into this week’s risk events. A break through the 10252 resistance level would signal the beginning of a wider recovery for the pair. However, such a move would likely represent a retracement of the selloff from 10537 should that upside break occur. Nonetheless, it is worthwhile noting the relationship between inflation and the dollar, with further declines in CPI likely to place further pressure on the dollar as long as equities are well supported.
    Source: ProRealTime
  2. MongiIG
    US equity indices kickstart the new trading week on a positive footing, but much remain up in the air as all eyes fall on the US CPI release ahead.
    Source: Bloomberg   Forex Indices Commodities United States Consumer price index Stock market index
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 14 February 2023  Market Recap
    US equity indices kickstart the new trading week on a positive footing, as a pause in Treasury yields’ ascent ahead of the key US Consumer Price Index (CPI) data aided to drive a broad-based recovery, notably in big tech stocks. The energy sector is the only outlier (-0.60%), being forced into negative territory on lower oil prices, as Biden Administration’s plans to sell 26 million barrels of crude oil from its Strategic Petroleum Reserve gave rise to an increased-supplies outlook. The US dollar remained in its ranging pattern despite a 0.6% decline overnight, largely on some wait-and-see for the US CPI to provide any added boost.
    On the economic calendar, the New York Federal Reserve’s (Fed) survey saw US consumers' one-year inflation expectation staying unchanged at 5% in January, while markets were not given a break from hawkish Fedspeak. Fed Governor Michelle Bowman continued to echo for more rate increases overnight but no specifics on peak rate was given. Much will still depend on the upcoming US CPI data to sway market rate expectations. Matching or below-estimate readings could see risk environment improve further (core inflation expected at 5.5% year-over-year (YoY), headline expected at 6.2% YoY), while any upside surprise will see the US dollar rallying higher and equities lower.
    The S&P 500 continues to trade on a series of higher highs and higher lows since October 2022, providing an overall upward bias on the broader trend. On the upside, the 4,200 level will stand as resistance to overcome, where the index failed to break above at the start of the month. Overcoming this level could leave the 4,310 level in sight, where a key 61.8% Fibonacci retracement level resides. On the downside, the key psychological 4,000 level will be in focus as near-term support.
    Source: IG charts  
    Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.66%, ASX +0.35% and KOSPI +0.50% at the time of writing. Sentiments are largely tracking the positive handover from Wall Street overnight, although much is still up in the air, with the upcoming US CPI likely to drive sentiments for the weeks ahead. The Nasdaq Golden Dragon China Index (+2.6%) got a lift overnight as well. The Hang Seng Index is attempting to stabilise after recent profit-taking activities, currently sitting at a 38.2% Fibonacci retracement level at the 20,900 level. A break below an upward trendline provides a mixed view for short-term moves however, with further retracement likely to leave the 19,200 level on watch for any formation of a higher low.
     
    Source: IG charts  
    Economic data this morning left markets with a disappointing fourth-quarter Gross Domestic Product (GDP) data out of Japan, with the preliminary reading coming in below expectations at 0.2% quarter-on-quarter (0.5% consensus). The data is supportive of a lower-for-longer stance from the Bank of Japan (BoJ) and for any tighter shift in policy moves towards the second half of the year, a more gradual transition will likely be on the table. The Nikkei 225 index has seen some downward pressure on the data release but continues to hang just below its 27,650 level of resistance. Any subsequent push above the level could potentially pave the way to retest the 28,400 level next.
    On the watchlist: Silver prices hanging at key $22.00 support ahead of US CPI data
    Silver prices have been struggling to find upside on some resilience in the US dollar lately, following a break below a previous consolidation pattern back in early February. The moving average convergence/divergence (MACD) has also headed into negative territory for the first time since November 2022, potentially reflecting some reversal in momentum to the downside. With the US CPI up ahead, muted moves to start the week reflect some wait-and-see as prices hang at its key $22.00 level of support. Failure to hold above the $22.00 level over the coming days could pave the way to retest the $20.80 level next, where a key 38.2% Fibonacci retracement level resides.
    Source: IG charts  
    Monday: DJIA +1.11%; S&P 500 +1.14%; Nasdaq +1.48%, DAX +0.58%, FTSE +0.83%
  3. MongiIG
    Hang Seng Index was in the red for two consecutive weeks and concluded the first half of February with a more than 7% decline. Is Hang Seng losing it momentum after an eye-widening 50% jump in three months?
    Source: Bloomberg   Indices Hang Seng Index China  
    Hebe Chen | Market Analyst, Melbourne | Publication date: Monday 13 February 2023  Hang Seng Weekly Review

    Hang Seng index has declined by more than 7% in the first two weeks of February after soaring as much as 55% from late October. It appears that, Hong kong’s major index is losing some momentum in the new month after skyrocketing on China's reopening story.
    Caution prevailed as more economic data from China challenged the optimism over China's recovery journey after three-years' "Covid Zero" setup. As such, unlike the rest of the world, China's lower-than-expected inflation print was hardly viewed as good news in the market.

    According to the recently released data, Chinese's consumer price index (CPI) grew at an annualized 2.1%, more than 1.8% in December but below expectations of 2.2%. While the reading reflected the ongoing recovery after the abrupt COVID relaxing, it also indicated that the economic uncertainty was holding consumers back.

    To add to the disappointment, China's Producer Price Index (PPI) contracted by an annual rate of 0.8% in January, which was not only lower than the expected drop of 0.5% but worse than the December reading, suggesting that the manufacturing sector continues to face significant pressure.
    Source: Tradingeconomics In fact, the question over whether China's recovery journey could meet the lofty expectation is poised to be a key discussion for the rest of the month. On March 5th, China will reveal its draft plan on national economic and social development, which will be the first time for China's new leadership team to demonstrate its economic strategy to the rest of the world.

    Although China's economy is anticipated to expand 5% this year, according to IMF's latest projections, versus 3% last year, there won't be a lack of economic challenges for the nation. The vision from China's top policymakers, especially President Xi, will undoubtedly impact the market's confidence in China-related equities broadly.

    Hang Seng Technical Analysis

    From a technical point of view, the Hang Seng index has followed a descending trajectory for the past two weeks. By the end of last week, the price of Hang Seng Index touched on the key support from 50-day MA. This could mean that the declines could take a near-term breather and turn into a brief consolidation in the new week.

    Down below, the September 2022 high of 20484 should slow or stop the further decline. However, a break below that point would open the floor to the critical psychological level at 20000. From the momentum point of view, it appears that the buyers’ appetite has faded substantially as the RSI is moving toward its lowest level since November.
     
    Hang Seng Daily Chart
  4. MongiIG
    A quiet US economic calendar overnight saw major US indices heading lower for the second straight session, as sentiments continue to struggle with the recent blowout jobs report.
    Source: Bloomberg   Forex Indices Commodities United States Gold Federal Reserve
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 07 February 2023  Market Recap
    A quiet US economic calendar overnight saw major US indices heading lower for the second straight session, as sentiments continue to struggle with the recent blowout jobs report. Sector performance revealed a defensive lean, with underperformance in rate-sensitive tech, Tesla (+2.5%) being the sole outlier. Interest rate expectations thus far have remained well-anchored from last Friday, following the hawkish recalibration for peak rate to be at the 5%-5.25% range. That continues to drive a broad-based increase in US Treasury yields overnight, leading to an in-tandem rise in the US dollar index for the third straight session as well. With the US dollar hovering at the upper resistance of its channel pattern at the 103.20 level, any subsequent break towards the 105.00 level could further leave equities on edge. All eyes will be on Federal Reserve (Fed) Chair Jerome Powell’s comments ahead, with the recent strength in the labour market seemingly opening the door for more hawkishness. That said, sticking to his script at the recent Federal Open Market Committee (FOMC) meeting with not too many surprises could see risk sentiments recover, in line with the upward bias presented from the broader trend.
    The 12,900-13,000 level will serve as near term resistance for the Nasdaq 100 index to overcome, where a Fibonacci confluence zone resides. Recent retest of the 12,900 level was met with some profit-taking, but the broader trend remains upward bias, with the more measured follow-through from recent sell-off and the index trading above its 200-day moving average (MA). Any subsequent move above the 13,000 level could pave the way towards the 13,700 level next.
     
    Source: IG charts  
    Asia Open
    Asian stocks look set for a slight positive open, with Nikkei +0.20%, ASX +0.09% and KOSPI +0.28% at the time of writing. Economic data this morning came in mixed for Japan, which saw a promising 4.8% year-on-year increase in average cash earnings for December, but that was not fed into household spending which contracted more than expected (-1.3% versus -0.2% forecast). The Nikkei 225 index largely reacted with muted moves, potentially with some lingering optimism from yesterday, where hopes for lower-for-longer rates surfaced from speculations of Masayoshi Amamiya’s nomination for the next Bank of Japan (BoJ) governor. Chinese equities continue to see some profit-taking, with the Nasdaq Golden Dragon China Index down 1.8% overnight. Concerns of worsening US-China ties on the balloon shoot-down and previous overbought technical conditions could account for the sell-off. Nevertheless, the constant paring of losses in the Nasdaq Golden Dragon China Index overnight may suggest some attempts to stabilise ahead.
    The key risk event ahead will be the Reserve Bank of Australia (RBA) rate decision. The wide consensus is for a 25 basis-point (bp) hike, effectively bringing the cash rate to 3.35%. Recent pull-ahead in Australia’s inflation has challenged hopes of a rate pause, with expectations still very much split on whether peak rate will eventually be at the 3.6% or 3.85% level. Much focus will be on how the RBA will address the recent inflation surprise to guide rate expectations. For the AUD/USD, it has traded below an upward trendline this week, struggling to push back above the 0.690 level. The trendline will serve as near term resistance to overcome for the pair. On the other hand, further downside moves could leave the 0.673 level on watch, where a Fibonacci confluence zone stands.
     
    Source: IG charts  
    On the watchlist: Gold prices attempt to stabilise after recent sell-off but Fedspeak looms
    Following the recent blockbuster US jobs report, more aggressive rate bets have led gold prices to unwind all of its past month’s gains. While there have been some attempts to stabilise into the new week, an upward trendline resistance serves as a key hurdle to overcome for now. Focus will shift to the upcoming Fedspeak, particularly Fed Chair Jerome Powell’s comments up ahead. With the Fed taking on a data-dependent stance to guide its monetary policies, the risks of a hawkish reaction to the recent economic data remains on the table. Buyers may attempt to overcome the trendline resistance once more, failing which may leave the US$1,800 on watch as potential support.
    Source: IG charts  
    Monday: DJIA -0.10%; S&P 500 -0.61%; Nasdaq -1.00%, DAX -0.84%, FTSE -0.82%
  5. MongiIG
    Does the BP share price dip represent a buying opportunity ahead of Q4 results?
    Source: Bloomberg   Indices Shares Commodities BP Share price Price
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 06 February 2023  Is BP still a good investment?
    With the BP share price having risen by around 25% last year on the back of surging oil and gas prices due to the nearly one-year old invasion of Ukraine by Russia, is the stock likely to continue to outperform, now that energy prices have come off significantly over the last few months?
    BP’s fourth quarter (Q4) 2022 results on 07 February 2023 might help investors answer this question. The results are for the fiscal quarter ending December 2022.
    What is ‘The Street’s’ expectation for the Q4 2022 results?
    According to Refinitiv expectations for the upcoming results are as follows:
    Revenue of $45,787 billion : -9.43% year on year (YoY)
    Earnings per share (EPS): $0.23 (+9.5% YoY)
    How to trade BP into the results
    According to Refinitiv, six analysts rate BP as a ‘strong buy’, twelve as a ‘buy’ and eight as a ‘hold’ with a median price target of 550p, some 14% above current levels (as of 3 February 2023).
    Source: Refinitiv
    With the share price mimicking the FTSE 100 year-to-date performance of just under 1%, versus over 6.5% for the STOXX Europe 600, for example, the question is whether the BP share price can replicate its outperformance versus its peers within the FTSE 100 for a third year in a row or whether falling energy prices will hurt its share price.
    The British oil and gas company has changed tack with regards to its green investments at a time when it can maximise profits amid booming demand for fossil fuels and may thus not achieve its long-term ambition to hit net zero by 2050.
    Its CEO, Bernard Looney, wants to “dial back” BP’s investments into clean energy since the returns on renewables, such as wind and solar, have been miniscule when compared to the company’s record profits from fossil fuels, thus keeping shareholders on its side.
    Despite BP’s share price having risen significantly over the past couple of years, how did the world’s 20th largest energy company, behind Shell in ninth, Exxon Mobil in fourth and Saudi Arabian Oil Co in first position, fare versus its larger rivals?
    Google Finance energy companies share price comparison
    Source: Google Finance
    As can be seen from the above chart, BP can hold its head high as it has risen by over 25% from a year ago, slightly ahead of its rival Shell and by considerably more than the world’s largest oil company, Saudi Arabian Oil Co, which remains in negative territory at -2.5%.
    Only Exxon Mobil, which last year reaped a record $55.7bn (£45.2bn) profit, outperformed with its share price rising by 43% since February of 2022.
    What does the technical outlook say about the BP share price?
    When analysing a weekly BP chart going back to 2020, it becomes clear that the share is trading within a clearly defined uptrend channel but has been trading sideways since it made its 504.40 pence October 2022 10-month high, as oil and gas prices have come off their lofty heights.
    Source: Tradingview
    Even if the share price hasn’t gotten anywhere over the past three plus months, the daily chart is still showing a series of higher lows which is encouraging for the bulls.
    Last week the BP share price slid back to but straight away bounced off the 55-day simple moving average (SMA) at 478.30p but now needs to exceed the November-to-February highs at 496.65 to 504.40 on a daily chart closing basis for the bulls to once more take control.
    A rise above 504.40p would engage the 508.45p January 2020 high, followed by the October and November 2019 peaks at 518.50p to 521.50p. These upside targets should remain in view while the BP share price stays above its 455p December low on a daily chart closing basis.
    Above this level, the July-to-February support line can be seen at 474.85p and the late January low at 468.60p. While the latter level underpins, an immediate upside bias should remain in play.
    Source: Tradingview
  6. 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 6 February
    Chris Beauchamp's insight
    After the excitement of last week, things calm down somewhat, but we still have the Reserve Bank of Australia (RBA) meeting, plus Chinese consumer price index (CPI) and UK gross domestic product (GDP). Meanwhile, after the big tech earnings of last week, which were a distinctly mixed bag, this week we have numbers from BP, British American Tobacco, Disney and Uber.
     
    Economic reports
    Weekly view Monday
    3pm – Canada Ivey PMI (January): expected to rise to 34 from 33.4. Markets to watch: CAD crosses
    Tuesday
    3.30am – RBA rate decision: rates expected to rise 20bps to 3.3%. Markets to watch: AUD crosses

    1.30pm – US trade balance (December): deficit to widen to $68.5 billion. Markets to watch: USD crosses
    Wednesday
    3.30pm – US EIA crude oil inventories (w/e 3 February): stockpiles rose by 2.6 million barrels in the preceding week. Markets to watch: Brent, WTI
    Thursday
    1.30pm – US initial jobless claims (w/e 4 February): claims to rise to 189K from 183K. Markets to watch: USD crosses
    Friday
    1.30am – China CPI (January): prices to rise 2% YoY and 0.6% MoM, from 1.8% and 0% respectively. Markets to watch: CNH crosses

    7am – UK GDP (Q4): YoY rate to weaken to -0.1% from 1.9%, and QoQ to rise to 0.1% from -0.3%. Markets to watch: GBP crosses

    1.30pm – Canada unemployment rate (January): expected to rise to 5.2%. Markets to watch: CAD crosses

    3pm – US Michigan consumer confidence index (February): expected to rise to 65 from 64.9. Markets to watch: USD crosses
      Company announcements
     
     
     
    Monday
    6 February
    Tuesday
    7 February
    Wednesday
    8 February
    Thursday
    9 February
    Friday
    10 February
    Full-year earnings
      Micro Focus   Unilever,
    AstraZeneca,
    British American Tobacco   Half/ Quarterly earnings
      BP,
    Hertz,
    Chipotle Barratt,
    SocGen,
    Disney,
    Uber,
    Under Armour Redrow,
    PepsiCo,
    Lyft   Trading update
      SSE Severn Trent Bellway       Dividends
    FTSE 100: None
    FTSE 250: Virgin Money, GCP Infrastructure, Impax, Target Healthcare
    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
    6 February Tuesday
    7 February Wednesday
    8 February Thursday
    9 February Friday
    10 February Monday
    13 February FTSE 100             Australia 200   0.1 0.5     2.3 Wall Street     13.8 1.5   14.0 US 500 0.07 0.13 0.63 0.84 0.63 0.50 Nasdaq   0.38 1.04 2.46 0.09 1.26 Netherlands 25     1.01       EU Stocks 50       4.2     China H-Shares             Singapore Blue Chip 0.06 0.29 0.27       Hong Kong HS50             South Africa 40             Italy 40             Japan 225             * Dividend adjustments due to be posted on a bank holiday will usually be posted on the previous working day
  7. MongiIG
    US equity indices managed to find their way higher in the aftermath of the Fed meeting, but were challenged by upside surprises in the US labour market and services sector activities to end last week.
    Source: Bloomberg   Forex Indices United States United States dollar Federal Reserve Bank of Japan
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Monday 06 February 2023  Market Recap
    US equity indices managed to find their way higher in the aftermath of the Federal Reserve (Fed) meeting, but were challenged by upside surprises in the US labour market and services sector activities to end last week. The US January non-farm payroll delivered a shocking read (517,000 versus 185,000 consensus), with unemployment rate heading to 3.4% compared to an expected increase to 3.6%. The US Institute for Supply Management (ISM) services Purchasing Managers' Index (PMI) also pulled way past expectations at 55.2 (50.4 forecast), with notably, the surprise turnaround in new orders (60.4 from previous 45.2). Both data suggested that economic conditions are still resilient to weather more rate hikes from the Fed, with the narrative fuelling a lean in interest rate expectations above 5%. Two more 25 basis-point hikes from the Fed are now the consensus, pushing back the timeline for a potential rate pause to May 2023.
    The US dollar index found renewed strength (+1.1%) from the more aggressive rate bets, with the US two-year yields jumping 20 basis-point to 4.3%. The 10-year yields are also up 13 basis-point points, seemingly finding support from its 200-day moving average (MA). Any further uptick in yields could see the US dollar pushing higher while rate-sensitive growth stocks heading lower. That said, previous attempts for the US dollar to bounce have been short-lived, with the downward trend raising the odds for the formation of a lower high. The S&P 500 is taking a breather off the 4,200 level of resistance, with the failure for VIX to move higher last Friday still pointing to some resilience in the risk environment. Any near term close below last Thursday’s candle may prompt further downside, but with the ongoing upward bias, any formation of a higher low could still be on the lookout.
     
    Source: IG charts  
    Asia Open
    Asian stocks look set for a mixed open, with Nikkei +0.80%, ASX -0.16% and KOSPI -0.96% at the time of writing. Reports suggesting that Bank of Japan (BoJ) Deputy Governor Masayoshi Amamiya has been sounded out to be the upcoming central bank governor has seen the USD/JPY heading to 132.30 this morning. With his involvement in the current accommodative policies from the BoJ, his nomination may be perceived to support dovish expectations. The Nikkei 225 index is finding strength on potentially lower-for-longer rate, diverging from the rest of the region which is otherwise facing some pressure from the stronger dollar. With the USD/JPY having traded within a falling channel pattern since November 2022, the confluence of a weaker yen and a surprise turnaround in the US dollar seems to prompt a break above the channel, with the 130.80 level of resistance giving way last week. Further upmove could leave the 134.50 level on watch next.
    Source: IG charts  
    Chinese equities continue to see some profit-taking to end last week, with the Hang Seng Index retracing 5.3% thus far from its 11-month high. The shooting down of a Chinese surveillance balloon by the US has further put US-China relations on the line, potentially bringing some caution on how China may react further. That said, any move to escalate further could still seem off the table for now, as China’s economic conditions are just starting to pick up but the complicated political ties between both superpowers seem to be one to drag on for longer.
    On the watchlist: Silver prices broke below previous consolidation pattern
    Renewed strength in the US dollar following the robust US non-farm payroll data has prompted a 5.6% plunge in silver prices last Friday. Having largely traded in consolidation between two Fibonacci levels since mid-December last year, recent downside marked a break below the lower support base at US$22.90. The Moving Average Convergence/Divergence (MACD) has also cut into negative territory, potentially signalling a switch to downside momentum. The US$22.00 level is on watch next, with any break below US$22.00 paving the way to retest the US$20.80 level, where a 38.2% Fibonacci retracement stands alongside its 200-day MA.
     
    Source: IG charts  
    Friday: DJIA -0.38%; S&P 500 -1.04%; Nasdaq -1.59%, DAX -0.21%, FTSE +1.04%
  8. MongiIG
    The three local banks are set to report their Q4 2022 earnings in February 2023, with DBS leading the pack.
    Source: Bloomberg   Shares DBS Bank Bank Loan Singapore Interest
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 03 February 2023  Source: Refinitiv  
    The three local banks are set to report their quarter four (Q4) 2022 earnings in February 2023, with DBS leading the pack. Year-to-date performance has seen DBS (5.5%) and OCBC (6.2%) largely trading in line with the Straits Times Index to kickstart the new trading year, with UOB seemingly the underperformer (-3.0%). That said, UOB’s underperformance comes on the back of stronger gains since October 2022, partially accounting for the recent divergence in performance with its peers. Much will depend on the upcoming earnings releases to determine if a retest of their respective 2022 highs can be in sight.
     
    Source: Refinitiv Source: Refinitiv  
    Another quarter of heavy-lifting by interest income but will momentum taper ahead?
    In Q4 2022, the US Federal Reserve has raised rates by 125 basis-points (bp) overall. Taking the cue from an in-tandem rise in Singapore’s three-month SORA and SIBOR, our local banks could be on track to enjoy another quarter of expansion in net interest margins (NIM). Previous guidance from our local banks has laid the ground for their net interest income (NII) portion to benefit from the rising interest rate environment, with DBS the clear forerunner in being the most sensitive to rate increases.
    That said, the Fed Funds futures markets are pricing for at most one more 25 bp hike in March this year before the Federal Reserve (Fed) keep rates on hold, suggesting that the rate hike cycle is likely coming to an end. That could bring about an upcoming moderation in growth momentum through 2023, further pressured by an upward revision in funding costs.
     
    Source: The Association of Banks in Singapore (ABS), Monetary Authority of Singapore (MAS)  
    Moderation in loan demand playing out in Q4 2022
    Based on Singapore’s bank lending data, the demand for loans and advances has shown a clear moderation in Q4 2022 as businesses and consumers adjusted to higher lending costs. The October-December period has marked three consecutive quarters of month-on-month declines and while the latter half of the quarter saw a lesser extent of contraction, the uncertain global economic outlook could still bring the risks of further moderation in loan demand. China’s reopening narrative may be looked upon to provide some cushion, but recovery on that front may be more gradual than swift.
     
    Source: Refinitiv  
    As of quarter three (Q3) 2022, non-performing loan (NPL) ratio for all three banks have reflected some resilience with a concurrent downtick from the previous quarter (DBS, OCBC at 1.2%, UOB at 1.5%). Any rise in NPL ratio will remain on watch as higher debt costs continue to challenge economic conditions in the period measured. This could bring about a higher-than-expected rise in loan losses provision, which could come at an expense of reported earnings. The pocket of optimism is that our local banks have been prudent in reversing any provisions since the Covid-19 pandemic, leading to more limited build-ups required ahead.
     
    Source: DBS, OCBC, UOB  
    Non-interest income likely to stay muted for now
    Still-cautious risk environment in Q4 2022 could drive muted interest in wealth management products but potential for recovery is presented in 2023, as sentiments has improved since January. For now, the VIX has struggled to stay above the key 20 level, which points towards optimism in the US markets. On another note, China’s reopening shift has also lifted confidence across the region, with the strong consensus that the worst is over. However, this will have to be balanced with a sharp slowdown in consumer spending and hence, spending in card fees. The banks’ outlook will once again be in focus here. Previous quarter’s releases were still met with signs of optimism in management’s outlook commentaries, with one to watch if similar optimism can likewise be presented in the upcoming results.
    SGX institutional fund flow data saw slight paring of exposure over past month
    The SGX fund flow data has revealed consistent net institutional inflows into the financial sector since July 2022, but inflows have since taken a pause in recent months. This seems to point to some slight paring of exposure into the upcoming earnings, coupled with the aftermath of the recent Federal Open Market Committee (FOMC) meeting prompting a sell-off in the local banks on softer rate hike bets. Current dividend yield for all three banks is hovering around the 4.1%-4.4% range, which could find traction as a dividend play on further downside, as Singapore’s 10-year risk-free rate has moderated from its October peak to hover around 2.9%.
     
    Source: SGX, IG  
    DBS share price: Technical analysis
    Following a brief period of consolidation, DBS share price has failed to move past the S$36.00 level in the aftermath of the recent FOMC meeting. The higher lows since its July 2022 bottom could still point to an overall upward bias for now, but a retest of the S$34.45 level could have to see some defending. This level is where an upward trendline support stands in coincidence with a key 61.8% Fibonacci retracement. Its 100-day moving average (MA) is also on close watch, having supported prices on two occasions since December 2022.
     
    Source: IG charts  
    OCBC share price: Technical analysis
    Likewise, OCBC share price is facing strong resistance at the key S$13.00 level, where a 76.4% Fibonacci retracement level resides. Moderation in the Relative Strength Index (RSI) from previous overbought region to more neutral levels may raise the odds of further retracement, along with the risks of a potential bearish crossover in its moving average convergence/divergence (MACD). That could leave the S$12.60 level on watch as the next line of support, in line with a 61.8% Fibonacci retracement.
     
    Source: IG charts  
    UOB share price: Technical analysis
    For UOB share price, a period of consolidation since November 2022 was marked with a downward break, which points to sellers potentially regaining control after its 21% surge in late-October. Recent downside seems to reveal the formation of a new lower high as share price is struggling to stay above the S$29.60 level for now. This level marks a 50% Fibonacci retracement. Failure to sustain above S$29.60 could pave the way for a new lower low as a reiteration of its near-term bearish bias and leave the S$28.70 level on watch next.
     
    Source: IG charts
  9. MongiIG

    Uber Q4 2022 earnings

    By MongiIG,


    Market News
    Uber is scheduled to report its fourth quarter (Q4) earnings after the market closes on Wednesday, the 8th of February, 2023.
      Source: Bloomberg
      Indices Shares Uber Earnings before interest, taxes, depreciation and amortization Revenue Technical analysis
     Tony Sycamore | Market Analyst, Australia | Publication date: Friday 03 February 2023  When will Uber report its latest earnings?
    Uber is scheduled to report its fourth quarter (Q4) earnings after the market closes on Wednesday, the 8th of February, 2023.
    What should traders look out for?
    In Q3 of 2022, Uber recorded a net loss of $1.2 billion, $512 million of which was attributed to revaluations of Uber’s equity investments. The company beat analysts’ estimate for revenue, which grew by 72% year over year to $8.3 billion, and reported adjusted EBITA of $516 million, exceeding its guidance of $440 - $470 million.
    Uber CEO Dara Khosrowshahi noted that behind the strong performance, several tailwinds were in place, including “cities reopening, travel booming, and, more broadly, a continued shift of consumer spending from retail to services.”
    With those trends expected to continue, Khosrowshahi provided upbeat guidance for Q4 and said he expected gross bookings to grow in Q4 by between 23% and 27% year over year (YoY) and an adjusted EBITA of $600 million to $630 million.
    How does Uber measure its performance?
    Uber has three main operating segments under which the company then measures its performance via the following metrics. Gross Bookings, Revenues and Adjusted EBITDA, all of which will be scrutinised for growth when the company reports.
    The Mobility segment is Ubers flagship ride-hailing business which connects consumers with drivers. In Q3, Revenues grew by 73% to $3.8 billion YoY for an Adjusted EBITA of $898 million.
    The Delivery segment provides a platform for consumers to search for food and either pick up the meal at the restaurant or have it delivered. In Q3, Revenues from this segment grew 24% YoY to $2.8 billion for an Adjusted EBITA of $181 million.
    The Freight segment connects carriers with shippers on the Uber platform and provides upfront and transparent pricing. In Q3, Revenues grew 336% YoY for an Adjusted EBITA of $1 million.
     
     
    Drilling down further the market will also be looking closely for:
    An increase in the number of monthly active platform users (which grew by 14% YoY to 124 million in Q3) An increase in the number of trips (which increased by 19% YoY to 1.95 billion trips in Q3) The trend of drivers returning to drive for Uber continues. An estimated 80% of the drivers who left the service during the pandemic have returned Uber One subscription adoption levels.  
     
    Uber Q4 earnings – what to expect
    Revenue: $8.47 billion vs $8.34 (Q3 2022) EPS: -$0.18c vs $-0.61c (Q3 2022) EBITA: - $614m vs $516m (Q3 2022)  
    Uber sales revenue chart
      Source: Trading Economics
    Uber shares technical analysis
    The share price of Uber fell almost 70% from the $64.05 high it traded to in February 2021 to a low of $19.90 in June 2022, the equivalent of $60 billion in shareholder capital being wiped.
    Uber weekly chart
      Source: TradingView
    Uber has experienced better fortunes in 2023, as the share price surged by almost 27% above the downtrend from September's $34.33 high. A performance that left the Nasdaq's 10.62% in its wake.
    Presuming Uber breaks higher above the downtrend can be sustained in the coming sessions, it allows for a test of the September $34.33 high before the $37.45 high of March 2022.
    Mindful that a sustained break above a band of resistance at $37.45/$38.10 is needed to suggest that the rally from the June 2022 low of $19.90 is impulsive rather than a bear market rally.
    Should Uber's share price fall back below the 200-day moving average, currently at $27.05, it would be an initial indication that the corrective rally is complete and that the downtrend has resumed.
    Uber daily chart
      Source: TradingView
    Summary
    Uber is scheduled to report its fourth quarter (Q4) earnings after the market closes on Wednesday, the 8th of February, 2023.
    The market will be keen to see evidence of volume expansion in the metrics noted above, as well as guidance that the company can continue to grow despite the presence of higher interest rates and slower growth and a more competitive market place.
    Uber daily chart
      Source: TradingView
    Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.
  10. MongiIG
    Friday’s US jobs report could bring further downside for payrolls, with average earnings also expected to decline
    Source: Bloomberg   Unemployment Federal Reserve United States Inflation Employment Payroll
     Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 02 February 2023  The December US jobs report is due to be released at 1.30pm, on Friday 3 January (UK time). Coming at the tail end of a week that will have seen monetary policy decisions from the Federal Reserve, European Central Bank, and the Bank of England, this latest report provides the basis on which markets can gauge the direction of travel for the US jobs market and economy. Recent market optimism comes amid heightened hopes of a so-called ‘soft landing’ for the US market, with investors hoping that consumers and businesses manage to take the recently elevated interest rates in their stride.
    From a market reaction perspective, there are two areas to focus on. Firstly, the average earnings figure provides a proxy for potential inflation pressures, with any notable uptick in wages bringing fear that the Federal Reserve will have to keep rates higher for longer. However, that would likely strengthen the dollar which has been losing traction in part on the prospect of a swifter dovish pivot than some had previously speculated might be the case. Elsewhere, look out for the payrolls and unemployment figures, with the ability to stave off any particularly notable deterioration on those fronts bringing optimism that a soft landing is indeed upon us. However, the caveat to that is the fact that a strong jobs market brings less pressure on the Fed to cut rates as soon as possible. It is within those boundaries that traders can view Friday’s release.
    What do other employment surveys tell us?
    It is often useful to look out for clues within alternate employment readings. That can come from several sources, including the ADP, Conference board, Department of Labour, and ADP.
    Conference board survey – The latest CB consumer confidence survey saw a strength over the current outlook, but deterioration over the six-month outlook. Within that survey, we saw the number of respondents claiming that jobs were ‘plentiful’ rise from 46.4% to 48.2%. Meanwhile, the number of replies stating that jobs were ‘hard to find’ fell back to 11.3%. This helped widen the gap between the two, which eases fears of an uptick in unemployment. Markets are currently expecting a move from 3.5% to 3.6% unemployment.
    JOLTS job openings – The latest JOLTS job openings data (December) portrayed a very similar message, with the latest figure reversing upwards to 11.01 million. That looks to be bringing an end to the declines seen since the March 2022 peak. However, it is worthwhile noting that layoffs and discharges did rise to a one-year low in December.
    ISM Manufacturing PMI – This week we are devoid of the crucial services PMI reading which is released after the jobs report. The ISM manufacturing PMI employment segment did decline, but remains in positive territory. Nonetheless, this is of less value given that the majority of the jobs being created are in the services sector currently.
    ADP payrolls – The latest ADP payrolls data brought greater concerns for economists, with the figure of 106k coming in well below estimates. That number represents the worst ADP payrolls survey in 10-months. With the ADP calculation having been adjusted, we can see below that there appears to be a closer correlation with the headline figure. Over the course of the past six-months, the average ADP miss has been 44k. To put this in context, the previous six-months missed by an average of 160k. With this in mind, the disappointing 106k ADP figure does highlight a likely figure below the current market expectations of 190k.
    Non-farm Payrolls
    Friday’s headline non-farm payrolls figure is forecast to fall below the 200k mark for the first time since December 2021, with markets expecting a figure of 190k. The table below highlights how the top five ranked respondents actually predicted figures well above the 200k mark. Whether the ADP release would have changed their view remains to be seen.
    Source: Eikon Taking a look at the breakdown of where jobs have been made and lost, it is notable that the trade, transportation, and utilities segment has been contracting twice out of the past four months. Government jobs shrank significantly last month, while Education/health, and leisure/hospitality remain the backbone of jobs growth of late.
    Unemployment
    As previously mentioned, unemployment is forecast to rise back to 3.6%, remaining within the 3.5%-3.7% range that has dominated for the past 10-months. Thus, unless we see a break from that range, a tick higher would not necessarily spark too much concern for markets.
    US average hourly earnings
    US average hourly earnings have become increasingly important over the course of this crisis, with traders providing a clear association between wages and inflation. Fortunately, we have seen this gauge decline over the course of the past year, although the relatively pedestrian pace of the move means that the differential between CPI and AHE has tightened to the lowest level in over a year. That is a positive development when considering the collapse in real earnings seen in 2022. Nonetheless, the Fed will hope that average hourly earnings will continue to decline to avoid a wage-price spiral that forces businesses to up prices in bid to address rising costs.
    Dollar index technical analysis
    The dollar has been hit hard over the course of the week, with the FOMC meeting bringing yet another decline for the greenback. The move through 101.10 has brought about a fresh nine-month low, despite the Fed’s insistence that they could yet raise rates further to bring down inflation. That decline brings yet another bearish continuation signal for the dollar. With that in mind, further downside looks likely unless we see price rise through the 102.26 swing-high.
    Source: ProRealTime Nasdaq technical analysis
    The Nasdaq has managed to push sharply higher this week, bringing a fourth consecutive week of gains for the index. The weekly chart below highlights the potential for Fibonacci resistance up ahead, highlighting the need to watch price action around the key 12465 and 12945 levels.
    Source: ProRealTime On the intraday charts, we can see a clear pattern of higher highs and lows. The ability to maintain that pattern is key here, with a bullish outlook remaining in play unless we see a move back below 11816.
    Source: ProRealTime
  11. MongiIG
    Hawkish reaffirmations from the Fed were met with rising doubts from the markets, as the US dollar index reacted to softer rate hike bets with a break below the 101.30 level.
    Source: Bloomberg   Forex Indices Federal Open Market Committee Federal Reserve United States dollar EUR/USD
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 02 February 2023  Market Recap
    As expected, the latest Federal Open Market Committee (FOMC) meeting concluded with a 25 basis-point hike to the 4.5%-4.75% range, which was fully priced by markets and seen as a no-surprise. Greater focus was placed on other wordings in the FOMC statement and the press conference. From the statement, the Federal Reserve (Fed) has left the door open for further rate hikes by maintaining that the Committee anticipates ‘ongoing increases’ in rate hikes. This was echoed by Fed Chair Jerome Powell in the press conference, who suggested ‘couple more hikes’, while acknowledging that the economy is slowing but labour market remains tight and inflation is still too high. However, those hawkish reaffirmations from the Fed were met with rising doubts from the markets, which saw a dovish takeaway from Jerome Powell’s acknowledgement of progress in the ‘disinflationary process’ and that he is not worried about loosening financial conditions. Following that, terminal rate hike bets leaned further into the 4.75-5% range, with markets starting to price for 50 basis-point rate cuts in 2023 as opposed to previous 25 basis-point.
    The US dollar index reacted accordingly to the softer rate hike bets, with a break below the 101.30 level after a brief period of consolidation. The formation of a new lower low reiterates its ongoing downward trend and seemingly setting its sight on the 99.00 level next, where a key 61.8% Fibonacci retracement level resides. US Treasury yields fell across the board, driving the outperformance for the rate-sensitive Nasdaq (+2.0%) overnight. After-market moves in the Nasdaq found further validation from Meta Platforms’ fourth quarter (4Q) results release, which pushed back against concerns of stalling growth with a 5% growth in family daily active people (DAP). Guidance of lower-than-before expenses in 2023 and a US$40 billion increase in share repurchase authorisation also lifted sentiments, sending its share price surging 19% after-market.
     
    Source: IG charts  
    Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.20%, ASX +0.40% and KOSPI +1.00% at the time of writing. Following a wild ride in Wall Street overnight, the strong positive close in major US indices reflected equity bulls retaining control, which could set the stage for some relief in the Asia session as well. That said, much of the overnight traction seems to revolve around growth sectors, while value stocks saw more measured upside (DJIA +0.02%). That may prompt a more lukewarm reaction in the Asia session, with heavier exposure to value-driven sectors. The energy sector could also come under some pressure in today’s session, following the negative sector performance in US overnight (-1.9%) as oil prices failed to find traction despite the turnaround in risk sentiments.
    After a falling channel pattern in the USD/JPY was threatened with a period of indecision over the past week, the conclusion of the FOMC meeting provided the much-needed clarity to guide the pair back on its downward trend. The 130.80 level of resistance has succeeded in keeping the pair down thus far, with the bearish-bias from a new lower high paving the way for a retest of the 126.84 level next. Stronger near term support may come from the 123.50 level, where a key 76.4% Fibonacci retracement level stands in coincidence with the lower channel trendline.
     
    Source: IG charts  
    On the watchlist: EUR/USD formed a new higher high following latest FOMC meeting
    Following the latest FOMC meeting, the EUR/USD has pushed to a new higher high on US dollar weakness, as market participants found tints of dovishness in Fed Chair Jerome Powell’s comments. The further downshift in rate hikes from the Fed also run in contrast to the European Central Bank (ECB), which markets have priced for 150 basis-point of hikes by June this year. The ECB meeting will be up later today, with recent persistence in core inflation rate (5.2% versus 5.1% consensus) likely to deliver another round of hawkish affirmation, although headline reading has showed signs of easing. For now, the EUR/USD is attempting a break above a rising channel pattern and may set its sight on the 1.120 level next.
    Source: IG charts  
    Wednesday: DJIA +0.02%; S&P 500 +1.05%; Nasdaq +2.00%, DAX +0.35%, FTSE -0.14%
  12. MongiIG
    With the FOMC meeting underway, the release of US economic data overnight has supported market hopes of potentially seeing the Fed easing up on its rate hike path.
    Source: Bloomberg   Forex Indices Federal Reserve Inflation Federal Open Market Committee United States dollar  
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 01 February 2023  Market Recap
    With the Federal Open Market Committee (FOMC) meeting underway, the release of US economic data overnight has supported market hopes of potentially seeing the Federal Reserve (Fed) easing up on its rate hike path. The US quarter four (Q4) employment cost index, which the Fed watches closely for signs of wage inflation, provided a slight downside surprise (1.0% versus 1.1% expected) and added to the list of recent inflation indicators pointing to moderating pricing pressures. Other economic data releases also showed that the US housing market and consumer confidence are reacting to the series of aggressive rate hikes enacted by the Fed thus far, which may be in line with what the central bank wants to see to keep inflation under check. Surge in mortgage rates resulted in a sharp drop in home buyer demand, while US consumer confidence in January fell more than expected (107.1 versus 109 expected). Now, all eyes will be up to the Fed to confirm recent market optimism, which could see central bankers staying firm on keeping inflation down but continue to emphasise on a data-dependent stance in making future rate decisions.
    Initial upmove in the US dollar was met with some paring of gains, but continue to hold above its 101.30 level of support thus far. Greater reaction could be in gold prices, which saw heavy dip-buying to form a bullish pin bar. The improved risk sentiments were also brought on by positive earnings and corporate guidance, such as General Motors, Exxon Mobil, UPS and Spotify just to name a few. With some dip-buying seen last night for the Nasdaq 100 index, the 12,200 level continues to be eyed for a break. The index continues to defend its 200-day moving average (MA) after breaking above it for the first time since January 2022. Any move above the 12,200 level could leave the 13,000 level on watch next.
     
    Source: IG charts
    Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.62%, ASX +0.60% and KOSPI +0.74% at the time of writing. Risk sentiments in the region could tap on the positive handover from Wall Street but upside could still be somewhat contained with a lingering tone of caution ahead of the US FOMC meeting outcome. The Nasdaq Golden Dragon China Index eked out a muted close (-0.14%) overnight while US equity futures this morning are slightly down. Economic data releases this morning displayed an uptick in New Zealand’s unemployment rate to 3.4% from previous 3.3%, but still-resilient reading continues to support a 50 basis-point hike in February before subsequent downshifts. On another note, South Korea’s exports in January provided another sign of a quicker moderation in global economic conditions, contracting far quicker than expected at 16.6% (-11.3% consensus). Nevertheless, losses in reaction to the softer data has been overcome by market optimism for central banks to ease on their rate hikes ahead, with the KOSPI sitting above its 200-day MA for the first time since September 2021.
    The Straits Times Index continues to defend its 3,370 level for now, which marks a key 76.4% Fibonacci retracement level. Staying above this level could set its sight on the 3,490 level next, which seemingly marks a double-top pattern back in early-2022. On a longer-term timeframe, the 3,490 level also points to a peak in 2015 and 2018 on the monthly chart, leaving it as a key resistance to overcome ahead.
     
    Source: IG charts  
    On the watchlist: USD/CAD failed to reclaim upward trendline
    An attempt for the USD/CAD to move back above an upward trendline resistance this week was met with a strong bearish rejection as earlier gains were erased sharply. The downside reaction in the pair followed after the concurrent release of Canada’s GDP reading and further moderation in US employment cost pressures presented in Q4 (1% versus previous 1.3%). Some renewed gain in oil prices likely played a part as well to deliver some downward pressure, along with the improved risk environment overnight. Failure to reclaim the upward trendline could provide a bearish bias for the USD/CAD, which may leave the 1.322 level on watch next. This marks its November low, where a key 38.2% Fibonacci retracement level resides. Resistance remains at the 1.350 level.
     
    Source: IG charts  
    Tuesday: DJIA +1.09%; S&P 500 +1.46%; Nasdaq +1.67%, DAX +0.01%, FTSE -0.17%
  13. MongiIG
    Meta will announce the company's Q4 and FY 2022 financial results after the market close on 1 February 2023. As Meta has transformed to a speculative turnaround bet, is it time to pay for Mark Zuckerberg’s expensive dream?
    Source: Bloomberg   City Motion Shares Meta Platforms Expense Investor Price
    Hebe Chen | Market Analyst, Australia | Publication date: Tuesday 31 January 2023  Meta earnings date
    Meta Platforms (NASDAQ: META) will announce the company's fourth quarter (Q4) and full-year 2022 financial results after the market close on Wednesday, 1 February 2023.
    Meta earnings expectation
    Meta's forecasted earnings per share (EPS) for the quarter is $2.12, a 42% decline from the same quarter in the previous year but a 29% improvement from the third quarter (Q3).
      Source: Meta
    Meta earnings key watch
    Revenue and Cost
    According to Meta’s forward guidance in October, the company expected the Q4’s total revenue would be in the range of $30-$32.5 billion, while Wall Street expected the actual number would be close to the lower end, around $31 billion, an approximately 7% to 10% decline from the same quarter in 2022.
    Meta’s core business, online advertising, which generates 98% of Facebook’s revenues, is struggling. In Q3, the average price per ad plummeted by 18% year-over-year despite the ad impressions delivered across Meta’s apps increasing by 17%.
    On the other hand, Meta’s costs and expenses are surging.
    Total costs and expenses in Q3 were $22.05 billion, an increase of 19% year-over-year. Even worse, the money spent in Q4 and the new year are expected to go higher. As its chief financial officer (CFO) mentioned in the Q3 report, there will be an estimated $900 million additional charges in Q4 and a further $2 billion in 2023 related to consolidating office facilities footprint.
    To offset the mounting bills, Meta laid off over 11,000 employees in early November, reducing its workforce by 13% and announcing a hiring freeze through Q1 2023. But even so, its stuff headcount at the end of 2023 will only down to the same level as Q3 2022.
      Source: Meta
     
    Expensive commitments
    Aside from subdued user growth and rising competition in the digital ad business, investor’s predominant concern is the company’s long-term growth capability.
    To address these concerns, Meta has committed to the ‘future-focus areas’ since 2021, such as artificial intelligence (AI) infrastructure and Reality Labs investments, which cost more than 3.6 billion dollars in the previous quarter and are likely to continue burning money in 2023. As Meta’s CFO confessed recently: ‘An increase in AI capacity is driving substantially all of our capital expenditure growth in 2023’.
    Therefore, in the upcoming earnings meeting, the Meta platform has to try very hard to convince shareholders that these ‘forward-looking’ business units can emerge as Meta’s profit powerhouse in the ‘not-too-far-away’ future.
      Source: Meta
    Meta share price
    Meta suffered its worst yearly decline last year and lost over $450 billion of its market cap, which placed Meta among the ten worst-performing S&P 500 stocks in the past calendar year.
    From the first trading session in the new calendar, Meta’s price has gained 34% and now climbed to the highest level in four months. According to the daily chart, the price of Meta has reached a critical point where a pack of resistance is just around the corner—the 200-day moving average (MA) and the previous massive support level at $154 are all the hurdles to clear. On the flip side, any slip can expect strong support from around $138, where the March 2020 low sits, before touching the lower boundary for the current moving trajectory and the 100-day MA.
      Source: IG charts
    Meta earnings summary
    Even with its recent cost-cutting measures and the company’s demonstrated confidence in growing its community base, it’s not easy for investors to neglect that the losses in its ‘future-focused’ division are mounting and yet to see the light at the end of the tunnel. Hence, as Meta has transformed from a superior growth stock to a speculative turnaround bet, the question is, will investors keep paying for Mark Zuckerberg’s expensive dream?

  14. MongiIG
    Find out what to expect from AMD’s earnings results, how they will affect AMD share price, and how to trade AMD’s shares.
      Source: Bloomberg
      Shares Advanced Micro Devices Intel Price–earnings ratio Nvidia Graphics card
    Monte Safieddine | Market analyst, Dubai | Publication date: Tuesday 24 January 2023  When are AMD’s results expected?
    AMD is expected to release its Q4 earnings on Tuesday, January 31st.
    AMD share price: forecasts from Q4 results
    And those long AMD’s shares will be hoping that even if it misses both earnings and estimates as it did in its third quarter release, it can still enjoy a rise in prices, though the blow was cushioned by preliminary third-quarter results weeks prior that had already warned of lagged guidance. There was optimism about cloud revenue and server chips, but there’s no taking away what’s been happening on the PC side of the business.
    In turn, expect focus to be on how the PC market demand is faring after weakness there “and significant inventory corrections across the PC supply chain” were cited as reasons it couldn’t match earlier guidance, even if dull fourth quarter demand for computers is something its CEO says they’ve already been prepping for, especially if a part of its offering is seen as more discretionary (gaming) than necessary within that sphere, and at a time when demand from cryptocurrency miners is expected to remain sedate.
    Semiconductor prices (PHLX Semiconductor Index) finished the quarter a bit higher after brief lows in October and higher highs in November and early to mid-December.
    Their new line of data centre ‘Genoa’ chips was launched in November, and the release of its high-end graphics cards late last quarter, this at a time when high-end cards are unlikely to sell as fast in the current inflationary climate, with expectations late this year or early next year will fare better. Rival Intel released its own line of the latter, so it’s also a matter of how AMD has managed to keep up against both it and Nvidia. The extent to which Intel has been able to respond will be noted when it releases its figures this Thursday.
    In all, expectations are we’ll see earnings per share (EPS) reading of $0.67 matching the final figure for the third quarter, and revenue a tad lower quarter-on-quarter but still within the $5.5 billlion handle (source: Refinitiv). As for analyst recommendations, while there’s quite a number on hold (10), it’s a clear majority when looking at combined buy (18) and strong buy (12) recommendations and in all more optimistic than semiconductors overall where it’s also net majority buy.
    The average price target amongst them stands at $91.01, far higher than where its share price currently resides (source: Refinitiv). Both AMD and (more so) rival Nvidia continue to trade at forward price-to-earnings ratios (P/E) above the industry average.
    AMD weekly chart with key technical indicators
      Source: IG
    Trading AMD’s Q4 results: technical overview and trading strategies
    From a technical standpoint, prices have moved above their weekly short-term moving averages (MA), but have yet to cross their long-term MA’s with the 200-week not that far off. It recently pulled out of its longer-term bear trend channel (red shaded in the image above) the start of which was off its highs in November of 2021 as the tech sector suffered heavily in 2022, and the lift-off of last October’s lows (after its preliminary third-quarter earnings release hit the wires) consolidatory with slight positive technical bias.
    The daily time frame is showing a bit more positive technical bias though we’ve had a strong movement for the tech sector outperforming in general for over a week now. Prices are near the upper end of its daily Bollinger Band, and when it comes to its DMI (Directional Movement Index) showing a small positive margin between +DI and -DI.
    Zooming out to the weekly time frame however, it still has quite a bit of climbing to do to tilt a few key technical indicators, with a -DI still above its +DI thus far, and an ADX (Average Directional Index) reading no longer in trending territory.
    Summing up the overview on the longer-term weekly time frame and it’s a weak bear average where prices have managed to recover at times and oscillations weakening some indicators, but we're getting out of its bear channel meaning it’ll need less to shift to a more consolidatory overview provided the intraweek moves remain relatively contained.
    What it also means from a strategic standpoint is that conformist strategies are sell and contrarians buy, but with far more caution for the former when it comes to selling off its weekly 1st Resistance level, doing so only after a significant reversal if it comes to pass.
    Those expecting upside bias and further risk-on or especially ‘buy-everything’ moves can entertain contrarian buy-breakouts off the weekly 1st Resistance level or buy-after-reversals after its 1st Support, and more so for those expecting the worst with regards to its bear overview has passed.
    A reminder that when it comes to fundamental events – chief amongst them earnings – that technicals will hold less relevance and levels are far less likely to hold once the figures are released, last time around its share prices rose as much as 6% when third quarter numbers hit the wires at the beginning of October.
    IG Client sentiment* and short interest for AMD shares
    In what is usually the case with most single stocks, the bias was and remains extreme amongst for retail traders, at 92% near the beginning of this month and since then rising further to 95% as of the start of this week.
    As for short interest, it’s been hovering largely within the 30m-40m range since March of last year, with the latest reading 32.3m shares that represent 2% of shares, a slightly higher percentage than most of its larger rivals (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 today morning 9am for the outer circle. Inner circle is from the 5th of January 2023.
  15. MongiIG
    The lead-up to the FOMC meeting has driven some de-risking to start the week, with US equity indices closing sharply lower while the 7.7% surge in VIX points to increased hedging activities.
    Source: Bloomberg   Forex Indices Commodities MACD Market trend Gold
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 31 January 2023  Market Recap
    The lead-up to the Federal Open Market Committee (FOMC) meeting has driven some de-risking to start the week, with US equity indices closing sharply lower (DJIA -0.77%; S&P 500 -1.30%; Nasdaq -1.96%) while the 7.7% surge in VIX points to increased hedging activities. Sector performance displayed a defensive lean, with consumer staples being the only sector to eke out a slight positive gain (+0.07%). On the other hand, big tech firms underperformed, with some shunning ahead of key earnings releases from the likes of Apple, Alphabet, Amazon and Meta Platforms this week. To top it off, the semiconductor industry was dragged down by a report indicating further decline in memory chip prices in first half of this year, while energy companies also tracked oil prices lower.
    Some positioning for a hawkish takeaway from the Federeal Reserve (Fed) could be in place, with the US dollar rising 0.4% and stabilising above a key support at the 101.30 level for now. US Treasury yields also saw a broad-based move higher overnight. Gold prices were largely in consolidation mode, tracking the muted moves in the US dollar index. The bearish crossover on moving average convergence/divergence (MACD) and reversion in Relative Strengtth Index (RSI) from overbought region points towards moderating upward momentum for now, largely on hold for a clearer direction from the upcoming FOMC meeting. Near term support may stand at the 1,895 level, where a 61.8% Fibonacci retracement level resides.
    Source: IG charts  
    Asia Open
    Asian stocks look set for a muted open, with Nikkei +0.02%, ASX +0.28% and KOSPI +0.23% at the time of writing. Chinese equities have seen some profit-taking lately, with the Nasdaq Golden Dragon China down 4.1% overnight, following the 2.7% drop in the Hang Seng Index earlier in the day. The Hang Seng index has been trading on a rising wedge pattern since November 2022 but recent overbought technical conditions seems to call for a breather to recent rally, with RSI cutting into neutral territory (<70) from overbought region while a MACD bearish divergence suggests moderating upward momentum for now. This comes as the index is hovering at its 22,870 level, where a 50% Fibonacci retracement may serve as near term resistance to overcome. The longer-term upward trend remains intact, however, leaving any formation of higher low on watch in a retracement.
    Source: IG charts  
    The day ahead will leave China’s Purchasing Managers Index (PMI) releases in focus, with expectations for its manufacturing PMI to deliver a smaller contraction to 49.8 from previous 47.0. With the cautious risk environment ahead of upcoming key risk events, any lower-than-expected read may be tapped on for further profit-taking.
    On the watchlist: AUD/NZD due for near-term retracement on MACD bearish divergence?
    Higher lows on the AUD/NZD pair have been met with lower highs on its moving average convergence/divergence (MACD) recently, with the bearish divergence pointing to moderating upward momentum and raises the odds of a near term retracement. This came after a retest of the 1.098 resistance level, where a 50% Fibonacci retracement stands in coincidence with its 100-day moving average (MA). Further downside could leave the 1.082 level on watch as near-term support, where an upward trendline stands. That said, the longer-term trend could still be upward bias, with a bullish hammer formed on the monthly chart and is set to be validated with a confirmation close this month.
    Source: IG charts  
    Monday: DJIA -0.77%; S&P 500 -1.30%; Nasdaq -1.96%, DAX -0.16%, FTSE +0.25%
  16. MongiIG
    What to expect and how to trade GSK’s upcoming results
    Source: Bloomberg   Shares GlaxoSmithKline Pfizer Price Vaccine COVID-19 vaccine
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 30 January 2023  When are GSK results expected?
    GSK is set to release its fourth quarter (Q4) 2022 results on 01 February 2023. The results are for the fiscal quarter ending December 2022.
    What is ‘The Street’s’ expectation for the Q4 2022 results?
    According to Refinitiv Eikon expectations for the upcoming results are as follows:
    Revenue of $10,010 billion : -78.66% year on year (YoY)

    Earnings per share (EPS): $0.50 (-58.14% YoY)
    Analysts expect lower revenue and Earnings Per Share (EPS) for the fourth quarter of 2022 compared to a year ago but over the past year, results consistently came in better-than-expected.
    Will earnings beat estimates this time round as well?
    It will depend on whether the pharmaceutical and biotechnology behemoth GSK, formerly GlaxoSmithKline, having spun off its Haleon consumer products arm last summer, may perhaps consider offloading more of its residual stake in Haleon and on how it does in the race for a new respiratory syncytial virus (RSV) vaccination.
    The virus, which together with the flu and Covid-19, has kept hospital admissions at record levels over the winter months, accounts for around half a million patients - mostly the very young and the elderly - being admitted to UK hospitals every year.
    According to The Times “so serious are the health implications that governments across the world have been encouraging pharmaceutical companies to come up with a vaccine, with the prospect of billions of dollars of orders for the teams creating the best drug.”
    The British newspaper estimates the RSV market to be worth $4 billion by 2027, making it a major prize for drug giants, “but, having failed to produce a Covid vaccine, the need to succeed is most acute for GSK and its chief executive, Dame Emma Walmsley.”
    The Times also states that Britain’s GSK “is leading the way alongside Pfizer, with both having completed trials and submitted vaccines to the US Food & Drug Administration for approval late last year.”
    Both GSK and Pfizer are expected to have their medicines approved in June but GSK’s vaccination rate seems to have a higher success rate in trials, at 83 per cent compared with Pfizer’s 67 per cent. Nonetheless, there remains a risk that Pfizer may offer its vaccine at a lower price in order to increase its market share, hurting GSK’s profit prospects.
    How to trade GSK into the results
    Refinitiv data shows a consensus analyst rating of ‘hold’ for GSK – 1 strong buy, 3 hold and 1 sell - with the median of estimates suggesting a long-term price target of $38.60 for the share, around 9% above where it is currently trading (as of 30/01/2023).
    Source: Refinitiv
    IG sentiment data shows that 97% of clients with open positions on the share (as of 30 January 2023) expect the price to rise over the near term, while 3% of clients expect the price to fall.
    57% of clients who trade the share bought it this month and 50% this week.
    Source: IG GSK technical view
    Since its early December spike to $39.74, the GSK share price on the New York Stock Exchange (NYSE) dropped towards the $35.00 mark, around which it has been oscillating in a +/- 70 cents band since mid-December.
    Fourth-quarter earnings may surprise to the upside once more, having over the last four quarters consistently beaten consensus EPS estimates, in which case a break out of the recent sideways trading band may ensue.
    Source: Tradingview
    For the bulls to be back in control, a rise and daily chart close above the 21 December to January highs at $35.73 to $35.85 would need to be seen, in which case the September-to-January uptrend may continue with the $39.74 December peak and the minor psychological $40.00 mark being back in the frame.
    The September-to-January support line at $34.73 may offer short-term support.
    Were earnings to disappoint, however, and a slide through the current January low at $34.23 and the early November high at $34.10 to be seen, the 61.8% Fibonacci retracement of the September-to-January advance at $32.77 could be revisited, and perhaps also the November trough at $31.22.
    Source: Tradingview
    From a technical perspective the share price will remain long-term bearish while it trades below the April 2022 high at $46.97 on a daily chart closing basis.
  17. 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 30 January
    Chris Beauchamp's insight
    It is an action-packed week. A trio of major central banks issue rate decisions, plus we have the monthly non-farm payrolls report, Chinese PMI figures and initial Q4 GDP readings for Germany and the eurozone. As if that was not enough, the heavyweight tech stocks (though less heavyweight since the 2022 declines) of Apple, Amazon and Alphabet, plus Meta, also report earnings figures, along with other major firms in the US. This week will be a vital test for markets that have been broadly risk-on since the beginning of the year.

     
    Economic reports
    Weekly view Monday
    3pm – eurozone consumer confidence (January): index to rise to -21. Markets to watch: EUR crosses

    Tuesday
    1.30am – Chinese purchasing managers index (PMI) (January): index to rise to 48 for both manufacturing and non-manufacturing. Markets to watch: CNH crosses

    9am – German GDP (Q4, flash): economy expected to have remained static QoQ and shrunk 0.2% YoY. Markets to watch: EUR crosses

    10am – eurozone GDP (Q4, flash): expected to see -0.4% growth QoQ and a 1.1% rise YoY. Markets to watch: EUR crosses

    1pm – German CPI (January, preliminary): forecast to be 7.8% YoY and -0.3% MoM. Markets to watch: EUR crosses

    2.45pm – US Chicago PMI (January): index to fall to 43 from 44.9. Markets to watch: USD crosses

    3pm – US consumer confidence (January): index to rise to 109.4. Markets to watch: USD crosses

    Wednesday
    1.45am – China Caixin mfg PMI (January): private sector survey expected to rise to 52, back into expansion territory. Markets to watch: CNH crosses

    10am – eurozone CPI (January) & unemployment (December): CPI to rise 8.7% YoY and fall 0.2% MoM, from 9.2% and -0.4% respectively. Unemployment rate to hold at 6.5%. Markets to watch: EUR crosses

    1.15pm – US ADP report (January): private payrolls to rise 131K, down from 235K. Markets to watch: US indices, USD crosses

    3pm – US ISM mfg PMI (January): index to fall to 48.2. Markets to watch: USD crosses

    3.30pm – US EIA crude oil inventories (w/e 27 January): Markets to watch: Brent, WTI

    7pm – FOMC rate decision: rates to rise to 4.75% from 4.5%. Markets to watch: USD crosses

    Thursday
    12pm – Bank of England rate decision: rates to rise to 4% from 3.5%. Markets to watch: GBP crosses

    1.15pm – ECB rate decision: rates to increase to 2.5% from 25%. Markets to watch: eurozone indices, EUR crosses

    Friday
    1.30pm – US non-farm payrolls (January): payrolls to rise by 175K from 223K, while the unemployment rate rises to 3.6% from 3.5%. Average hourly earnings to rise 0.3% MoM and 4.6% YoY. Markets to watch: US indices, USD crosses

    3pm – US ISM non-manufacturing PMI (January): index to fall to 49 from 49.8. Markets to watch: USD crosses
      Company announcements
     
     
     
    Monday
    30 January
    Tuesday
    31 January
    Wednesday
    1 February
    Thursday
    2 February
    Friday
    3 February
    Full-year earnings
    Sthree
      Novartis Deutsche Bank
      Half/ Quarterly earnings
    Ryanair,
    Philips
    Spotify,
    Pfizer,
    AMD,
    McDonald's,
    Exxon,
    General Motors,
    Caterpillar
    GSK,
    Meta BT,
    Shell,
    Amazon,
    Ford,
    Merck,
    Starbucks,
    Apple,
    Alphabet   Trading update
    Smith & Nephew
    AG Barr,
    Pets at Home Vodafone,
    Entain         Dividends
    FTSE 100: None
    FTSE 250: Paragon Banking, JLEN, Merchants Trust, Edinburgh Inv
    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
    30 January Tuesday
    31 January Wednesday
    1 February Thursday
    2 February Friday
    3 February Monday
    6 February FTSE 100             Australia 200     0.01       Wall Street         2.4   US 500 0.08 0.07 0.23 0.25 0.28 0.08 Nasdaq   0.20 0.40 0.19 1.64   Netherlands 25         0.3   EU Stocks 50         0.7   China H-Shares             Singapore Blue Chip       0.27     Hong Kong HS50             South Africa 40             Italy 40         0.3   Japan 225             * Dividend adjustments due to be posted on a bank holiday will usually be posted on the previous working day
  18. MongiIG
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 30th January 2023. These are projected dividends and likely to change. IG cannot be held responsible for any changes made.
    Dividends highlighted in red include a special dividend, therefore some or all of the amount will not be adjusted. Amount in brackets is the expected adjustment after special dividends excluded (where shown on major indices). Dividend adjustments due to be posted on a bank holiday will usually be posted on the previous working day. 
    If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video. 

    Bloomberg Code
    Effective Date
    Summary
    Dividend Amount
    N/A
     
    Special Div
     
    How do dividend adjustments work?  
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  19. MongiIG
    The Hang Seng (Hong Kong) index has traded to its best levels since April 2022, following the Lunar New Year Holiday.
    Source Bloomberg   Indices Hang Seng Index China
     Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 26 January 2023  Gains on the benchmark index have been led by the Hang Seng’s technology sector which added as more than 4% on Thursday alone.
    Hang Seng (Hong Kong 50)
    Source IG The new yearly highs on the Hang Seng Index confirm what the moving averages have been suggesting for the last few months, in that the short, medium and long terms trends for the Asian benchmark are up. The moving average (MAs) evidence this by trading in what is considered ‘proper order’, with the 20MA (red) above the 50MA (green) above the 200MA (blue).
    While the moving averages confirm the uptrend, the stochastic oscillator does suggest that the index is overbought in the very near term.
    We assess the trend to carry more relevance than the overbought signal, although use the overbought signal as a suggestion that those looking for long entry might be able to do so at more favourable levels than what is current.
    Our preference is to look for a pullback from overbought territory once again to find long entry, with 24500 a longer-term upside resistance target. 21365 and 20100 provide support levels where long entry might be considered, should a price pullback manifest. Ideally, we would like to see a price pullback end with a bullish candlestick reversal pattern around either of these levels to initiate new long trades.
    It should be noted that the index could also correct from overbought territory should it not pullback and instead move into a sideways consolidation. In this scenario, we would then look to identify the range of the consolidation and wait for an upside breakout for long entry.
    While recognizing the possibility of a pullback or correction to follow, we are not looking to short a move lower in lieu of the underlying uptrends prevalent.
    China A50
    Source IG The China A50 Index while lagging its Hang Seng counterpart has also confirmed its new uptrend as it trades to its best levels in many months. The moving averages also now trade in ‘proper order’ for an uptrend, following the recent ‘golden cross’ (marked with the red arrow), which sees the 50MA now trading above the 200MA.
    The index is also overbought, and our sentiment remains like that of trading the Hang Seng i.e., our preference is to look for long entry into a pullback from overbought territory. Pullback levels considered for long entry are around 13750 and 13275, while 15100 provides a longer-term upside resistance target. If the index instead looks to correct from overbought territory through a sideways consolidation, we would instead look for a breakout scenario for long entry.
  20. MongiIG
    Direct Line, NCC Group, and Greencoat UK Wind could constitute three of the best FSTE 250 companies to consider next month.
    Source: Bloomberg   Shares United Kingdom Insurance Inflation FTSE 100 Dividend
     Charles Archer | Financial Writer, London | Publication date: Wednesday 25 January 2023  The FTSE 250 has experienced something of a renaissance thus far in 2023. The UK’s secondary index fell to 16,611 points in mid-October 2022, recovered to 18,853 points by the end of the year and has now recovered to 19,916 points.
    Of course, it remains far from the 24,194 points it commanded in September 2021, so there remains a chance of decent returns in some of the best FTSE 250 companies that have simply been weakened by the wider economic environment.
    UK economic background
    Despite the cost-of-living crisis, and the Bank of England’s predicted two year-long recession to weather, the economy appears to be in a better shape than only a few months ago. European natural gas prices have fallen below their pre-Ukraine invasion point and Cornwall Insight is now predicting that domestic energy bills could fall to £2,201 a year by July. For context, it wasn’t long ago that £6,000 annual bills were being predicted for April.
    In further good news, CPI inflation has fallen from a peak of 11.1% to 10.5%, and Bank of England Governor Andrew Bailey has told the Commons Treasury Committee that inflation could see a ‘rapid fall’ as energy costs subside.
    But some of the fundamentals have not changed. Despite surprise 0.1% GDP growth in November, analysts still expect the country to face a long recession. The base rate stands at 3.5% and is expected to rise through 2023. And the effect on mortgages and the wider housing market is expected to see significant real-terms house price falls throughout this year.
    And after a successful ballot of the National Education Union, teachers will soon be joining the increasingly long list of striking professionals demanding inflation-busting pay rises that the government remains keen to avoid. This is a complex policy area, because unaffordable rises — and this is the government line — will only serve to accelerate the inflation-wage spiral, and also send a further message of unreliability to the markets after the disaster of the Truss-Kwarteng epoch.
    Then there’s the political situation to consider; new PM Rishi Sunak promised to preside over an era of ‘integrity and professionalism,’ but is now contending with multiple legacy issues; whether bullying claims against Gavin Williamson and Dominic Raab, Nadhim Zahawi’s much publicised tax dispute, and even allegations that former PM Boris Johnson discussed a guarantee on a £800,000 personal loan with the new BBC Chairman weeks before recommending him for the role.
    Financial affairs are a politically delicate topic for Sunak to navigate given his wife’s entirely legal but contentious former non-domiciled tax status. This isn’t a political point but is relevant as the FTSE 250 is comprised of domestic companies to a far higher degree than the FTSE 100, and any further political upheaval will likely see the index take another hit during its precarious road to recovery.
    Altogether, these factors are making selecting some of the best FTSE 250 shares to buy next month somewhat of a challenge. However, January’s picks, Centamin, ITV, and Games Workshop, have risen by 1%, 9%, and 6% respectively over the past month.
    Best FTSE 250 stocks
    1. Direct Line (LON: DLG)
    Direct Line saw a sharp share price drop earlier this month after being forced to scrap its dividend after December’s ‘prolonged period of sub-zero temperatures’ caused a spike in damage-related claims, including for burst water pipes and tanks.
    With over 3,000 customers claiming already, the FTSE 250 company expects this ‘freeze event’ could cost around £90 million, and weather-related claims for the financial year are now expected to total £140 million. Further, while the insurer had previously advised that motor insurance claims costs were ‘tracking closely to our expectations,’ these costs are continuing to increase as the price and parts of used cars continue to rise.
    Direct Line is having to toe a delicate line; it needs to raise premiums but is operating within an environment where consumers are watching every penny and in the highly competitive insurance market.
    Insurance companies must keep significant capital on the books to ensure they can pay out claims fairly and on time. Inevitably, there is going to be the occasional year where claims are higher than normal, and dividends have to be sacrificed in the interests of the wider needs of the business.
    But the company remains one of the largest insurers in the UK, with a focus on motor insuring including brands Privilege, Green Flag, and the eponymous Churchill. February could be an excellent chance to ‘buy the dip’ before March’s results.
    2. NCC Group (LON: NCC)
    NCC Group is an information assurance company which operates in the software escrow and verification space, as well as cyber security consulting and managed services for its 15,000 global clients.
    It’s not hard to see the near-term investment case for the group, as businesses continue to increase spending on cyber-defence to prevent costly attacks. Most recently, Royal Mail has seen an attack which has left customers unable to send parcels overseas for the past two weeks, with no end in sight for restoration of service.
    NCC’s software escrow service allows companies to store their source code and key data that allows essential applications to run, meaning they can continue to offer services even if they are hit by a cyber-attack.
    Of course, like Direct Line, NCC operates in a hypercompetitive industry. But in November, the FTSE 250 company told investors that constant currency rates at its Global Assurance division are rising at double-digit percentages, and last month it secured £162.5 million in fresh borrowing facilities to fund expansion, at a time of increasingly tight monetary policy.
    3. Greencoat UK Wind (LON: UKW)
    Greencoat UK Wind is a green energy-focused investment company which owns 45 wind farms across the UK with an aggregate net capacity of 1,289.8 megawatts representing 5% of the UK’s windfarm market share. This is sufficient to power 1.5 million, or 6% of all domestic homes in the country. And it recently invested in a 12.5% stake in Hornsea 1, at present the world’s largest offshore windfarm.
    UKW aims to provide investors with a dividend income that increases with inflation while preserving the capital value of its portfolio. However, for context, this dividend is only at 4.8%, far below inflation, but just above the FTSE 100 average dividend yield.
    One key investor concern is that the company’s profits will be affected by the windfall tax, which comes in at wind energy sold above £75 per mega-watt hour. However, UKW is now trading at a NAV discount of 5.3%, and the ban on onshore windfarms looks set to be scrapped soon, proving a strong chance for the company to make further investments.
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.*
    Learn more about trading or investing in shares with us, or open an account to get started today.
  21. MongiIG
    Despite initial jitters over Microsoft’s results overnight, equity bulls managed to retain control with major US indices paring almost all its losses by the close.
    Source: Bloomberg   Forex Indices United States Bank of Japan Inflation CAD/JPY
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 26 January 2023  Market Recap
    Despite initial jitters over Microsoft’s results overnight, equity bulls managed to retain control with major US indices paring almost all their losses by the close (DJIA +0.03%; S&P 500 -0.02%; Nasdaq -0.18%). With that, the S&P 500 has defended its 3,980-4,000 region with the formation of a bullish pin bar, clinging above its key downward trendline support. US Treasury yields trended slightly lower after a face-off with their respective resistance, notably the 100-day moving average (MA) for the two-year yields and an upward trendline resistance for the 10-year. The US dollar also struggled to find gains for now, despite nearing its near-term support at the 101.28 level. US stock futures saw a slight uplift from Tesla’s result releases this morning, with the company’s top and bottom-line beat boosting share price by 5.4% in after-hours trading. Despite initial concerns over its sharp decline in vehicle profit margins, market participants seem to have bought into Chief Executive Elon Musk’s guidance that aggressive price cuts will support demand outlook.
    Ahead, the advance estimate for US quarter four (Q4) GDP will be on watch later today, with a more resilient number being looked upon to provide more conviction of a potential ‘soft landing’ and room to avoid a recession ahead. Current expectations are for US Q4 GDP to come in at 2.8% quarter-on-quarter, down from the previous 3.2%. For now, the Nasdaq 100 index has managed to hold onto a confluence of support at the 11,600 level. Further upside will leave the 12,200 level in focus next, which marks the top end of its previous consolidation zone.
    Source: IG Charts Asia Open
    Asian stocks look set for a flat open, with Nikkei +0.02% and KOSPI +0.14% at the time of writing. The Australian market is closed for holiday today. On the other hand, Hong Kong markets will be back online after its Chinese New Year break, with some positive catch-up performance likely on the table. This morning’s economic calendar saw a deeper-than-expected contraction in South Korea’s Q4 real GDP (-0.4% versus -0.3% forecast) as moderation in global demand continues to take a toll on its economy. Private consumption dipped by 0.4% while exports contracted by 5.8%. With the data being somewhat backward-looking and pre-empted by policymakers previously, the KOSPI managed to hold onto its gains with the resilient global risk environment. On another front, the summary of opinions from the Bank of Japan (BoJ) revealed policymakers sticking to their views on ‘transitory’ inflation, with more wait-and-see for further pick-up in wages. The USD/JPY remains capped by a descending channel pattern, with the upper channel trendline at 130.80 serving as key resistance to overcome.
    After trading within a period of consolidation since mid-November, the Straits Times Index has managed to find a clearer direction lately with buyers taking control. The 3,380 level may be on watch as near-term resistance, where earlier retests in February and April last year were met with strong selling pressure. Overcoming this level could potentially pave the way to retest its post-Covid high at the 3,490 level.
    Source: IG Charts On the watchlist: Policy divergence may leave further downside in CAD/JPY in focus
    At the latest BoC meeting, the central bank raised policy interest rate by 25 bp to 4.5% and confirmed market expectations of a peak in rate by signalling for a potential pause ahead to assess the impact of cumulative rate increases. This decision is looked upon as a dovish takeaway by markets, supported by the central bank’s projections of stalling growth and significant decline in inflation in 2023. With that, the narrative of policy divergence could be on watch for the CAD/JPY, where expectations continue to brew for the BoJ to step away from its accommodative policies this year while in the case of the BoC, a rate cut may be the next phase of speculation. After breaking below its 200-day MA in mid-November last year, the pair has been trading on lower highs and lower lows as an indication of a downward bias. A falling wedge pattern keeps recent price action in place for now, with the 97.56 level serving as a confluence of resistance to overcome. Further downside may leave the 94.50 level in focus, which marks its 10-month low.
    Source: IG Charts Wednesday: DJIA +0.03%; S&P 500 -0.02%; Nasdaq -0.18%, DAX -0.08%, FTSE -0.16%
  22. MongiIG
    The RBA and ASX 200 under fire as quarterly CPI data is released.
      Source: Bloomberg
      Indices Inflation ASX Market trend Interest Interest rates  
     Tony Sycamore | Market Analyst, Australia | Publication date: Wednesday 25 January 2023 On this day one year ago, the annual rate of headline inflation rose to a higher-than-expected 3.5% to put the market on notice that the inflation genie had escaped the bottle.
    Twelve months later, despite a record 325bp of RBA rate hikes, headline inflation shocked today as it rose by 1.9% QoQ, taking the annual inflation rate to 7.8% YoY from 7.3% in September.
    The trimmed mean or core inflation (the RBA's preferred measure of inflation) rose by 1.7% QoQ, taking the annual rate to 6.9% - the highest level since the ABS first published the series in 2003.
    According to the ABS, "the most significant price rises were Domestic holiday travel and accommodation (+13.3%), Electricity (+8.6%), International holiday travel and accommodation (+7.6%) and New dwelling purchase by owner-occupiers (+1.7%)."
    The substantial rise in electricity prices was not unexpected due to the unwinding of electricity rebates this quarter in Perth and Canberra, partially offset by new rebates introduced in QLD and Tasmania.
    Providing some relief, the rate of price growth in New Dwelling purchases continued to ease, "reflecting subdued new demand and improvements in the supply of materials."
    Before this morning's release, the Australian interest rate market was 50% priced for a 25bp interest rate hike at the RBA's February Board meeting, which would take the cash rate to 3.35%.
    The higher-than-expected CPI print has been the catalyst for an aggressive sell-off in the rates market, and the rates market is now 76% priced for a 25bp rate hike to 3.35% on February 7.
    The expectation of higher interest rates has weighed on the ASX 200, causing it to peel from a fresh nine-month high this morning at 7507 to be trading 22 points lower at 7468 at the time of writing.
    The RBA and the ASX 200 will hope that evidence soon emerges that inflation has peaked in Australia and begun to cool in line with the trend as seen in the UK, Euro Area and the US of late.
    What do the Charts Say?
    At this morning's high, the ASX 200 was up almost 7% for January, just 1.5% below its bull market 7632 high.
    The January rally in the ASX 200 has taken the RSI into overbought territory. For the Elliott Wave enthusiasts, a five-wave advance from the October 6411 low can also be viewed on bearish RSI divergence, which warns of a pullback.
    Ahead of the end of the month, we continue to favour trimming ASX 200 longs ahead of the bull market 7632 high and would then look to buy a sustained break of the 7632 high or a pullback into the 7200/7000 support area.
    ASX 200 daily chart
      Source: TradingView
    Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.
  23. MongiIG
    Upward momentum in the Hang Seng Index is strengthening; rising odds that the worst could be over for HK/China stocks and what are the key levels to watch?
      Source: Bloomberg
      Indices Shares China Market trend Hang Seng Index Economic growth
     Manish Jaradi | IG Analyst, Singapore | Publication date: Wednesday 25 January 2023  Hang Seng Index technical outlook: bullish
    Higher highs registered on the weekly charts suggests that the Hang Seng Index’s trend remains up on optimism related to China’s economic reopening.
    Technicals
    The Hang Seng Index (HSI) rose to a new six-month high last week. This coupled with still-strong upward momentum on the daily charts following the break earlier this month above the 200-day moving average confirms that the short-term trend is bullish.
    Sentiment
    In only three weeks of 2023, foreign buying of Chinese stocks exceeded last year's total.
    Narrative
    China's ending of its zero-Covid policy is prompting re-rating of economic growth prospects, while the jump in copper prices is pointing to a swift economic rebound in China. Moreover, less regulatory pressure on China's internet and gaming sectors is supportive. Notwithstanding the recent rebound, HK stocks were trading at the cheapest level in more than 10 years. Risk: from a longer-term perspective, structurally subdued Chinese economic growth on deteriorating demographics poses a headwind. Technical analysis
    The Hang Seng Index (HSI) rose to a new six-month high last week (Hong Kong markets reopen on Thursday after the Lunar New Year holidays). This coupled with still-strong upward momentum on the daily charts (the 14-day Relative Strength Index is above 75) confirms that the short-term trend is bullish.
    The index has achieved the price objective of a reverse head & shoulders pattern triggered last month – scenario 2 highlighted in November - the break mid-December above resistance at 18415 triggered the bullish pattern (the left shoulder is the early-October low, the head is the end-October low, and the right shoulder is the November 22 low), paving the way toward 21800, the target of the pattern.
    The Hang Seng Index is now approaching another barrier at the April and July 2022 highs of 22450-22500. Any break above could open way toward the 200-week moving average (now at about 24875).
    Hang Seng Index daily chart
      Source: TradingView
    From a medium-term perspective, the strong rebound from the end of last year raises the odds that the worst could be over for HK/China stocks. The index has retraced 100% of the July-October 2022 slide – a sign that bears are getting exhausted. This is further reinforced by the surge in inflows this month as China's ending of its zero-Covid policy is prompting re-rating of economic growth prospects (see table highlighting the broader narrative).
    Hang Seng Index weekly chart
      Source: TradingView
    Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.
  24. MongiIG
    Coming after two days of stellar gains, US equity markets took a breather overnight as growth stocks underperformed slightly ahead of big tech earnings releases.
    Source: Bloomberg   Forex Indices Bank of Japan United States United States dollar Inflation  
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 25 January 2023 Market Recap
    Coming after two days of stellar gains, US equity markets took a breather overnight (DJIA +0.31%; S&P 500 -0.07%; Nasdaq -0.27%) as growth stocks underperformed slightly ahead of big tech earnings releases. Nevertheless, equity bulls seem to have a reason to cheer lately, with the S&P 500 moving back above a key downward trendline resistance and buyers will attempt to defend the 3980-4,000 range in the coming days to support further upward bias. It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth, but that will be put to the test next week on whether the Fed will react to recent downside surprise in inflation and growth. Previous comments from Fed officials suggest that some pushback could still be possible, but that has done little in swaying market expectations of having peak rate below 5%.
    Source: IG Charts
    The economic backdrop remains challenging, with US flash PMI figures improving slightly from December (46.6 versus previous 45) but continuing to trend in contractionary territory for the sixth consecutive month. Market movement in the aftermath of the data release were short-lived, which could leave corporate earnings in the driving seat. After-market release from Microsoft initially saw share price moving 4% higher on a profit beat and resilient cloud revenue, but more downbeat guidance for its businesses in the current quarter dampened the optimism. Further contraction in the PC market is expected to weigh on its ‘More Personal Computing’ business ahead, while cloud revenue forecast for the current quarter was slightly lower than expected.
    Asia Open
    Asian stocks look set for a mixed open, with Nikkei +0.09%, ASX -0.42% and KOSPI +1.44% at the time of writing. Economic data this morning saw another upside surprise in Australia’s December inflation (8.4% versus 7.6% expected), which anchored expectations that another 25 basis-point (bp) from the Reserve Bank of Australia (RBA) in February is warranted. There are also mounting bets that another 25 bp in March may be needed as well. The AUD/USD jumped in reaction to the data release. Having seemingly found support at a key 76.4% Fibonacci retracement level last week, that may leave the 0.714 level in sight.
    Source: IG Charts
    Singapore’s inflation rate will also be due for release later today, with the core aspect still providing little conviction that a peak is in place. Past two months’ readings have hovered around 5.1%, just barely a tick lower from its high at 5.3%, potentially pointing to some pricing persistence. Expectations are for a 5% print for December. A further upside surprise could be on watch to provide further downside for USD/SGD, which has been consolidating at its three-year low at the 1.310 level.
    On the watchlist: USD/JPY back at key confluence of resistance
    After the wild swing delivered in the aftermath of the Bank of Japan (BoJ) meeting on 18 January, the USD/JPY has once again moved to retest a key confluence of resistance at the 130.80 level. Some recovery in the US 10-year yields over the past week may be the key source of strength for the upward moves here. That said, an upper channel trendline resistance, its 20-day moving average (MA) and a horizontal support-turned-resistance are technical factors to put sellers in place at the 130.80 level, with any failure to overcome the level keeping the downward bias intact and potentially prompting the next move towards the 126.84 level. On the contrary, any successful attempt to move past the level may leave the 134.40 level on watch.
    Source: IG Charts
    Tuesday: DJIA +0.31%; S&P 500 -0.07%; Nasdaq -0.27%, DAX -0.07%, FTSE -0.35%
  25. MongiIG
    The S&P 500 and Nasdaq surge to start the week as tech stocks rally.
      Source: Bloomberg
      Indices Shares Nasdaq Federal Reserve S&P 500 Stock market  
     Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 24 January 2023  US equity markets ripped higher overnight on hopes of a slower pace of Fed tightening, easing inflation and ahead of key earnings reports.
    The tech-heavy Nasdaq led the charge higher for its best two-day run since November.
    Tesla surged 7.74%, taking its two-day rally to over 13% NVIDIA added 7.59% Netflix added 4.36% Meta added 2.8%. In contrast to January 2022, when the Nasdaq fell 8.52% before falling a further 24%, this January, the Nasdaq is now +8.53% for the month - an interesting statistic for those who subscribe to the idea that January sets the tone for the remainder of the year.
    For those who take a more bearish view of the world, there remains a lot to ponder. Despite the Fed’s rhetoric that it will raise rates by 75bp above 5% and keep rates on hold for an extended period, the market is not convinced.
    An expected slowdown in growth during the second half of this year has the interest rate market pricing 55bp of rate hikes before the Fed turns in the second half of this year and cuts rates by 210 bp, taking the Fed Funds rate back to 2.75% by December 2024.
    For those wondering the reason why the Fed would cut rates by 210bp, it would likely be in response to a recession which equity markets are not priced for.
    What do the charts say?
    Technically the S&P 500 (and the Nasdaq) have closed above the downtrend lines drawn from their January 2022 highs.
    Presuming the break higher in the S&P500 sustained in the coming sessions, it opens the way for the rally to extend towards 4180 (Dec spike high) and then 4327 (Aug high).
    The first cause for concern that the overnight break higher had failed would be a sustained close back below the 200-day moving average at 3970.
    S&P 500 daily chart
      Source: TradingView
    Nasdaq
    For the Nasdaq, there is more reason to be suspicious of the overnight break higher as it has yet the clear the 200-day moving average at 12,072.
    If it was to see a sustained break above the downtrend and the 200-day moving average, the upside target would be the December spike higher at 12,239, followed by the August 13,740 high.
    Nasdaq daily chart
      Source: TradingView
    Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

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