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MongiIG

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  1. MongiIG

    FTSE 100: Are Ocado shares an attractive buy?

    By MongiIG,


    Market News
    Following Ocado takeover speculation in June its share price nearly tripled: does the current retracement lower represent a good buying opportunity?
    Source: Bloomberg   Shares Ocado Grocery store Retail Price Supermarket
     Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 12 September 2023  What to watch out for regarding Ocado
    Ocado, the innovative online grocery company, has disrupted the traditional supermarket industry with its automation and efficiency. By streamlining the process of fulfilling online orders, Ocado has surpassed physical stores in the online grocery market. But the company's ambitions don't stop there. Building on its success as an online grocery retailer, Ocado now offers complete solutions for automating online groceries to stores worldwide through its technology solutions branch.
    This branch has experienced remarkable growth, with a 59% year-on-year increase. As grocery stores face tighter budgets, there is a strong incentive to enhance operations, and Ocado's products have proven effective in achieving that. For example, retailers like Kroger have witnessed a 25% increase in productivity after adopting Ocado's products. Once stores have implemented Ocado's hardware, it becomes challenging to switch away, leading to loyal customers and a 61% year-on-year growth in recurring fees.
    While this tech solutions branch currently represents only 11% of Ocado's total income, the company's management predicts significant future growth, projecting a 40% increase in revenue. This positive outlook has been well received by investors.
    However, there are concerns about Ocado's financial situation. Net losses have been growing, primarily due to inflation. The supermarket industry has been particularly affected, with earnings before interest, taxes, depreciation and amortisation (EBITDA) falling from £31.3m in the first half of 2022 to a £2.5m loss in the first half of 2023. On a more positive note, Ocado has managed to slightly improve its market share, and management expects slightly positive EBITDA in the retail sector next year.
    Furthermore, the company's capital expenditures remain high due to investments in the tech solutions branch, which have increased by 18.9%.
    With rising interest rates and uncertain macro conditions, the lack of profitability not only dampens investor sentiment but also adds volatility to the stock.
    Technical analysis on the Ocado share price
    Ocado’s share price, the darling of short-sellers in 2021 and 2022, reversed its fortunes when Amazon takeover speculation led to a near tripling of its share price from its five-and-a-half year June low at 342.00p to its 1,017.00p July peak.
    Ocado Weekly Candlesticks Chart
    Source: Tradingview From that peak the Ocado share price has been drifting lower since, so far reaching an August low at 712.80p, before making another attempt to the upside in late-August and early-September before sliding to the June-to-September uptrend line which currently underpins.
    Were it to be slipped through, the 55-day simple moving average (SMA) at 752.6p may offer support, together with the 712.8p August low. While it holds on a daily chart closing basis, the medium-term uptrend from the June trough remains intact.
    Ocado Daily Candlesticks Chart
    Source: Tradingview Were support at 712.8p to give way, however, the 200-day SMA at 610.6p would be back in the picture.
    For the bulls to be back in control a rise and daily chart close above the current September high and the 2021-to-2023 downtrend line at 902.4p to 922.2p would need to occur.
    In case of the July peak at 1,017p being exceeded, the April 2022 high at 1,249.5p would be back in sight.
    Analysts’ recommendations and IG sentiment
    Fundamental analysts are torn between ‘hold’ and ‘buy’ for the Ocado share price with Refinitiv data showing 6 strong buys, 1 buy, 6 hold and 4 sells - with the median of estimates suggesting a long-term price target of 680.00 pence for the share, roughly 18% below the current price (as of 12/09/2023).
    Source: Refinitiv IG sentiment data shows that 80% of clients with open positions on the share (as of 12/09/2023) expect the price to rise over the near term, while 20% of clients expect the price to fall whereas trading activity over the last week shows 65% of buys and this month 70% of sells.
    Source: IG
  2. MongiIG

    6 advanced forex trading techniques

    By MongiIG,


    Analyst Piece
    Advanced forex trading demands fundamental and/or technical analysis skills to trade profitably. Explore some of the more advanced forex trading strategies to help you navigate this volatile market.
    Source: Bloomberg   Forex Price United States dollar Hedge Currency Euro  
    IG Analyst What’s on this page?
    1. What is forex trading?    2. 6 advanced forex trading techniques 3. How to trade forex What is forex trading?
    Forex trading is when you take a position on the price movements of currency pairs. Trading forex is done for practical reasons, but also to generate profits.Even experienced forex traders keen to learn about more advanced forex trading strategies need to ensure they’re familiar with the basics and have a solid foundation.
    When trading forex, you’ll always use a currency pair, which measures the exchange rate between two currencies.
    If, for example, you buy the EUR/USD pair, then EUR is the base currency and USD is the quote. You’ll buy the forex pair if you think the base currency will rise against the quote currency. You’ll sell if you think the opposite will happen.
    Continuing with the example above, you’d buy EUR/USD if you thought the euro would rise against the dollar and sell if you believed the opposite were true.
    At a simplistic level, it may appear the only job in trading is to pick the direction of a currency pair and collect the profit. However, there are some strategies on how to enter and exit a trade you can use.
    6 advanced forex trading techniques
    Hedging forex Position trading Ichimoku clouds Trading forex options Forex scalping Nonfarm payrolls (NFP) trading Hedging forex
    Hedging forex is an advanced trading technique that mitigates risk. You hedge your profits or losses from your open position. Note that while hedging enables you to reduce your potential losses, you won’t usually make a profit.
    Hedging involves selecting two currency pairs that are positively correlated, such as GBP/USD and EUR/USD, and then taking positions on both pairs but in the opposite direction.
    For example, say you’ve taken a short position on EUR/USD at the top of a recent price range, but the currency pair is looking strong, threatening to break upward.
    You could then decide to hedge your USD exposure by opening a long position on GBP/USD. If EUR/USD were to advance further, i.e. the US dollar fell, your long GBP/USD hedge would offset any loss to your short position. If the euro did fall against the dollar, your long position on GBP/USD would have taken a loss, but it would be mitigated by profit to your EUR/USD position.
    Note that the net profit of the two trades may be below zero while both your positions are open. However, you can make more money by timing the market just right – without closing the initial trade and only putting the offset currency pair position, in the above example GBP/USD, on, once you are in profit on the original position, thus in effect securing your profit until that point. Hedging can also be used to protect yourself against a big loss – much like an insurance policy against an expensive car accident.
    Position trading
    Position trading is when you ‘buy and hold’ a trade over the long term, such as over months or years, depending on your strategy. Based on the long-term nature of this type of technique, you’d use fundamental analysis, such as a country's economic data, central bank monetary policy and macro-economic outlook within your strategy.
    If you choose to trade long-term, you must ensure you’ve got sufficient funds in your account. These should cover swings in the short term and avoid margin calls.
    Position trading is based on your overall exposure to a currency pair. You’ll take a position on the price movement of the forex market using CFDs.
    There are several technical indicators you could use under this technique such as trend trading where, for example, moving averages are used to enter or exit a trade. Support and resistance in forex trading is also another technique to look at.
    Ichimoku clouds
    Ichimoku clouds are a technical analysis tool that combines multiple averages and looks at market trends, momentum and several other data points. You use this indicator by plotting these five calculated lines on a price chart:
    Tenkan-sen, which is the conversion line Kijun-sen, known as the base line Senkou span A, known as the Leading Span A Senkou span B, known as the Leading Span B Chikou span, known as the lagging span Once your software calculates and plots the lines, the chart reveals a ‘cloud’ that can be used as a technical indicator. It enables you to see at which point a price might find support or resistance. For instance, an uptrend would be confirmed when Leading Span A (Senkou span A) rises above Leading Span B (Senkou span B) and forms a bullish cloud. Similarly, a downtrend is confirmed if the Leading Span A is falling and drops below the Leading Span B, forming a bearish cloud.
    If you look at the position of the candlestick and it’s above the cloud, then the price will most likely move up. When the price is below the cloud, the trend is most likely moving downwards. On the other hand, if the price is inside the cloud, then the market is in a state of transition.
    The Ichimoku cloud technique is an advanced trading strategy that with practice, you’ll find tends to increasingly become easier to use.
    Trading forex options
    Trading forex options is a means of securing the right to purchase or sell a forex pair at a specified time and at a particular price. As opposed to you settling the transaction at the outset and paying the value across to a third party, forex options give you the choice to purchase or sell at a later date.
    In addition, you’re not obliged to ‘exercise’ your option - and thus put into effect the right to buy or sell the underlying forex pair specified in the options contract - if you choose not to. In this case you’ll only lose the ‘premium’ you paid for the option, i.e. your initial deposit, and your risk is capped at that amount.
    A forex option is an agreement to purchase a currency pair at a predetermined price in the future.
    You may take a long position on the EUR/USD pair at 1.20 but shortly afterwards worry that it may fall to 1.18 in overnight trading. Not wanting to risk too much of your capital, you can decide to place a stop loss at 1.1750, limiting the potential loss to 250 pips.
    Instead of using a stop loss you can purchase an option for the overnight hours with a strike price of 1.1750. If EUR/USD never touches 1.1750 overnight, the only loss would be the relatively small premium paid for the currency option compared to the profit your long EUR/USD position is making. If, however, EUR/USD were to fall to 1.1750, your 250 pips loss would be reduced by the profit you made on your option.
    Forex scalping
    Scalping in forex trading is a style involving you opening and closing multiple positions, lasting seconds or minutes, on one or more currency pairs over the course of a day. Rather than opening a position at the start of a trend and closing it at the end, when scalping you’ll open and close several positions throughout a trend’s course.
    There are several indicators that you can use as part of your forex scalping strategy. These include the use of the Bollinger Bands to indicate areas of market volatility, while moving averages enable you to spot common and emerging market trends. Another indicator is the stochastic oscillator, which compares a forex pair’s current value to its range over a recent period.
    Your objective is to gain just a few pips at a time, looking for multiple small gains rather than fewer larger ones. A ‘pip’ denotes a change in price at the fourth decimal place. For example, if the quoted price of a forex pair decreases from 1.3981 to 1.3980, it has fallen by one pip.
    Scalpers often use CFDs to trade forex pairs that are rising or falling in value. You’ll open a position to ‘buy’ (go long) if you think the price will rise and open a position to ‘sell’ (go short) if you think the price will fall.
    Leveraged products like CFDs enable you to open a position with a deposit, called margin. Your profit or loss is calculated upon the full value of the position, which can amplify your profits – but also magnifies your losses. Therefore, it’s important to have an appropriate risk management strategy in place, no matter which scalping techniques you’re using.
    Nonfarm payrolls (NFP) trading
    NFP is one of the most anticipated indicators of US economic growth in the global forex market. The NFP report shows the number of jobs created in the United States in the non-agricultural sector during the previous month.
    This nonfarm employment change report reflects the level of activity and health of the American economy, which is often factored in by people or institutions when deciding on whether to invest in US dollars vs other global currencies. When more people want to buy the US dollar, the value of the currency rises, and vice versa.
    The monthly NFP data release is important to forex traders as it often creates volatility and enables you to trade on the market reaction to the report, and to leverage your exposure with CFD trading. In doing so, you also have access to extended hours trading on US markets and can trade out of hours on over 70 key US stocks and indices.
    How to start trading using advanced forex techniques
    Open a CFD account to trade forex or practice on a demo account Pick the currency pair you want to trade Choose the way to trade your forex pair – futures, spot or options Place your trade Monitor your position With us, you can trade using advanced forex techniques via CFDs.
    Futures
    Trade futures with us by locking in current forex market prices until you exchange them at a set date via your CFD trading account. With us, you can take a position on the price of forex futures using leveraged products like CFDs.
    When trading with leverage, you’re relieved of any obligation to buy and sell the underlying forex since you won’t be taking outright ownership of the asset. Leverage will magnify your profit, but it’ll also amplify your losses which may exceed the initial deposit – manage your risk carefully.
    Spot forex trading
    Spot forex trading is buying and selling with the intention of taking delivery of the currency pair immediately or ‘on the spot’. It’s popular among day traders, as they can open short-term positions with low spreads and no expiry date.
    You can also trade the spot forex market using leveraged derivatives such as CFDs. In that case, you won’t take ownership or delivery of the underlying currency. But you can still benefit from real-time, continuous pricing that reflects the underlying market.
    You can open a position using a deposit – called margin – which, at the fraction of the underlying market, will increase your exposure to the full value of the market. Note that CFDs use leverage, which can potentially magnify your profits if the market price moves in your favour or amplify your losses should it move against you. Manage your risk carefully.
    Forex options
     
    Forex options are derivative products that enable you to buy and sell currency pairs without being obligated to adhere to an expiry date at a specific or strike price There are two forex option types – puts and calls. With us, you can trade forex put or call options.
    A put option is a contract that will give you as the buyer the right but not the obligation to sell forex at a specific price and expiry date. While a call option will give you the right but not the obligation to buy forex at a specific price and expiry date.
    The value of a put option increases if the asset's market price depreciates. The put option’s value will increase if the forex market price depreciates. On the other hand, a call option’s value appreciates if the forex market price increases.
    CFDs, as leveraged products, will require that you pay an initial deposit or margin to take your position and gain exposure to the forex market. Trading with leverage will amplify your profit or magnify your loss in excess of your initial outlay, remember to make use of our risk management tools.
    Advanced forex trading techniques summed up
    Forex trading is the act of making a prediction on the price movements of currency pairs Advanced forex trading is about having the ability to use multiple tools when you make a trade Advanced forex trading involves the use of a selection of the following techniques: hedging, position trading, FX options, Ichimoku clouds, NFP trading, and scalping Advanced forex trading is about using any of these techniques when placing a trade as an alternate way to make profits and control losses With us, you can trade using advanced forex techniques via CFDs
        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.
  3. MongiIG
    It’s a FTSE 100 stock. Is this re-promotion to the UK’s premier index a short-lived adventure or could M&S continue to rise through the ranks?
    Source: Bloomberg   Indices Shares Marks & Spencer FTSE 100 Stock market index Stock
     Charles Archer | Financial Writer, London | Publication date: Tuesday 05 September 2023  Marks & Spencer (LON: MKS) shares have risen by 77% year-to-date — and by 138% since early October 2022 — to 224p today. Having been re-promoted by FTSE Russell to the FTSE 100 last week, the retailer will likely be further boosted by the index inclusion, as fund managers and passive investors alike increase buying pressure.
    Of course, past performance is not an indicator of future returns. M&S shares were changing hands for 257p apiece in January 2022, and have experienced significant volatility over the past five years of trading.
    But where next?
    FTSE 100: Marks & Spencer shares
    In a trading update on 15 August, the company informed investors of its ‘strong trading and outlook for the year,’ and increased its profits guidance based on ‘good progress on the programme to reshape M&S.’ Importantly, the FTSE 100 retailer thinks that interim results on 8 November will ‘show a significant improvement against previous expectations.’
    Over the 19 weeks to 12 August, food sales rose by 11% while clothing and homeware rose by over 6%. And the company is selling more items at full price, in stark contrast to competitors who are in the throes of price cuts. For context, annual revenues came in at £11.9 billion in May, a full £1 billion higher than in the prior full year.
    However, the FTSE 100 retailer noted that ‘there remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses.’ Further, chief digital and technology officer Jeremy Pee is leaving to return to Canada.
    But while the macro outlook is uncertain, the British Retail Consortium saw annual shop price inflation fall to 6.9% in August, the lowest reading since October 2022. And together with KPMG, the organisations reported that sales of non-food items in the UK had their best month since February, as customers ‘splurged on self-care’ — with retail sales rising by 4.1% in August compared to August 2022.
    BRC CEO Helen Dickinson advises that ‘the sales figures reflected the improvement in consumer confidence in August, and retailers hope this general upwards trend will carry on.’
    Flagship issues
    M&S launched legal action against the government this month over the decision to block the demolition of its flagship shop on Oxford Street. Operations Director Sacha Berendji argues that Secretary of State Michael Gove ‘wrongly interpreted and applied planning policy, to justify his rejection of our scheme on grounds of heritage and environmental concerns.’
    It’s worth noting that M&S had previously seen two years approvals at every stage up to the final decision — with support from neighbouring businesses, inspectors, and relevant local authorities.
    Gove specifically disagreed with an expert’s view that demolition was the ‘only realistic option.’ CEO Stuart Machin has labelled the decision ‘utterly pathetic,’ labelling Gove as ‘anti-business’ and necessitating a review of its position at Marble Arch after a century of operating at the flagship.
    Given the plainly spelt-out problems with the current building, it’s perhaps unlikely that another operator is waiting in the wings.
    Where next for Marks & Spencer?
    Machin has implemented a clear turnaround plan — the company’s revenue, brand power and social media presence have all demonstrably improved. This month it added Estée Lauder Fragrance to its growing roster of third-party brands, and ambitions for further growth are evident.
    It was only in 2019 that the company dropped out of the FTSE 100, with profits collapsing and a share price near a record low, though at that point it had further to fall still.
    It’s telling that while the focus has been on a digital turnaround, the recent update noted ‘strong growth in stores, and more subdued growth in online’ in at least one sector. With Pee exiting, there may be an opportunity to further upgrade its web presence and fast-growing ‘Sparks’ loyalty scheme.
    While some operators may be struggling or indeed failing outright through this inflationary period, well-run FTSE 100 retail companies across the value chain are outperforming: M&S, Next, Card Factory, Sainsbury’s, B&M European Value Retail et al are all performing admirably in 2023 despite vastly different target consumers.
    But having won a hard-fought promotion, M&S is now operating a different competitive field — one where a half-dozen top-performing FTSE 250 companies will be perennially vying to take the company’s newly granted spot on the FTSE 100 roster.
    But Machin seems up for the challenge.

       
    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.
  4. MongiIG
    How to trade Tullow Oil’s first half results?
    Source: Bloomberg   Indices Shares Commodities Tullow Oil Price Petroleum
     Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 05 September 2023 15:37 What impact will Gabon’s military coup and the selling of Tullow Oil’s majority stake in Guyana have on its share price?
    Tullow Oil (TLW.L) has finalised an agreement to sell its majority stake in the unexploited fields located off the coast of Guyana to its minority partner, Eco Atlantic. The transaction is valued at $700,000 in cash. If a commercial discovery is made, Eco will pay Tullow an additional $4 million with a further $10 million due if Guyana grants a production license and royalty payments on future production.
    The deal will raise Eco's stake in the Orinduik field to 75%, making it the project's operator. TotalEnergies holds a 25% stake in this field.
    This strategic shift by Tullow aligns with its 2020 announcement to concentrate the majority of its spending on its existing infrastructure in West Africa, primarily in Ghana.
    However, Tullow Oil faced a significant setback in late August when its shares fell by around 12% following the declaration of a coup by military officers in Gabon, a country where Tullow has interests in several onshore and offshore fields.
    Despite this, the company has stated that its operations in Gabon remain unaffected by the ongoing political activity, and that production continues as usual.
    Gabon is the largest non-operated contributor to Tullow's oil production, with partners including Anglo-French oil and gas group Perenco and Paris-listed Maurel & Prom operating the fields.
    In conclusion, these developments underscore the company's ability to navigate geopolitical challenges while staying committed to its strategic goals, leading to a swift recovery in its share price since last week.
    How to trade Tullow Oil’s first half results?
    On Wednesday 13 September Tullow Oil is expected to publish its first half results which will likely impact its share price.
    Expectations for the upcoming results are as follows:
    Revenue of $704 million : -20% year-on-year (YoY)
    Earnings per Share (EPS) : $0.11: -38% (YoY)
    The company’s share price, which has risen year-to-date by nearly 5% and is thus outperforming the FTSE 100 index by around 6%, remains on an upward trajectory.
    Tullow Oil/FTSE 100 year-to-date comparison chart
    Source: Google Finance It has to be said, though, that Tullow Oil’s share price is far more volatile than the FTSE 100 with it having slid by nearly 40% earlier this year before regaining all of its losses and rising to this week’s high at 39 pence.
    Tullow Oil Daily Candlesticks Chart
    Source: Tradingview Tullow Oil’s share price is benefitting from the recent near 10% surge in the oil price on supply tightness to do with Russia agreeing with its OPEC partners on continued export curbs while Saudi Arabia aims to maintain its voluntary 1 million barrel per day output cut into October.
    The company’s share price is currently trying to overcome its August peak at 38.20p, a daily chart close above which needs to be made, for the next higher late-December 2022 and January highs at 39.70p to 40.20p to be in the frame.
    If overcome as well, there is nothing technically stopping the Tullow Oil share from heading back up towards its November 2022 49.48p high and the psychological 50p mark.
    Tullow Oil Weekly Candlesticks Chart
    Source: Tradingview The fact that Tullow Oil’s share price has broken through its 2022-to-2023 downtrend line at 35.00p and then revisited that breached trendline with last week’s bullish Hammer formation low on the weekly chart, points towards further upside towards the 200-week simple moving average (SMA) at 41.86 and higher being on the cards. This bullish chart pattern will be confirmed if this week’s Friday close is made above last week’s high at 37.50p.
    The medium-term bullish technical view will remain valid while last week’s low at 31.66p underpins on a weekly chart closing basis.
    Unexpected failure at 31.66p would probably indicate the resumption of Tullow Oil’s long-term downtrend.
    Analysts recommendations and IG sentiment
    Fundamental analysts are torn between ‘hold’ and ‘buy’ with Refinitiv data showing 3 strong buys, 2 buy, 3 hold, 1 sell and 1 strong sell - with the median of estimates suggesting a long-term price target of 47.50 pence for the share, around 24% higher than the current share price (as of 05/09/2023).
    Source: Refinitiv IG sentiment data shows that 95% of clients with open positions on the share (as of 5 September 2023) expect the price to rise over the near term, while 5% of clients expect the price to fall whereas trading activity over the last week shows 81% of sells and this month 60% of sells.
    Source: IG
       
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  5. MongiIG
    Historically, September has been a relatively weaker month in the financial world. What are the key events and releases could potentially influence the global markets this September?
    Source: Bloomberg   Inflation European Central Bank Bank of Japan China Central bank Federal Reserve   Hebe Chen | Market Analyst, Australia | Publication date: Wednesday 30 August 2023  As August comes to a close, the financial world gears up for the final month of the third quarter. Historically, September has been a relatively weaker month in the financial world.
    Over the past two decades, the probability of seeing the market move higher by the end of the month has been only 60% for September, the second lowest out of the 12 months. So, what are the key events and releases that could potentially stir the global markets this September?
    Source: https://tradethatswing.com/seasonal-patterns-of-the-stock-market/ September 1st to 10th
    September 1st：US job report
    The US job report for August will raise the curtain for September’s economic updates, including the Non-Farm Payrolls and the unemployment rate. Over the past two months, Non-Farm Payrolls have declined to the lowest levels of the year, and it's expected that August's figure will be around 180,000, marking the smallest increase in over 12 months. However, despite recent signs of a cooling in the job market, the unemployment rate is still projected to remain historically low at 3.5%. This suggests that there is still some way to go before the US labor market reaches a more balanced level, alleviating the Federal Reserve's concerns about rising service inflation.
    September 5th：RBA meeting and Australia’s Q2 GDP
    The Reserve Bank of Australia (RBA) is scheduled to hold its interest rate meeting on the first Tuesday of September. This meeting will be the final one under the leadership of the current RBA Governor, Philip Lowe. In both the July and August meetings, the Australian central bank kept its interest rates unchanged, and the market anticipates that the RBA will likely keep the current rate of 4.1% on hold in the September meeting.
    At the same time, Australia’s GDP growth rate in the second quarter is anticipated to be a quarter-on-quarter increase of 0.2% and an annual rate of 1.5%. If these expectations materialize, it would signify the lowest level of economic growth in Australia since the fourth quarter of 2020.
    September 9th：China’s deflation
    China's Consumer Price Index officially dipped into deflation territory in July, and this trend is expected to persist as the August price index is projected to decline by 0.4% year-on-year. One of the most criticized factors contributing to China's lackluster economic recovery thus far is its insufficient domestic demand. The growing deflationary concerns are putting a serious damper on confidence in China's economic outlook.
    September 11th to 19th
    September 13/14th: US Inflation
    This gauge of consumer and producer price data will be the final set of inflation indicators before the Federal Reserve's interest rate decision in the September FOMC meeting. At the time of writing, expectations suggest that the US consumer prices will rise by 0.3% compared to the previous month, with a year-on-year increase of 3.4%, and the core inflation rate at 4.6%.
    Starting from July, due to base effects, the ongoing downtrend of the US’s primary inflation metric has come to an end, and it appears that the trajectory of inflation has reached an inflection point. Therefore, if this month's CPI figure exceeds expectations, it would not bode well for the Federal Reserve, signalling that inflation has entered a more sticky and challenging-to-control phase. Additionally, the Producer Price Index, which rebounded to its highest monthly increase since January 2023 last month, bakes more uncertainty into the future path of the inflation.
    September 13th: ECB interest rate meeting
    Currently, the market widely expects the European Central Bank to pause its rate hikes at the September meeting. In the August rate meeting, the European Central Bank raised rates by 25 basis points for the ninth consecutive time. Although inflation in the Eurozone has moderated somewhat, it still remains above the European Central Bank's 2% inflation target.
    At Jackson Hole, the ECB Governor reaffirmed her dedication to the 2% inflation target, signaling that the European Central Bank's rate hike journey is yet to reach its conclusion. As such, if ECB decides to pause in September, it will be more likely to be a hawkish pause.
    September 15th: China’s economic snapshot
    On this day, China is set to unveil a slew of economic data, including housing prices, industrial production, fixed asset investment, unemployment rates, and retail sales. At present, it is anticipated that China's housing prices will continue their downward trajectory, while the unemployment rate is expected to climb to its highest level since February of this year, reaching 5.4%.
    Over recent months, the majority of China's economic update have fallen short of market expectations. Concurrently, since the early days of this quarter, China has introduced a series of economic stimulus policies. Thus, these to-be-revelled economic indicators will play a pivotal role in assessing the effectiveness of these stimulus measures.
    September 20th to 30th
    This week is set to be the busiest period of September, with three major central banks scheduled to make updates to their monetary policies. The signals these central banks send following their meetings are poised to have a profound impact on global markets.
    September 20th: FOMC meeting
    After almost two months, the forthcoming FOMC meeting in September is garnering significant attention. Over the past weeks, the Federal Reserve has consistently emphasized its hawkish stance, including Powell's recent speech at Jackson Hole where he reiterated the commitment to keeping high-interest rates in place for longer to bring inflation back within the 2% target range.
    As of the end of August, the market only perceived a 22% likelihood of a rate hike during the September meeting. Nevertheless, with more inflation and employment data coming in, it cannot be ruled out that market sentiment may shift as the Federal Reserve meeting approaches.
    Source: CME September 20th: BOE meeting
    While there was a noticeable dip in UK inflation last month, it still remains remarkably high at 6.8%. Consequently, the Bank of England has a relatively long journey ahead in its tightening cycle.
    During the August rate meeting, the Bank of England raised rates by 25 basis points, reaching 5.25%. This marked the 14th consecutive rate hike by the Bank of England and pushed UK interest rates to their highest point in 15 years. As we look ahead to the September rate meeting, the prevailing market expectation is that the Bank of England will continue hiking rates with another 25 basis points.
    September 21th: BOJ meeting
    Despite Japan grappling with persistently high inflation and a yen at decades-low levels, the Governor of the Bank of Japan recently reiterated that the Bank of Japan still views "underlying inflation" as remaining below the bank's target. Therefore, it wouldn't come as a surprise to the market if the BOJ's September meeting will continues to uphold its ultra-loose monetary policy.
    However, the Bank of Japan did surprise the market in the previous meeting by stating that its 0.5% yield curve control ceiling should be regarded as a reference point rather than a strict limit. This was interpreted as an early signal of introducing more flexibility into its current monetary policy setting. As such, the key watch for the upcoming BOJ meeting is whether the BOJ will signal an exit from its contentious Yield Curve Control (YCC) .
  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 4 September
    Chris Beauchamp's insight
    US Labor Day ensures a quieter start to the week, but rate decisions from the Australian and Canadian central banks and the US ISM services purchasing managers index (PMI) will be worth watching later on. UK corporate news dominates, including earnings from Ashtead and Barratt Developments.
      Economic reports
    Weekly view Monday

    Labor Day – US markets closed
    7am – German trade balance (July): surplus to rise to €19.1 billion. Markets to watch: EUR crosses

    Tuesday

    2.45am – China Caixin services PMI (August): expected to fall to 54 from 54.1. Markets to watch: CNH crosses
    5.30am – RBA rate decision: rates expected to remain at 4.1%. Markets to watch: AUD crosses
    3pm – US factory orders (July): orders to rise 0.1% MoM. Markets to watch: USD crosses

    Wednesday

    2.30am – Australia GDP (Q2): growth to be 0.2% QoQ and 1.5% YoY. Markets to watch: AUD crosses
    9.30am – UK construction PMI (August): expected to fall to 51.2 from 51.7. Markets to watch: GBP crosses
    1.30pm – US trade balance (July): deficit to increase to $68 billion. Markets to watch: USD crosses
    3pm – US ISM services PMI (August): forecast to fall to 52.4 from 52.7. Markets to watch: USD crosses
    3pm – Bank of Canada rate decision: rates expected to hold at 5%. Markets to watch: CAD crosses

    Thursday

    4am – China trade balance (August): exports to fall 10%, a an improvement on July’s 14.5% drop. Markets to watch: China indices, CNH crosses
    1.30pm – US initial jobless claims (w/e 2 September): claims to fall to 239,000. Markets to watch: USD crosses
    3pm – Canada Ivey PMI (August): previous reading 48.6. Markets to watch: CAD crosses
    4pm – EIA crude oil inventories (w/e 1 September): stockpiles fell by 10.6 million barrels in the previous week. Markets to watch: Brent, WTI

    Friday

    1.30pm – Canada employment data (August): unemployment rate to hold at 5.5%. Markets to watch: CAD crosses
     
      Company announcements
     
     
     
     
    Monday
    4 September
    Tuesday
    5 September
    Wednesday
    6 September
    Thursday
    7 September
    Friday
    8 September
    Full-year earnings
        Darktrace,
    Restaurant Group,
    Barratt Developments,
    Dechra Pharmaceuticals     Half/ Quarterly earnings
      Ashtead   Vistry,
    Direct Line,
    Beazley Computacenter Trading update*
    DS Smith WHSmith,
    Halfords    
        Dividends
    FTSE 100: DS Smith, Admiral, Prudential
    FTSE 250: Baltic Classifieds, Greggs, Serco, CLS Holdings, Derwent London, TBC Bank Group, Empiric Student Property, Harbour Energy, Assura
    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.
  7. MongiIG

    Best shares to buy in September 2023

    By MongiIG,


    Market News
    What are the best stocks to buy in September 2023?
    Source: B.oomberg   Shares Dividend Share Dividend yield Stock Microsoft         Piper Terrett | Financial writer, London       Investors continue to face a number of challenges at the moment, both in the UK and abroad. UK inflation remains high, although it has fallen back slightly –6.8% in July compared with 7.9% in June. Analysts are still pencilling in another interest rate hike by the Bank of England in September.
    Meanwhile, concerns about rising interest rates also remain a major concern Stateside, hitting the US tech sector for six. The so-called ‘Magnificent Seven’ tech stocks, which include Meta, Apple and Alphabet, have lost millions off their combined market capitalisations in recent weeks as investors have taken flight – providing possible long-term buying opportunities for new investors.
    Bearing these considerations in mind, here are some of the stocks we think could be the best to buy in September 2023. They have been selected for their market capitalisation, past performance and future growth prospects. Only invest money you can afford to lose.
    Imperial Brands – attractive for its dividend yield
    Investing in tobacco companies is not for everyone. However, dividend seekers could do worse than buy shares in Imperial Brands, which is a strong cash generator. After an initial strong run earlier this year, the shares have dipped by 6% to 1771.5p, yet they yield a chunky 8% and trade on a price earnings ratio (PE) of just 10. The company is completing its £1 billion cash return to shareholders in the second half of the year.
    While the traditional tobacco market may be on the wane, the vaping market is opening up and the tobacco giant is busy trying to move its customers onto these next generation products.
    What’s more, although cigarette volumes have fallen this year, due to the winding down of Covid-related boosts – customers smoked more during lockdown - Imperial is continuing to see strong demand in its US, Spanish and Australian markets.
    Half-year operating profits increased by nearly 30% (28%) to £1.5 billion (from £1.2 billion in 2022), while sales rose slightly by 0.3% to £15.4 billion (£15.3 billion in 2022).
    At 1771.5p, the shares are trading some way off their three-year highs of 2185p last seen in July 2022, and are worth buying for the dividend yield and growth prospects. Analysts at broker Royal Bank of Canada think the shares could reach 2,200p.
    Source: Bloomberg Microsoft – a solid player in artificial intelligence and cloud
    Microsoft is enjoying plenty of buzz from the excitement in artificial intelligence and its new products are generating definitive orders, suggesting they are living up to at least some of the hype. Chairman and chief executive officer Satya Nadella recently told investors that its customers are not just asking how they can use their AI products but “how fast”.
    Its Cloud products are also performing well, with sales up 30% in the recent fourth quarter results. These were strong, with group sales up 8% to $56.2 billion, while operating profits rose 18% to $24.3 billion. Full-year net income fell slightly compared with last year’s figures, however, coming in at $72.4 billion ($72.7 billion in 2022). However, one downside is that Microsoft has had to resubmit its takeover of gaming firm Activision Blizzard to UK regulators.
    At $322, Microsoft shares are up 16% this year but off their recent 10 year highs of $351.47. The shares aren’t cheap, on a price earnings ratio of 32, but analysts at broker Tigress Financial think they could reach $433.
    Next – weathering the storm
    Next recently posted its August update, which showed that trading continues to be strong at the clothing and furnishings retailer. Full price sales rose 6.9% in the second quarter – ahead of previous guidance of an expected increase of 0.5%. In June the company released an unscheduled trading statement revealing that trading was much better than expected, due in part to the warmer weather. Since then, full price sales have been up 3.7% on last year, better than the company’s internal forecasts.
    As such, Next has increased its earnings guidance for the full year by £10 million to £845 million. This is still down 2.9% on last year’s figures but better than expected given the challenging macroeconomic environment.
    Like Marks & Spencer, Next appears to be weathering the cost of living crisis well. The shares are up 19% this year to 6,936p but still trade on a relatively affordable price earnings ratio of 12 and remain some way off their three-year highs of 8440p, seen in December 2021. They also offer a dividend yield of 3%. Analysts at broker Liberum think the shares could reach 7,500p.
    Phoenix Group – strong cash generator
    Phoenix Group has an impressive dividend yield of 10%, which should be an attractive prospect for income seekers. The life insurer, which operates savings and pensions businesses, is a strong cash generator and has a target in place to deliver cash of between £1.3 billion and £1.4 billion in 2023 and £4.1 billion between 2023 and 2025.
    Shares in the company are down 14% this year to 518p – as it continues to recover from the gilts crisis last autumn and the weak UK stock market. However, analysts at broker Barclays think they could reach 765p.
    Past performance is not a guide to future returns

      This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  8. MongiIG
    After a difficult month of August for stocks will the remainder of the year turn out to be more positive?
    Source: Bloomberg   Indices Shares Stock market index Stock United States S&P 500    Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Thursday 31 August 2023  Why the August correction in equity indices is probably over?
    This week’s break through the August downtrend lines and daily chart close above last week’s highs point to an end of the August correction, according to chart analysis. The fact that equity indices kept rising over the past few days despite disappointing Chinese data and a cooling of the US labour market while inflation remained high in Europe seems to indicate that investors buy stocks regardless, now that they have returned from their vacations. Friday’s Non-Farm Payrolls (NFP), global central banks’ monetary policy and the China’s economy may, of course, still throw a spanner in the works but these events may happen further down the line. Will a red August for stocks be followed by a green September?
    Most global stock indices had a summer correction in August amid relatively low volume as investors went on holiday.
    This is nothing unusual but the question on investors’ minds is whether the August correction will turn into something more nasty and whether it could last until October as was the case last year when the S&P 500 slipped by over 18% in autumn.
    The difference with last year is that we were in a bear market then and that this year we have seen strong gains across the board in a clear bull market.
    It is true that historically speaking “stocks do not like September” as this chart by Yahoo Finance shows. However, it is only an average since 1960 and within that average were times when September turned out to be a positive month.
    S&P 500 performance by month between September and December from 1960 to 2022
    Source: Yahoo Finance The fact that all four major US stock indices, that is to say the Dow, Russell 2000, S&P 500 and Nasdaq 100, alongside most European counterparts, have risen above last week’s highs and in doing so broke through their August downtrend lines, is a technically speaking positive sign.
    S&P 500 Daily Chart
    Source: Tradingview It means that, provided the August lows underpin these stock indices, a retest of the July or August highs may well ensue over the coming weeks. For the S&P 500 the technical level which needs to hold is the mid-August low at 4,335.31 with the July peak coming in at 4,607.07, around 2% higher than current levels.
    Weak US growth data spurs equity investors on
    The downwardly revised US Q2 gross domestic product (GDP) growth and softer-than-expected employment data out this week has been interpreted by investors as giving the Federal Reserve (Fed) the opportunity to keep its interest rates on hold. Bad data has in effect been turned into a good story for stocks.
    According to the FedWatch probabilities tool 88% expect to see no rate hike in September with the first rate cut expected to be seen by 36% in May 2024.
    FedWatch Tool: Probabilities
    Source: CME FedWatch Tool Sticky Eurozone inflation hardly dampens the mood but…
    Sticky Eurozone inflation at 5.3% year-on-year for the month of August, for both core and headline inflation, doesn’t seem to have done much damage to European equity indices on Thursday morning as most of these remain in the green at the time of writing.
    DAX 40 Daily Chart
    Source: Tradingview The German DAX 40 index, like several of its European counterparts, has been trading in a wide sideways trading range since April.
    Even though it is also expected to have formed a bottom at its 15,468.65 mid-August five-month low and to re-integrate the upper boundaries of its large sideways trading range, it is unlikely to rise above its July peak at 16,528.97 in September.
    For that to happen, a swift ascent like that seen from the July trough would need to occur, something which is unlikely to happen given seasonality.
    Historically equity markets are often volatile during the months of September and October but very rarely take out previous monthly highs. This is not to say that the Dax 40 and other European stock indices cannot rise further still but that such an advance is unlikely to be a dramatic one.
    Spanner in the works
    The moment investors start to believe that the no longer expected recession in the US could again rear its head - given the cooling of US growth and its labour market - the above-mentioned bullish outlook could rapidly unravel.
    Such a scenario looks to be more likely sometime next year, though, if at all, once rates have peaked in the US and the effect of rapidly raised interest rates on the US economy may be felt more strongly.
  9. MongiIG

    AU earnings: the season wraps up

    By MongiIG,


    Market News
    Investor Spotlight reviews the results of Commonwealth Bank, Woolworths and Appen, and analyses their stock’s charts.
     

    IG Analyst | Publication date: Wednesday 30 August 2023  In this week’s bonus edition of Investor Spotlight, we review the results of three companies from the ASX reporting period and analyse their stock’s technicals.
     
    Commonwealth Bank of Australia’s better-than-expected results boost dividend
    The Commonwealth Bank of Australia (CBA) delivered a slightly better-than-expected set of full-year results. Revenues were in line with expectations. However, the bottom line increased by more than expected, which supported a chunkier dividend.
    The bank's robust results can be attributed to two main factors: continued growth in its loan portfolio and a 17-basis point increase in Net Interest Margins (NIM) compared to the previous year. Despite this, the bank did note that NIM was slightly lower compared to the first half of the year, indicating that peak margins for this business cycle have been surpassed.
    Key financial metrics
    Revenue: $27.23 billion, up 9.4% (Est. $27.1 billion) NPAT: $10.5 billion, down 6% (Est. $10 billion) Final dividend $2.40 (Est. $2.26) CEO signals cautious outlook
    Further, CBA's CEO Matt Comyn validated analysts' worries about potential challenges to profitability. He signaled that consumer demand is moderating and economic growth is slowing, factors which could have a dampening effect on future performance.
    The overall reaction from analysts was somewhat upbeat, nudging the consensus price target upwards. However, despite the strong set of results and slight increase in price targets, analysts believe that the bank is currently trading at a valuation that is higher than its intrinsic worth.
    Price target summary
      Source: Refinitiv
    Commonwealth Bank of Australia technical analysis
    CBA shares lifted following the bank’s full-year profits. However, the gains were pared, with the stock remaining range-bound. Major resistance remains at the share’s all-time high at $110. Support could be funded at an upward-sloping trendline of around $97 in the short term. Major support could emerge at $90, which coincides with the 200-week moving average.
    Commonwealth Bank of Australia weekly chart
      Source: IG
     
    Woolworths full-year results meet expectations
    Woolworths' annual results largely met analysts' forecasts, with only a minor shortfall in profits compared to consensus estimates. Both revenue and net profit showed growth year-over-year, culminating in a final dividend of 58 cents per share.
    Key financial metrics
    Revenue: $64.3 billion, up 5.7% (Est. $64.2 billion) NPAT: $1.61 billion, up 4.6% (Est. $1.68 billion) Final dividend $0.58 CEO points to "relative stability" amid challenges
    Woolworths CEO Brad Banducci noted that while the past year marked a return to "relative stability" for the company, cost-of-living pressures and persistent supply chain disruptions acted as drags on performance. As for the outlook for FY24, Banducci expects inflation to ease but concedes that the consumer landscape will "remain challenging."
    The markets and analysts responded in a mixed fashion to Woolworths' full-year results. The share price lifted on the day of the report; brokers' median consensus price target was pared back slightly but remains at a small premium to the current share price.
    Price target summary
      Source: Refinitiv
    Woolworths technical analysis
    In the long term, Woolworth's share price appears to be range-bound, suggesting a lack of directional conviction among investors. Recently, the stock lost its short-term trend-line support, signaling a change in momentum towards a bearish stance. While upward movements above $40 have been met with selling pressure, there seems to be substantial buying interest when the price approaches $30 per share.
    Woolworth weekly chart
      Source: IG
     
    Appen faces uphill battle
    Appen has once again underwhelmed investors with its half-year performance, reflecting the company's ongoing struggle to turn the business around. The numbers were far from encouraging, with both revenue and net profit after tax (NPAT) missing estimates.
    Key financial metrics miss the mark
    Revenue: $138.9 million, down 24% (Est. $143 million) NPAT: -$43.3 million, down 15% (Est. $29.6 million) CEO cites "challenging external environment"
    Appen's CEO and President, Armughan Ahmad, didn't mince words in acknowledging the grim results. He cited a "challenging external environment" as the major factor behind the disappointing numbers. The company's primary focus now is on reducing costs in a bid to end the year with a positive EBITDA.
    Analysts remain neutral with a slight bearish bias towards Appen shares. However, after the result and a subsequent plunge in the share price, brokers’ consensus price target has been sliced to $1.65.
    Price target summary
      Source: Refinitiv
    Appen technical analysis
    Appen’s share price is in a clear downtrend, having broken through psychological support of $2.00 after the release of half-year results. The next key level to watch is $1.20.
    Appen weekly chart
       
    Source: IG
  10. MongiIG
    Wall Street took comfort from several downside surprises in US macro data overnight, with the data taming some rate hike bets and saw US Treasury yields decline.
    Source: Bloomberg   Forex Indices United States United States dollar Federal Reserve Macroeconomics  
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 30 August 2023  Market Recap
    Wall Street took comfort from several downside surprises in US macro data overnight, with the data taming some rate hike bets and saw US Treasury yields decline. The US two-year yields were down 11 basis-point (bp), reversing all of last week’s gains, while the 10-year yields were down 8 bp to deliver a two-week low. The US dollar reverses further (-0.3%), allowing major US indices to secure its third straight day of gains.
    Both the US job openings and consumer confidence data overnight were lower than expected, which point towards a weaker consumer spending outlook and some cooling in labour demand. US consumer confidence fell by the most in two years, while job openings touched its lowest level since March 2021. The weaker data may aid to tame the upside in pricing pressures ahead and provided room for the Federal Reserve (Fed) to consider keeping rates on hold, as compared to additional tightening.
    The overnight risk rally has allowed the Nasdaq 100 index to overcome its last Thursday’s sell-off, reflecting some control from buyers. This follows after finding support off the 14,630 level, where its 100-day moving average (MA) stands alongside the lower edge of its Ichimoku cloud on the daily chart. A bullish crossover is formed on its moving average convergence/divergence (MACD), with any move above the 15,400 level potentially paving the way to retest its year-to-date high at the 15,900 level next.
     
    Source: IG charts  
    Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.47%, ASX +0.85% and KOSPI +0.66% at the time of writing. The Nasdaq Golden Dragon China Index is up 3.7% overnight, with Chinese equities riding on the improved risk environment for a turnaround from Monday’s whiplash. Earlier stamp duty cuts on stock trades provided some lingering optimism, although its upcoming purchasing managers index (PMI) releases tomorrow will provide another reckoning for its still-weak economic conditions.
    This morning saw a significant downside surprise in Australia’s monthly Consumer Price Index (CPI) read, coming in at 4.9% versus the 5.2% expected, which validates current rate expectations for the Reserve Bank of Australia (RBA) to keep rates on hold into next year. This marked the first time since February 2022, where the monthly CPI indicator falls below the 5% level. But given that it is still a distance away from the RBA’s 2-3% target, the central bank may continue to maintain its hawkish-pause stance for some policy flexibility, although we are likely seeing the end of its tightening process.
    Improved risk sentiments and some near-term relief on the China’s front have allowed room for some recovery in the AUD/USD this week, but upside has been challenged into today’s session with the lower-than-expected Australia’s inflation number. The pair has been displaying a near-term double-bottom pattern on its four-hour chart, but resistance are currently found at its neckline at the 0.648 level, which also marked the peak of last Thursday’s sell-off. A move above this level will be much needed to support further recovery to retest the 0.660 level next, while on the other hand, further downside may leave its 0.638 level on watch.
     
    Source: IG charts  
    On the watchlist: Paring rate hike bets brought some cooling in US dollar rally
    Rate expectations for the November Fed meeting have leaned back towards a rate-pause scenario, following yesterday’s weaker-than-expected US macro data. The odds for rates to be kept on hold in November currently stands at 51%, versus the 38% probability priced at the start of the week. With paring rate hike bets, the US dollar rally cooled for the third straight day, finding its way back to the 103.12 level.
    Its 200-day MA will be one to watch next, with the US dollar having reclaimed the MA line previously for the first time since November 2022. Any failure for the 200-day MA to hold may validate sellers in greater control and potentially pave the way back towards the 100.50 level next.
    Source: IG charts  
    Tuesday: DJIA +0.85%; S&P 500 +1.45%; Nasdaq +1.74%, DAX +0.88%, FTSE +1.72%
  11. MongiIG
    Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These companies have been chosen for their historical earnings growth, market size, and sector dominance.
    Source: Bloomberg   Shares Semiconductor Nvidia Artificial intelligence Integrated circuit AMD    Charles Archer | Financial Writer, London Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
    Semiconductors — or chips — are essential to the functioning of electronic devices and have seen particular interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, film CGI, or a hundred other applications, all of which are essential to 21st century living.
    OpenAI’s revolutionary ChatGPT chatbot, the US ban on some semiconductor exports to China, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
    For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022.
    But remember, past performance is not an indicator of future returns.
    Best semiconductor stocks to watch
    Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
    For example, the Vaneck Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
    In addition, the ARM IPO could see the tech giant become one of the most valuable semiconductor stocks in the world when it relaunches to the public later this year.
    Of course, some companies will do better than others, and this is not an exhaustive list. No returns can be guaranteed.
    1. Oxford Instruments
    While the largest semiconductor stocks are dominated by non-UK entities, London-listed Oxford Instruments is a £1.3 billion established leader and the largest semiconductor company in the country. It serves multiple markets across the sector, but the key focus is currently on its semiconductor and communications division.
    In recent full-year results, the company saw orders grow by 20.9% to £511.6 million, while adjusted operating profit rose by 21.4% to £80.5 million.
    CEO Ian Barkshire enthuses that the company ‘delivered growth in orders, revenue and profit, as well as maintaining margin, with performance strengthened in the second half as we converted our order book and realised the benefits of new pricing structures...our strong balance sheet positions us well to invest in people, infrastructure and innovation, and to make synergistic acquisitions to augment our organic growth.’
    However, the company is much smaller than its stateside competitors.
    2. Nvidia
    Nvidia shares have been on a dizzying rally this year to a $1.2 trillion valuation. The semiconductor champion is clearly the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
    However, the company once again delivered analyst-beating results in Q2 2023, with revenue up by 88% quarter-on-quarter to $13.51 billion, and its critical Record Data Center revenue up by 171% compared to Q2 2022.
    CEO and co-founder Jensen Huang believes that ‘a new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI... (our) leading enterprise IT system and software providers announced partnerships to bring NVIDIA AI to every industry.’
    Of course, Nvidia now has a huge price-to-earnings ratio, and perhaps too much exposure to a faltering Chinese economy.
    3. Taiwan Semiconductor Manufacturing Co
    While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to TSMC. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
    TSMC shares have done well in 2023 given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
    However, Taiwan’s complex political status, including its relationship with China remains a long-term risk.
    4. Qualcomm
    Qualcomm shares may be largely flat in 2023, but this could change soon. The NASDAQ titan returned $1.3 billion to stockholders in Q3 2023, including $893 million in dividends and $400 million through share buybacks.
    The company has struggled in 2023 due to low consumer demand for smartphones through the cost-of-living crisis, but it’s now pivoting towards the AI business.
    CEO Cristiano Amon is ‘pleased with our technology leadership, product roadmap and design-win execution, which position us well for growth and diversification in the long term. As AI use cases proliferate to the edge, on-device AI has the potential to drive an inflection point across all our products. Qualcomm remains best positioned to lead this transition given the unmatched accelerated computing performance with the power efficiency of our platforms.’
    5. Advanced Micro Devices
    Advanced Micro Devices — commonly abbreviated to AMD — is a distant second to Nvidia, but it has several near-term catalysts to consider. For example, in mid-June 2023, AMD rolled out its new Instinct MI300 series chips, which should become popular for customers looking to accelerate their generative artificial intelligence chip processing.
    While Nvidia may control circa 80% of the AI market, this new AMD chip could be a gamechanger — and its shares have climbed sharply this year as a result.
    Chair and CEO Dr Lisa Su notes that the company ‘delivered strong results in the second quarter as 4th Gen EPYC and Ryzen 7000 processors ramped significantly...we made strong progress meeting key hardware and software milestones to address the growing customer pull for our data center AI solutions and are on-track to launch and ramp production of MI300 accelerators in the fourth quarter.’
  12. MongiIG
    Wall Street gained for the second straight day, as US Treasury yields took a breather after touching their recent highs.
    Source: Bloomberg   Forex Indices United States United States dollar GBP/USD Federal Reserve
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Tuesday 29 August 2023  Market Recap
    Wall Street gained for the second straight day (DJIA +0.62%; S&P 500 +0.63%; Nasdaq +0.84%), as US Treasury yields took a breather despite a hawkish takeaway from the Jackson Hole Symposium. Both the US 2-year and 10-year yields cooled by around 5 basis-point (bp) overnight after touching their recent highs. The VIX has also hit its two-week low, potentially as hedging bets unwind from greater clarity on the Federal Reserve (Fed)'s policy outlook. Amid the quiet economic calendar to start the week, market focus will now turn to a series of macro data ahead to justify whether a November rate hike from the Fed is warranted.
    Today’s schedule will leave Germany and US consumer confidence data on watch, along with the US Job Openings and Labor Turnover Survey (JOLTS), where further moderation in US July job opening numbers is expected (9.465 million forecast versus 9.582 million prior). The US S&P/Case-Shiller home price index will be in focus as well, with US home prices expected to mark its fourth straight month of year-on-year decline (-1.3% forecast versus -1.7% prior).
    Perhaps one to watch may be the Russell 2000, which has been attempting to defend its 200-day moving average (MA) over the past week. Further upside may validate a bullish crossover on its moving average convergence/divergence (MACD) on the daily chart, with immediate resistance to overcome at the 1,900 level. On the broader scale, the index remains stuck in a long-ranging pattern since April 2022, with any move above the 1,900 level potentially leaving its upper bound at the key psychological 2,000 level on watch for a retest next.
     
    Source: IG charts  
    Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.50%, ASX +0.45% and KOSPI +0.34% at the time of writing. Lower Treasury yields, a slightly weaker US dollar and the positive handover from Wall Street provide room for some relief in the region, despite lingering reservations surrounding Chinese equities.
    Beijing’s latest efforts to boost markets has been met with a lukewarm reaction, with gains in Chinese equities fizzling into the close yesterday. The Hang Seng Index was up as much as 3% at one point, but closed only 0.9% higher. Similar measure in 2008 eventually saw the CSI 300 move to form a new low, suggesting that a turnaround in economic conditions remains the key driving force for longer-term upside in Chinese equities.
    This morning saw Japan’s July unemployment rate head higher to 2.7% from previous 2.5% (forecast 2.5%), with the sharper moderation in Japan’s labour market likely to provide more room for dovishness for the Bank of Japan (BoJ) by having a taming effect on wage pressures. For now, the USD/JPY has breached the 145.00-145.80 level, where previous yen-buying intervention was executed back in September 2022. While the overall trend remains up with a rising channel pattern in place, some near-term exhaustion seems to be in place, with a flat-lined MACD and lower highs on its relative strength index (RSI) from the daily chart. The 145.00 level will be an immediate support to hold, failing which may pave the way to retest the 141.60 level next.
     
    Source: IG charts  
    On the watchlist: GBP/USD retesting neckline of head-and-shoulder formation
    The GBP/USD has retraced by close to 4.5% since mid-July this year, further weighed by weaker-than-expected purchasing manager’s index (PMI) data out of the UK and some firming in the US dollar last week to retest its 1.260 level. On the broader scale, the 1.260 level seems to mark the neckline of a head-and-shoulder formation, with an attempt to stabilise after recent sell-off. Its weekly RSI continues to trade above the 50 level for now, which could still put an upward trend in place, but any failure to defend the 1.260 level over the coming days may potentially pave the way to retest the 1.231 level next.
     
    Source: IG charts  
    Monday: DJIA +0.62%; S&P 500 +0.63%; Nasdaq +0.84%, DAX +1.03%, FTSE +0.07%
  13. MongiIG
    Tentative signs of stabilisation in AUD/USD’s recent slide; AUD/NZD rebounds from key support and AUD/JPY flirts with key resistance.
      Source: Bloomberg
      AUD/USD AUD/JPY AUD/NZD Australian dollar Forex China    Manish Jaradi | IG Analyst, Singapore | Publication date: Tuesday 29 August 2023  AUD seeks positive catalysts
    The Australian dollar is looking for positive catalysts as it attempts to recoup some of its recent losses ahead of key Australian inflation data due Wednesday. 
    Australia's CPI moderated to 5.2% on-year in July from 5.4% previously. The ongoing disinflation trend is in tandem with the Reserve Bank of Australia’s view that the worst is probably over for inflation.
    The Australian central bank held rates steady at 4.1% at its previous two meetings, and markets are pricing in a high chance that the central bank will stay pat when it meets next week amid tentative signs of cooling of the labour market and a deteriorating growth outlook in China. 
     
    Struggling China not helping AUD
    Chinese policymakers’ additional stimulus in recent days has failed to cheer AUD bulls so far. China’s macro data continues to be underwhelming, posing downside risks to the economic growth outlook amid a struggling property sector.
    With a massive stimulus seemingly off the table (given the associated risks of creating imbalances within the economy), AUD would need to rely on other catalysts to get a boost.
    The China Economic Surprise Index is just off mid-2020 (Covid levels), and China is Australia’s largest export destination.
    AUD/USD daily chart
      Source: TradingView
    US economy resilient
    Globally, the USD remains well supported by diverging economic outlooks – a resilient US economy compared with slowing growth outside of the US, especially in China and Europe.
    Powell’s remarks at Jackson Hole last week were largely balanced, but with a slightly hawkish tilt, offering some support to the greenback. The market is now pricing in about a 50% chance of a November hike compared with 38% a week ago, according to the CME FedWatch tool. 
    AUD/USD weekly chart
      Source: TradingView
    AUD/USD: downtrend fatigue?
    Tentative signs of downtrend fatigue are setting in AUD/USD lower timeframe charts. This comes as the pair continues to hold above vital converged support on the median line of a declining pitchfork channel since June and a downtrend line from the end of 2023.
    Still, a break above Friday’s high of 0.6440 is needed for the on-month-long slide to stall. A more decisive signal for any material consolidation would be a crack above last week’s high of 0.6590.
    AUD/USD 240-minute chart
      Source: TradingView
    AUD/JPY: Downward bias yet to reverse 
    AUD/JPY has been well guided lower by the downward-sloping 200-period moving average on the 240-minute charts, a bias highlighted in the previous update.
    While a hold above horizontal trendline support at about 93.00 is an encouraging sign for bulls, the cross needs to clear 94.00-95.00, including the 200-period moving average and the mid-August high for the bearish pressure to fade. 
    AUD/JPY 240-minute chart
      Source: TradingView
    AUD/NZD: Starting to flex muscles
    The recent pickup in upward momentum could be a sign that AUD/NZD is beginning to flex muscles after months of remaining directionless. This follows a repeated hold above quite strong support on the lower edge of a rising channel since April. A break above the initial barrier at the July high of 1.0925 could open the way toward the June high of 1.1050. 
    AUD/NZD daily chart
      Source: TradingView
    This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  14. MongiIG
    Hello Community,
     
    We are proud to be nominated for the 2023 Investing Innovation Awards.
    Vote for your favourite investing provider for the chance to win £500 in a prize draw here: https://www.finder.com/uk/investing-peoples-choice-award
     
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  15. MongiIG
    Nvidia has delivered an impressive quarterly result for Q2, 2023. So, what does Nvidia's financial report indicate, and can this upward momentum in its stock price be sustained?
    Source: Bloomberg   Nvidia Shares Stock Price Share price Company Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 24 August 2023  Nvidia Q2 Earnings Key Takeaway

    Nvidia's second-quarter financial report has injected a much-needed boost into the recently sluggish stock market, as both revenue and profit have surpassed market expectations.

    According to Nvidia's Q2 report, the company achieved another record-breaking quarter, with total revenue surging by 88% compared to the previous quarter and doubling to $13.51 billion compared to the same period last year. Earnings per share also saw an astonishing 854% year-over-year increase, aligning with market expectations.

    What's even more surprising to the market is the substantial increase in Nvidia's profit margin. The company's profit margin skyrocketed from 43.5% in the same period last year to an impressive 70.1%.
    Source: Nvidia  
    Nvidia's CEO, Jensen Huang, emphasized during the post-earnings press conference that a new era of technology has dawned, with global businesses actively embracing faster computing and AI technologies. In the last quarter, several major cloud service providers announced their adoption of Nvidia's H100 artificial intelligence infrastructure. Nvidia's AI chips have already found applications across various industries.

    Furthermore, Nvidia also announced a stock buyback of 7.5 million shares and the distribution of dividends totaling $3.38 billion.

    Nvidia's Q3 Outlook

    Nvidia anticipates that in the third quarter of 2023, the company's total revenue will continue to increase significantly to $16 billion, while profit margins are expected to further optimize from the current 70% to a range between 71.5% and 72.5%.

    However, despite the company's nearly impeccable fundamentals, Nvidia faces significant risks from policy environment. Nvidia admitted that they anticipated stricter U.S. restrictions on chip sales to China, which will have far-reaching negative implications for the company.

    Colette Kress, the company's Chief Financial Officer, mentioned during the earnings release that the U.S. government's restrictions on selling AI chips and high-end components to China, which have been in place since September last year, have already had a noticeable impact. Although Nvidia currently sells a lower version of the chip in China, it is still significantly affected.

    Currently, two-thirds of Nvidia's sales come from markets outside the United States, and losing access to the Chinese market would be a substantial blow to the company.

    Nvidia's Stock Price

    Nvidia, after an over 280% stock price surge in 2023, now boasts a market capitalization exceeding $1 trillion, solidifying its position as a standout performer in the tech stock arena.

    Despite a brief dip of over 10% in Nvidia's stock price during the first half of August, primarily attributed to supply constraints and economic outlook concerns, these concerns have steadily faded away. This shift came after Morgan Stanley upgraded Nvidia's target price and reaffirmed their support for AI stocks.

    Nvidia's stock price started a significant rebound from the short-term bottom at $400 just two days before the earnings report was unveiled, surging by over 20% in a week.

    It appears that the recent pullback has come to an end. The stock price has broken through multiple resistance levels in the past three days, including the 20-day moving average, the downward trendline, and the previous high around $470-$480.

    Following the earnings announcement, the stock even breached the psychological barrier of $500. However, it might face some selling pressure at this critical level, prompting some investors to pocket their profits.

    While Nvidia's valuation is undeniably on the higher side, and its short-term surge has already reflected the company's fundamentals and prospects, the Relative Strength Index (RSI) is also nearing overbought territory. But the recent pullback has revealed that even when Nvidia experiences short-term retracements, many investors consider it a buying opportunity. Hence, in the medium to long term, the stock's upward momentum is likely to persist.

    However, as Nvidia's Chief Financial Officer candidly pointed out, the company's most significant risk stems from the policy environment, which is a risk factor investors should pay close attention to.
     
  16. MongiIG
    The Federal Reserve's central banking symposium gets underway today in Jackson Hole, Wyoming. The big question is, will it clear the air for the markets on interest rates on both sides of the Atlantic going into Autumn?
     

     Jeremy Naylor | Analyst, London | Publication date: Thursday 24 August 2023  It was a very different story last year where central bankers were fighting runaway inflation and the message was that their respective feet were firmly on their local accelerators. Now it's the balancing act of conquering inflation while trying to maintain what little growth there is around.
    (Video Transcript)
    The Fed's central banking meeting
    Now the Federal Reserve's central banking meeting gets underway in Jackson Hole, Wyoming later on today. We've been on about it all week and I think it's worth just highlighting exactly what the big pivot point might be when we're looking at the markets and the trading on the rest of today and tomorrow when we get the big statements coming through. Will it clear the air for the markets in terms of where central banks are going in terms of interest rates?
    The U.S. dollar
    Yields and the USD are falling ahead at the start of the symposium a little bit later on today. I want to begin first of all with a look at what's been happening with the U.S. dollar. Now don't get me wrong, this plot that we saw yesterday wasn't about the fact that people are expecting a message from Jackson Hole, it was all about purchasing managers' index (PMI) data. But I think certainly some of what's happening in the markets with yields down and the dollar down a little bit on from the highs that we saw yesterday, it might give some hope to the message that the worst of the global inflation shock is behind us. But what may come out is that while the quarter may be in sight, it has yet to be turned and we'll see some of these central banks continue to keep interest rates high.
    The European Central Bank
    We know that from market expectations, we know that there is the expectation that the European Central Bank is going to continue with its foot on the pedal. It was a very different story last year when central bankers were fighting runaway inflation. The message was that their respective feet were firmly on their local accelerators.
    Now it's the balancing act of ensuring inflation seeps away in the hope that it doesn't kill what little fragile growth there is. In yesterday's trade, we went below the total retracement of this Fib in meaning that the euro was weak enough to pull back. Then came the fight back in the euro, not because of the euro up, more so because of that drop we saw in the dollar yesterday. So we're back now above what is this line of support taken down from the Fib, from the lows we had back on the 6th of July at 108.34, currently trading at 108.57.
    Jackson Hole speeches
    Where we go from here really does depend very much on what comes out of that symposium. I want to show you the other big cross where we've seen now as of today's trade ahead of the start of the Jackson Hole speeches. We've got a third and we have losses for turning against the US dollar. So it really is a question of where you see the markets and how you think this message is going to be perceived in the markets. We get the big speech tomorrow on Friday coming through from the Federal Reserve Chairman Jerome Powell.
  17. MongiIG
    Technical overview remains cautious on the daily time frame, while bullish on the weekly and, in sentiment, retail trader sell bias rises.
      Source: Bloomberg
      Nasdaq Forex Indices Federal Reserve /business/market_index Inflation   Monte Safieddine | Market analyst, Dubai | Publication date: Thursday 24 August 2023  Disappointing data
    There were a couple items out of the housing market on offer yesterday where MBA’s weekly mortgage applications reading showed a drop of -4.2%, while new home sales was a beat out of the Census Bureau.
    But what took the attention were preliminary purchasing managers’ index (PMIs) for the month of August out of S&P Global, and for the US showed ongoing contraction for manufacturing as it dropped from 49 to 47. Services also a miss remaining in expansionary territory at just 51 from 52.3 prior.
    Yields in retreat, tech outperforming
    The story was generally worse globally with the services sector falling into contraction in the Euro Zone and the UK, and economic worries rising meant a clear pullback in bond yields. Treasury yields finished the session significantly lower and so too when adjusting for inflation, with the seven-year to 30-year part of the curve back beneath 2% in real terms.
    Market pricing (Refinitiv) has backed off on rate hike likelihoods for the European Central Bank (ECB) where it’s a coin toss on a 25bp (basis point) hike in September, the Bank of England (BoE) where they no longer anticipate peak 6%, and for the US Federal Reserve (Fed) moving further away from another rate hike even if still a significant minority in November/December.
    Tech outperforms, Nvidia after-hours boost
    And a pullback in yields and hopes of less aggressive central bank tightening is always a plus for growth stocks and their lofty valuations.
    The net result of yesterday’s fundamental updates was to put both tech and communication on top by the close and outperforming as sectors in a session where only energy was in the red, powering the tech-heavy Nasdaq 100 to a stronger finish besting both Dow 30 and S&P 500 for the session.
    Nvidia’s earnings after the market close was an added plus for the index and chipmakers in general, easily beating on earnings and revenue, with better guidance and a decent share buyback offering.
    Upcoming items
    We've got the weekly claims as well as durables for the month of July releasing today. As for tomorrow, revised figures out of University of Michigan (UoM) when it comes to consumer sentiment and inflation expectations before focus shifts shortly thereafter to central bank speak with Fed Chairman Powell's speech at Jackson Hole.
    Nasdaq technical analysis
    It was more about fundamental updates than technicals, and the results took price past its previous 1st and 2nd Resistance levels with strong gains for contrarian buy-breakouts and lacking a trigger for cautious conformist sell-after-significant reversals.
    And then came earnings from Nvidia, giving an additional boost for the index with futures above today's 1st Resistance level already. The overview on the weekly time frame is still ‘bull average’ where price is already hovering near this week’s weekly second resistance level favoring conformist buy-breakout strategies in that time frame.
      Source: IG
    CoT speculators shift to middle
    As for sentiment, a big increase in retail trader sell bias from what was slight sell 53% to 63% and not far off heavy short territory. CoT speculators as per last Friday’s report shifted from majority short 55% to the middle.
    IG client* and CoT** sentiment for the Nasdaq
      Source: IG
    Nasdaq chart with retail and institutional sentiment
      Source: IG
    * The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
    ** CoT sentiment taken from the CFTC’s Commitment of Traders report: outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
  18. MongiIG
    FTSE 250 favourite Marks and Spencer, alongside underperformers Crest Nicholson and ABRDN, could be the three best FTSE 250 shares to watch next month. These shares are selected based on certain value investor metrics.
    Source: Bloomberg   Indices Shares Inflation Share Dividend FTSE 100    Charles Archer | Financial Writer, London The FTSE 250 has experienced an unpleasant August thus far, with the index having now fallen by 6.5% year-to-date to 17,899 points. While this is far above the 16,611 point low of October 2022, it’s also a big drop from the 20,615 points of early February 2023.
    For context, the UK’s domestically focused index has been relatively volatile this year, perhaps reflecting the wider volatility within the UK economy. Importantly, CPI inflation fell to 6.8% in the year to July, down from 7.9% in June. And with the Bank of England still predicting that this crucial measure will fall to 5% by the end of 2023, this is clearly good news.
    But this most recent reading masks some potentially worrying trends. Leisure inflation — a good measure of consumer discretionary demand — increased. Services inflation rose to 7.4%, a 30-year record high. And the all-important core inflation metric remained sticky at 6.9%.
    The picture is complicated by mixed news out of the ‘real’ economy. Companies from Thames Water to Wilko are under serious financial pressure — but others including Marks & Spencer are doing far better than expected.
    This reflects the complex data underlying UK corporate income; wages including bonuses rose by 8.2% in June, the fastest rate of growth since records began in 2001 — meaning wage growth is now above inflation. On the other hand, retail sales fell by a hefty 1.2% in July underscoring the reality that wages have some time to catch up to the inflation of the past two years.
    Overall, the markets are expecting the base rate to now peak at 6% — but these predictions seem to change with the winds. It was only a few short weeks ago that Schroders was predicting a terminal rate of 6.5%, and JP Morgan even speculating that it could reach as high as 7%.
    But where there’s uncertainty, there’s often opportunity. But remember, past performance is not an indicator of future returns.
    Best FTSE 250 shares to watch
    1. Marks & Spencer
    Under the transformational leadership of CEO Stuart Machin, Marks & Spencer Group has gone from strength to strength in 2023. The FTSE 250 company increased its profits guidance last week after declaring a period of ‘strong trading.’
    Over the past 19 weeks, food sales have risen by 11% while clothing and homeware is up by over 6%. And the company is selling more items at full price, in stark contrast to competitors who are in the throes of price cuts. The only recent cloud is that chief digital and technology officer Jeremy Pee — who only started in January — is leaving to return to Canada.
    Regaining its place in the FTSE 100 is now on the cards, with the FTSE 250 stock up 73% year-to-date to 219p. For context, annual revenues came in at £11.9 billion in May, a full £1 billion higher than in the prior full year.
    As a caveat, it’s worth considering that the tighter monetary environment may make achieving growth less complex than maintaining it.
    2. Crest Nicholson
    Crest Nicholson issued in some ways the opposite guidance to investors this morning, warning that full-year adjusted profit before tax is now expected to be circa £50 million, down from analyst expectations of £73 million. Shares have fallen by 8.3% today, and are now close to their pandemic crash low, at 178p.
    The mid-tier housebuilder blamed the ‘poor trading environment’ and legacy costs at its Brightwells Yard development — with its sales rate per outlet per week falling to just 0.25 in the 7 weeks to August 18, down from 0.50 in the first half. And the FTSE 250 company does not expect any material improvement before the end of October.
    Further, while it’s negotiating bulk land deals to support future delivery volumes, management is actively reducing overheads and scaling back growth plans. For context, Rightmove data shows that UK asking prices fell by 1.9% month-on-month in the five weeks to 12 August.
    But with Help to Buy now over, mortgage rates peaking, and the likelihood of further stimulus slim, it might be the case that much of the headwinds is now priced in.
    It’s worth noting that average house prices are still circa 20% higher than pre-pandemic. Crest retains a strong financial position, plans to pay the dividend as usual, and boasts experienced leadership used to the cyclical nature of the housing market.
    3. ABRDN
    ABRDN shares have fallen by 56% over the past five years, and 30% over the past month alone, with many analysts blaming a botched rebrand alongside nimbler competitors. In recent half-year results, the investment management company saw net outflows of £4.4 billion, with the investor reaction perhaps to be expected.
    However, the FTSE 250 company may now be appealing to value investors. There’s still £496 billion of assets under management (AUM0 to consider, alongside a dividend yield of 9%. If you compare the fundamentals to its competitors, ABRDN may be considered oversold — though it’s worth observing that the interim dividend of 7.3p is only just covered, at 1x adjusted capital generation.
    But on the bright side, adjusted operating profit rose by 10% to £127 million, while adjusted capital generation also increased by 33% to £142 million. IFRS losses before tax came in at £169 million, but much of this can be accounted for by a £181 million reduction in the value of shares in companies on its balance sheet — and these paper losses could well be recovered over the longer term.
    The key point is that the company is cyclical; with interest rates comparatively high, cash is currently attractive compared to ABRDN’s asset management returns. When — or if — rates start to fall, a strong recovery could be in the works.
     
     
     
     
     
    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
    Preserving some defensive stocks in the share portfolio will help hedge against potential risk and install a safety net in the event of a downturn in the financial markets.
    Source: Bloomberg   Shares Telstra AGL Energy Wesfarmers Recession Market sentiment   Hebe Chen | Market Analyst, Melbourne The global economy is notably suffering after experiencing two very profitable years during the Covid-19 pandemic. Even though we understand that financial markets remain resilient in the face of tough times, there are several reasons why investors should consider bolstering their portfolio with defensive stocks while preparing for the next recession.
    Leaving some defensive stocks in the share portfolio will help to hedge against potential risk and will install a safety net in the event of a downturn in financial markets. A small proportion of your investments should be deployed there when you have a bullish stance on the future of equities, with more funds being allocated when bearish sentiment emerges.  
    In addition, defensive stocks can inject some stability to your share portfolio when financial markets are volatile or when the economy is heading for a downturn.
    Like safe havens, investors tend to start piling defensive stocks when bearish sentiment emerges which can help identify when the market experiences a change in mood. This applies the other way too, with an unravelling of defensive stocks suggesting investors are selling up as they have a greater appetite for riskier investment opportunities.  
    Today, I would like to introduce five ASX-listed defensive stocks for your reference.
    Bega Cheese – food and drink producer Wesfarmers – consumer staple Telstra – telecoms AGL – energy CSL – pharmaceuticals 1. Bega Cheese – food producer
    Food or drink manufacturers and sellers are regarded as defensive businesses as people always need to eat and drink regardless of economic performance. They often outperform the wider market during the downturn and can span a variety of sectors including those that produce the food, those that sell it, agriculture, ingredient suppliers, and so on.  
    Bega Cheese is one of the largest companies in Australia’s dairy sector and the household name behind Australia’s iconic Vegemite. For the first half of the 2022 financial year, Bega Cheese reported its revenue to be up 113% to $1.5 billion against the prior corresponding period with earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 48% to $97.2 million.
    Key metric
      Source: Bega
    2. Wesfarmers – consumer staple
    General retailers that sell everyday products like Wesfarmers, Woolworth and Coles carry defensive qualities with low beta scores and reliable dividends. The Wesfarmers group owns one of the highest quality retail portfolios in Australia with strong in-demand brands including Bunnings, Kmart, and Officeworks.
    While the company is facing the headwinds from the soaring inflation and cost pressure, from a long-term perspective, the services, and products it provides remain firmly on top of the priority list for every single Australian family during the downtimes.
    Key metric
      Source: Wesfarmers
    3. AGL – energy
    While many stocks' defensive characteristics spawn from their international reach and diversification, others get theirs through owning monopolies in crucial areas. Utilities providing electricity and water are heavily regulated businesses with limited competition in their markets.  
    AGL Energy Limited is Australia's leading integrated energy company and the largest ASX-listed owner, operator, and developer of renewable energy. The AGL share price has outperformed the ASX 200 through 2022 so far and although the recent financial shows negative earnings per share, the company expects the EPS to return to positive in 2023 and move up steadily afterwards.
      Source: AGL
    4. Telstra – telecommunication
    Telecom companies and infrastructure managers secure income by providing necessary services on a contract basis. Phones, broadband and television are all seen as the basics for any household in a developed economy and signing people up on contracts means their revenue is more predictable.
    Telstra is Australia’s largest telecom provider, which builds and operates telecommunications networks and markets voice, mobile, internet access, pay television, and other products and services. It is a member of the S&P/ASX with the largest market capitalization in the telecommunications sector. Telstra’s diversified and entrenched customer base provides the group with a stable revenue stream making it one of the market’s favourite yield stocks for decades.
    Key metric
      Source: Telstra
    5. CSL
    Pharmaceutical companies are responsible for producing vital medicines and treatments and are often treated as a priority by governments and consumers. Due to this, their spending is not hastily cut down in the event of a downturn and the CSL is the third-largest company on the ASX with a market capitalisation of approximately $126.17 billion.
    CSL is the third-largest company on the ASX, with a market capitalization of approximately $126.17 billion. The multinational specialty biotechnology company is also a market leader in the research, development and manufacturing of products that treat and prevent critical human medical conditions. The company is growing at a strong and steady pace and it has managed to grow its revenue at a rate between 7 to 15% during the past five years.
    Key metric
       
    Source: CSL
     
     
     
     
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  20. MongiIG
    Fitch’s US rating downgrade highlights concerns surrounding US debt, but is this enough to press the ‘risk off’ button?
     
     Angeline Ong | Financial Analyst, Presenter and Content Editor, London | Publication date: Thursday 03 August 2023 14:47 IG financial analyst @AngelineOng caught up with Shard Capital’s @Bill_Blain to find out why he thinks the US jobs report is the bigger risk event.
    (Video Transcript)
    Eye on global assets
    Hello, I'm Angeline Ong, and welcome to IG's Trading the Markets. Here to discuss the outlook for global assets, now that investors have had a bit of time to digest the fit downgrading the US's credit rating is Bill Blain, strategist and head of alternative assets at Shard Capital.
    AO: Bill, there seem to be two camps out there. Some brokerages say the downgrade is unlikely to result in a sustained drag on US financial markets. And then there's another camp, there's CEO Jamie Dimon, JP Morgan, of course, calling Fitch the move ridiculous, and Janet Yellen saying it's based on outdated data. Which camp are you in?
    BS: Well, I'm on the side that says Fitch are absolutely right to be raising the risks of increased political conflict in the US. They call it governance in the full statement. Now, some of the points they make about the US budget deficit and the sustainability are all fair points, but, you know, I don't think that we face, in normal circumstances, a risk of the US defaulting.
    It's simply not going to happen. They can press the printing press button and print more money to get into that situation. Now, that has consequences for the currency yield. But the key thing that this report highlights is rising political risk.
    And it's interesting that it came the same day that former President Trump was indicted on effectively treason charges against the US. Now, that risk of increased polarisation and increased conflict in terms of the debt ceiling and all the negotiations that go around that, that's what we're really looking at in terms of what the risks identified here are.
    Fitch shakes things up
    AO: Bill, I've been watching the reaction to Fitch, and at first there was a bit of a judder, as you rightly pointed out, but then it started stabilising across different asset classes. There were some Asian stocks and markets that still registered losses earlier today, but it seems to have come into a more even keel. What do you think this means for investors who were slightly concerned and thinking, perhaps I should change my allocation, or should they stand pat and watch out for perhaps another set of figures that might give us better direction?
    BS: You know, we've got some really interesting other numbers coming up. And, you know, later today, some of the big tech companies will be reporting earnings. If they come in weaker than expected, that's going to fuel the sentiment that's developing that tech earnings are getting overstated in terms of their valuations.
    We've also got an absolutely critical number on Friday, which is the US employment report. And the suspicion there is that the resilience or the apparent resilience of the US economy and the fact that it seems to be heading towards that holy grail of a soft landing, that's actually a lagging effect in terms of the 13 interest rate hikes that the Federal Reserve (Fed) has made.
    People now think the US economy may not be as strong as we thought it was, as resilient as we thought it was. And if that happens, that's going to really impact expectations in the stock markets. So, every day, you have some earnings or some economic numbers. It's just when you have Apple reporting and then you have the big monthly employment data, they really have the capability to shake markets.
    So, on top of yesterday's shock and surprise from the downgrade, which does have implications for big investors and then maybe a little bit of a dent in the over-rosy expectations for tech stocks, and then the resilience of the economy being damaged, together they amount to quite a substantial shock for investors.
    And we could see something of correction in the equity markets as a result. Of course, if they come in stronger than expected, then everyone will rejoice, and they'll start spending more money again and buying stocks and everything will go stratospheric again.
    The market as a ' voting machine'
    AO: Speaking of a correction or a reset, some think that perhaps there might be a buying window later this year, maybe even this quarter. What are your thoughts on that and what would you look out for before making this decision?
    BS: I certainly have thought about this: we're not going to have a kind of major devastating crash of the kind that we saw in the 1920s. No, I'm not old enough to remember it personally, but I do remember very well what happened in 2007 and 2008.
    I don't think we're heading for that kind of thing, but I think we're going to see certainly the current market uncertainties and instabilities mean that some kind of reset, some kind of rationalisation of expectations is more likely to occur than not, because there are so many things that investors are beginning to fear.
    Now, one of the things you've got to remember is that markets are not clever. They are not omnipotent. All that the market is, is a voting machine, and it sums up what everybody thinks collectively and has waited for the amount that they spend to back that thinking.
    And that really depends on sentiment, and we've got a lot of sentiment issues coming up just now. We've got things like rising consumer debt, which is on top of the inflation effects, biting into discretionary spending, things like cars, for example. We've also got corporates under trouble because they can't refinance themselves. Credit conditions are tightening. We've got concerns about the banking sector in terms of how much they hold of underwater debt. You've also got things like, as I've talked about earlier, politics is going to be, you know, we're running into an election cycle in the US and the UK, which are both going to be extremely polarising.
    If you take all these things together and a host of other things, like just how overvalued the tech sector looks because of this AI bubble, and all these things point to some kind of correction. That's my expectation. Other people think that markets are going to go higher and that we will see inflation drop completely, and that should boost the chances of interest rates being cut, which would obviously be very positive.
    AO: We have to leave it there. Interesting stuff. Bill Blaine there, sharing his thoughts on the Fitch downgrade and where financial assets will go for the rest of this year. Bill Blaine, strategist and head of alternative assets at Star Capital.
  21. MongiIG
    As the Bank of England predicts inflation will hit 10.2% later this year, the FTSE 100 offers an excellent selection of defensive stocks.
    Source: Bloomberg   Shares Inflation Recession Economy Stock Bank of England
     Charles Archer | Financial Writer, London Last week, the Bank of England set in stone that which investors have been afraid to hear. Whilst increasing the base rate to 1%, it predicted that double-digit inflation will see the UK’s economy contract by 0.25% in 2023.
    While the country should avoid a technical recession (two consecutive quarters of falling GDP), Governor Andrew Bailey admitted that ‘it is a very obviously sharp slowdown in activity.’
    But MPC member Huw Pill has rejected the notion that the UK is headed for stagflation, saying ‘we are not headed in that direction.’
    However, Capital Economics expects the base rate to strike 3% next year, arguing that the ‘weakening economy won’t do the MPC’s job.’ And given the Bank’s inflationary track record, investors are understandably nervous about the economy’s future trajectory.
    Meanwhile, Chancellor Rishi Sunak is resisting calls to increase financial support for the economy despite poor local elections results.
    And as equities fall, the pound drops, and growth stalls, many investors are recalibrating their portfolios in favour of defensive stocks to combat the spectre of recession.
    FTSE 100 Defensive Stocks
    The widespread appeal of defensive stocks is that they usually outperform the market during recessions. Regardless of external events, their dividends, earnings and share prices usually remain comparatively stable, because they offer a product or service for which there is consistent demand. This could be because they hold a dominant market position, hold a reputation for value for money, or even provide the bare necessities.
    In investor vernacular, the best stocks within defensive sectors benefit from ‘inelasticity of demand,’ making them ‘safe havens.’ If they raise prices to tackle inflation, consumers will almost always still buy the product or service.
    And with UK growth grinding to a halt, increased investment in defensive stocks grants investors the ability to protect their wealth from inflation whilst minimizing their stock market risk.
    Source: Bloomberg Best FTSE 100 defensive sectors
    Happily, for UK investors, the FTSE 100 is packed with some of the best defensive sector stocks.
    First and foremost is Consumer Staples, which is the sector with companies that sells essential products and services. FTSE 100 examples include stalwarts like AB Foods, Tesco, Unilever, and British American Tobacco. Consumers will always purchase food, household products, and tobacco, regardless of financial means or the wider economic picture.
    Second is the Healthcare sector. There is consistent demand for medical treatments every year, as well as financial incentives to develop new drugs. And as a consequence of the covid-19 pandemic, there is strong political consensus that FTSE 100 healthcare companies are to be backed for future preparedness. Giants GlaxoSmithKline and AstraZeneca are excellent examples.
    Third is the Utilities sector. The risk-reward ratio is currently elevated as the global transition towards renewables amid climate goals and the rejection of Russian fossil fuels. But the need for electricity, gas, and water will never subside. FTSE 100 exemplars include National Grid and Centrica.
    Finally, telecommunication is an excellent defensive sector, as consumer demand for mobile phones and broadband services remains consistent. While some growth may now be found from the expansion into 5G and superfast internet, demand for connectivity means that titans like BT and Vodafone are unlikely to see weakened demand, even if recession strikes.
    Of course, there’s a strong argument that growth stocks, having taken a hammering so far in 2022, are now at excellent buy-in points. For example, the tech-heavy NASDAQ Composite is down 23% year-to-date. Both ARK Innovation ETF and Scottish Mortgage are in the doldrums despite previous years of outperformance. And there’s no knowing where the bottom might be.
    Moreover, FTSE 100 stocks like the oil majors BP and Shell, or mining giants Rio Tinto and Anglo American, currently offer far better returns than those in the defensive sectors. However, the cyclical nature of commodities does leave investors at the mercy of demand volatility.
    And as rising inflation and interest rates continue to increase the risk of a full-blown recession, the hallmark consistency of FTSE 100 defensive stocks becomes ever more appealing.
    Go short and long with spread bets, CFDs and share dealing on 16,000+ shares with the UK’s No.1 platform.* Learn more about trading shares with us, or open an account to get started today.
    * Best trading platform as awarded at the ADVFN International Financial Awards 2021
  22. MongiIG
    Coinbase’s share price has skyrocketed by an eye-watering 180% this year. With the Q2 quarterly report and the ongoing unsettled with the SEC, the upcoming earnings date is poised to be a major highlight on investors' calendars.
    Source: Bloomberg   Shares Coinbase U.S. Securities and Exchange Commission Revenue Security Cryptocurrency
    Hebe Chen | Market Analyst, Australia | Publication date: Thursday 03 August 2023  Coinbase Q2 Earnings Date:
    Coinbase is scheduled to report its second quarter (Q2) earnings after the market closes on the 3rd of August, 2023.
    Coinbase Q2 Earnings Expectation:
    EPS: $-0.62 (vs $-1.23 in Q2, 2022)
    Revenue: $640.41M (vs 865.38M in Q2,2022)
    Coinbase Q2 Earnings Key Watch Points
    Subscription and Services Revenue:
    Based on Coinbase's guideline published with its first-quarter earnings, the trading platform is optimistic that the momentum in its subscription and services revenue will carry over into the second quarter. According to the Q1 results, Coinbase experienced substantial growth in revenue from subscriptions and services, which increased by 16% quarter-over-quarter, reaching $361.7 million. This growth was largely attributed to the rising market capitalization of Crypto assets and increased market volatility during that period.
    However, the company is also aware that despite the continued uptrend in market capitalization in the second quarter, the overall market volatility has notably slowed down. In fact, during the first month of the second quarter, the volatility in the Crypto market was 25% lower than the average seen in Q1. As a result, Coinbase expected the Q2’s revenue from subscriptions and services to stay relatively close to the Q1 level, estimating it to be around $300 million.
    Source: Coinbase Q1 earnings report Cost-efficiency
    Early this year, Coinbase anticipated that the company's transaction expenses for the second quarter can be kept in the low and mid-teens, in line with the results from the first quarter, which were at 13%.
    However, a sharp increase in sales and marketing expenses is also anticipated. The company projects that the money spent on sales and marketing could increase from $64 million to $80-$90 million, potentially substantially increasing its percent of net revenue. Additionally, the cost of technology development, combined with general administrative expenses, is also expected to increase from $596 million to $600-$650 million.
    Source: Coinbase Q1 earnings report SEC Lawsuit
    In June, the US Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, accusing the company of operating as an unregistered securities exchange and identified 13 cryptocurrencies traded on the platform as securities. The alleged securities may subject Coinbase to SEC supervision, but the company has opted not to register with the commission. Now, it appears that the company's future heavily depends on the outcome of the court case. Hence, it’s also crucial for the company to restore the shareholders' confidence at this very critical timing.
    Coinbase Technical Analysis
    From a technical perspective, resurging concerns surrounding the SEC lawsuit have caused the price to pull back from its peak of the year, reaching near $110 in July. Notably, the price has also broken through the mid-term ascending trendline and is currently facing challange at the 20-day MA.
    In the near-term, the key support level to watch will be at $90, and a further decline from there could open the floor to its mid-March peak at $83. On the flip side, the 20-day MA at around $94 will continue to be a crucial level for the price to resume its bull-biased momentum before establishing a renewed uptrend.
    Source: IG
  23. MongiIG
    Asian stocks look set for a subdued open, following a mixed showing in Microsoft and Alphabet’s result releases after-market.
    Source: Bloomberg   Indices Shares Federal Reserve Inflation Federal Open Market Committee Central bank  
     Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 26 July 2023 Market Recap
    Wall Street saw a drift higher overnight (DJIA +0.08%;S&P 500 +0.28%; Nasdaq+0.61%), uplifted by outperformance in the technology (+1.2%) and materials (+1.8%) sectors, but after-market moves were more subdued following Microsoft and Alphabet’s result releases.
    Both big tech companies beat top and bottom-line estimates, but market participants are finding some unease with the weaker-than-expected revenue guidance from Microsoft, which overshadowed its current Q4 resilience. Continued weakness in the PC market was to be blamed, likely to be cushioned by consistent growth momentum in its Intelligent Cloud segment, but coming off a 46.5% year-to-date rally, much may be priced for perfection. Its share price is down 4% after-hours.
    The US$327.00 level could serve as a key support confluence level (trendline support, 50-day MA, Ichimoku) to hold in the near term, with the broader trend still leaving the formation of any new higher low on watch. But for now, some defending will have to come from buyers tonight, as its relative strength index (RSI) is flirting with the key 50 level. Past three interactions since April this year were met with some support, so one to watch if it can hold this time round as well.
     
    Source: IG charts  
    On the other hand, Alphabet managed to surprise on a stronger-than-expected rebound in advertising and steady growth in its cloud-computing unit, which may validate the resilience in economic conditions thus far. Improving year-on-year revenue growth for the second straight quarter also provides some conviction for the worst-is-over view, with further recovery expected over coming quarters.
    Ahead, all eyes will be on the Federal Open Market Committee (FOMC) meeting outcome. The Fed funds futures suggest that a 25 basis-point (bp) hike has been fully priced, but expectations for subsequent rate path remain misaligned with policymakers’ views. Broad market pricing are looking for an extended rate pause through the rest of the year, while Fed officials could likely leave the door open for one more rate hike in the September or November meeting. Interpretation of the Fed’s rate path will revolve heavily around Fed Chair Jerome Powell’s press conference.
    Asia Open
    Asian stocks look set for a subdued open, with Nikkei -0.34%, ASX +0.13% and KOSPI -0.54% at the time of writing. Chinese equities had a strong positive reaction yesterday to China’s recent stimulus pledge, with the Hang Seng Index up 4.3% in a single trading session. But much will still depend on the Politburo meeting outcome for any follow-through, with strong stimulus hopes in place also providing room for disappointment if the stimulus details were to lack conviction.
    The economic calendar will leave Australia’s Q2 inflation rate on the radar. Despite keeping its rate on hold at the previous meeting, the Reserve Bank of Australia (RBA) has shown a clear intention to be on the lookout for incoming data to guide its next decision. Off the back of recent firm labour data, rate expectations saw a hawkish build-up for another 25 bp hike from the central bank over coming months, but better-than-expected progress in inflation may likely challenge that. Current expectations are for headline inflation to fall to 6.2% YoY from 7%. The RBA's preferred measure of core inflation, the Trimmed Mean, is expected to fall to 6.0% YoY from 6.6% previously.
    Perhaps one to watch may be the AUD/NZD, which has recently bounced off a resistance-turned-support trendline but is currently hovering just below its 1.091 level of resistance. A move in the RSI back above the 50 level marked an attempt for buyers to retain control, as moving average convergence/divergence (MACD) attempts for a cross above the key zero line. Any successful move above the 1.091 level could potentially pave the way to retest its year-to-date high at the 1.108 level next.
     
    Source: IG charts  
    On the watchlist: US dollar on watch in the lead-up to the FOMC meeting outcome
    The US dollar has attempted to reclaim its key psychological 100.00 level ahead of the FOMC meeting outcome but some reservations are still in place, with a bearish shooting star candle in formation on the daily chart overnight. This follows after a retest of the 50% Fibonacci retracement level from the recent sell-off. The recent CFTC data also revealed that the aggregate dollar positioning versus G10 currencies have headed further into net-short territory last week, turning in its highest net-short positioning since June 2021.
    While the Fed is likely to keep the door open for another rate hike after July, we are still nevertheless treading in the final phase of the Fed’s hiking cycle. A hawkish tone from the central bank could be supportive of the US dollar, but given the broader downward trend on lower highs and lower lows, any upside could still leave any formation of a new lower high on watch. Near term, the 101.30 may serve as immediate resistance to overcome, while on the other hand, failing to hold the key 100.00 level could pave the way back towards its July low at the 99.20 level for a retest.
     
    Source: IG charts  
    Tuesday: DJIA +0.08%; S&P 500 +0.28%; Nasdaq +0.61%, DAX +0.13%, FTSE +0.17%
  24. 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 31 July
    Chris Beauchamp's insight
    A busy week of jobs data and earnings reports lies ahead. US payrolls end the week on Friday, while China purchasing managers index (PMI) and the US ISM PMIs are also key events along with eurozone gross domestic product (GDP). Earnings come from across the S&P 500, including Pfizer, Uber, Apple, Amazon and ConocoPhillips. The two tech giants are likely to be the most closely-watched this week.
    Economic reports
    Weekly view Monday
    2.30am – China PMIs (July): manufacturing PMI to fall to 48 from 49, and non-manufacturing to fall to 52.9 from 53.2. Markets to watch: China indices, CNH crosses
    10am – eurozone GDP (Q2, flash), CPI (July, flash): GDP to grow 0.3% QoQ from 0%, and 0.6% from 1.1% YoY. CPI to be 5.2% from 5.5% YoY, and fall 0.2% from a 0.3% rise MoM. Markets to watch: eurozone indices, EUR crosses
    2.45pm – US Chicago PMI (July): index to rise to 43 from 41.5. Markets to watch: USD crosses
     
    Tuesday
     
    2.45am – China Caixin manufacturing PMI (July): index to fall to 49 from 50.5. Markets to watch: China indices, CNH crosses
    5.30am – Reserve Bank of Australia rate decision: rates expected to rise 25 basis points, from 4.1% to 4.35%. Markets to watch: AUD crosses
    8.55am – Germany unemployment (July): unemployment rate to hold at 5.7%. Markets to watch: EUR crosses
    3pm – US ISM manufacturing PMI (July): index to rise to 48 from 46. Markets to watch: USD crosses
     
    Wednesday
    1.15pm – US ADP employment report (July): private payroll survey to show an increase of 210,000 jobs, compared to 497,000 in June. Markets to watch: US indices, USD crosses
    3.30pm – US EIA crude oil inventories (w/e 28 July): previous week saw stockpiles fall by 600,000 barrels. Markets to watch: Brent, WTI
     
    Thursday
    2.45am – China Caixin services PMI (July): index to fall to 52 from 53.9. Markets to watch: China indices, CNH crosses
    12pm – Bank of England rate decision: rates expected to rise 25bps as the Bank seeks to bring inflation under control. Now that UK CPI has slowed, we may see some caution about future hikes. Markets to watch: FTSE 100/250, GBP crosses
    1.30pm – US initial jobless claims (w/e 29 July): claims to rise to 225K. Markets to watch: US indices, USD crosses
    3pm – US ISM services PMI (July): index to fall to 52 from 53.9. Markets to watch: US indices, USD crosses
     
    Friday
    1.30pm – US non-farm payrolls (July): payrolls to rise 190K from 209K last month, and unemployment rate to hold at 3.6%. Average hourly earnings to rise 0.3% from 0.4% MoM, and 4.3% from 4.4% YoY. Markets to watch: US indices, USD crosses
    1.30pm – Canada employment report (July): unemployment rate to rise to 5.5% from 5.4%. Markets to watch: CAD crosses
    3pm – Canada Ivey PMI (July): expected to fall to 49.7 from 50.2. Markets to watch: CAD crosses
      Company announcements
     
     
     
     
    Monday
    31 July
    Tuesday
    1 August
    Wednesday
    2 August
    Thursday
    3 August
    Friday
    4 August
    Full-year earnings
      Diageo       Half/ Quarterly earnings
    Pearson BP,
    Greggs,
    HSBC,
    Fresnillo,
    Travis Perkins,
    AIG,
    PayPal,
    Caterpillar,
    AMD,
    Starbucks,
    Uber,
    Merck,
    Pfizer Taylor Wimpey,
    BAE Systems,
    Haleon,
    Qualcomm,
    Kraft-Heinz LSE,
    Adidas,
    Societe Generale,
    BMW,
    Ab InBev,
    ConocoPhillips,
    GoPro,
    Airbnb,
    Coinbase,
    Moderna
    Apple,
    Amazon
    WPP,
    Credit Agricole Trading update*
          Pets at Home,
    Next    
        Dividends
    FTSE 100: BT, Unilever, Lloyds, Reckitt Benckiser, RELX, Rentokil
    FTSE 250: Oxford Instruments, Moneysupermarket.com, Games Workshop, Tyman, Rathbones, Jupiter, Inchcape, Vesuvius
  25. MongiIG
    Legal and General, Rio Tinto, and Persimmon could constitute the three best FTSE 100 dividend shares to watch in August 2023.
    Source: Bloomberg   Forex Indices Shares FTSE 100 Dividend Rio Tinto
     Charles Archer | Financial Writer, London | Publication date: Monday 24 July 2023  The FTSE 100 has enjoyed somewhat of a volatile 2023, starting the year at 7,554 points, breaking the symbolic 8,014 points barrier in February, before falling to as low as 7,257 points in early July. The index has bounced back over the past fortnight to 7,653 points, but further volatility seems likely given the FTSE’s overweighted composition of oilers, miners, and banks.
    For context, FTSE Russell data shows that 82% of FTSE 100 companies’ income is derived from overseas. This means that the strength of sterling is more important than UK domestic economic performance, and particularly the exchange rate with the US dollar.
    If a FTSE 100 company generates most of its revenue in US dollars, and then converts this revenue into sterling, a weaker pound means that the company will report higher earnings as the same of amount of US dollars translates into more pounds.
    This matters because when the Bank of England increases the base rate, the pound strengthens, hurting FTSE 100 corporate income. Of course, if rates start to fall, it hurts different FTSE 100 companies which are reliant on imports.
    And the trajectory of both inflation and interest rates in the UK remains uncertain.
    CPI fell from 8.7% in May to 7.9% in June — exceeding forecasts of a drop to 8.2%. Consequently, JP Morgan’s prediction that the base rate could rise to as high as 7% in a worst-case scenario, might now be overly pessimistic.
    However, while the markets are set by expectations, 7.9% CPI inflation is still higher than the 7.0% print of March 2022, and almost quadruple the official 2% target. And analysts still believe that the base rate will rise to 5.75% by the end of the year — and stay there for some time.
    This makes picking the bets FTSE 100 dividend stocks somewhat of a challenge. But where there’s uncertainty, there’s often opportunity.
    Best FTSE 100 dividend stocks to watch
    1. Rio Tinto (LON: RIO)
    Rio Tinto shares have risen by 18.6% over the past year, leaving the FTSE 100 miner with an attractive 6.2% dividend yield. Despite a 36% decrease in net cash generated from operating activities last year, Rio Tinto remains committed to dividend investors having returned $8 billion in 2022, equivalent to 60% of total underlying earnings.
    Of course, Rio Tinto's dividend performance is closely tied to global demand, and particularly for the iron ore it mines from the Pilbara region in Western Australia, which is heavily influenced by Chinese demand.
    In an update in advance of Wednesday’s half-year results, Rio noted that ‘China’s economic recovery has fallen short of initial market expectations as the property market downturn continues to weigh on the economy...China’s reopening recovery started strongly but slowed in the second quarter. Consumption is still improving, while weakness in the export and property sectors is providing a drag to growth. Factory activity has slowed down, as manufacturing PMI contracted.’
    However, while half-year results may disappoint in the short term, the company's strategic investments in projects such as the Oyu Tolgoi copper-gold project in Mongolia and the Rincon Lithium Project in Argentina position it for long-term growth.
    2. Legal & General (LON: LGEN)
    Legal & General has been a FTSE 100 dividend favourite for years, and while past perfomance is no guarantee of future results, 2023 may be no different. Its share price has dropped by 7.5% year-to-date, leaving LGEN with an attractive dividend yield of 8.3%.
    The FTSE 100 insurer boasts a strong balance sheet, reflected by its a Solvency II coverage ratio of 240%. In FY22 results, LGEN saw operating profit rise by 12% to over £2.5 billion, with a return on equity of 20.7% and new business from PRT rising from £7.2 billion to £9.5 billion. This growth included a 23% increase from international markets, highlighting the FTSE 100 company’s expansion plans in the US, Asia, and Europe.
    Its reliable dividend is secured by its wide economic moat; the brand is well recognised and generally trusted by over 10 million customers in the competitive finance sector. Further, it sports a diversified business model, focusing on pensions, annuities, and equity release products, which provides solid growth opportunities as western populations age.
    Most importantly, the company increased its full-year dividend by 5% to 19.37p in 2022, demonstrating a commitment to rewarding shareholders.
    The only concern to consider — other than inflation — is that long-term CEO Nigel Wilson is leaving at the end of the year. His replacement, António Simões, has already been selected and will formally take up his post on 1 January 2024. This leaves ample time for the handover, but there is usually volatility when a reliable pair on hands cedes control of the tiller.
    3. Persimmon (LON: PSN)
    Persimmon shares have fallen by 37% over the past year, reflecting the challenging housing market amid rising rates, new restrictive landlord rules, and the withdrawal of key first time buyer incentives including Help to Buy.
    However, the dividend yield now stands at a whopping 14.4%. While this may not be sustainable, this may prove too tempting for some investors to ignore, and especially those with a long-term mindset who are prepared to wait for the real estate cycle to return to positivity.
    In FY22, revenue at the UK’s largest housebuilder reached £3.82 billion and pre-tax profits rose above £1 billion. Meanwhile, new build completions rose slightly to 14,868.
    And in Q1 results, CEO Dean Finch enthused that ‘Trading over recent weeks has offered some signs of encouragement with visitor numbers up, cancellation levels normalising and sales rates continuing the steady improvement evident since the start of the year. If sales rates continue at the levels seen year to date, we would expect full year 2023 volumes to be toward the top end of the previously indicated range of 8,000 to 9,000 completions.’
    The CEO also noted that ‘The longer-term demand fundamentals for new homes remain robust and Persimmon has made significant progress over the past two years in building a stronger, more sustainable business for the future.’
    Half year results arrive on 10 August.

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

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

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

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

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