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ArvinIG

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  1. ArvinIG
    USD/JPY rallies to a fresh yearly high as it extends the series of higher highs and lows from earlier this week.

    Source: Bloomberg   Forex United States dollar Japanese yen USD/JPY Federal Reserve Exchange rate   USD/JPY extends the advance from the start of the month despite the recent pullback in US Treasury yields, and the bullish momentum underlying the exchange rate looks poised to persist as long as the RSI holds above 70.
    As a result, USD/JPY may attempt to test the August 1998 high (147.67) as Federal Reserve Vice-Chair Lael Brainard warns that “monetary policy will need to be restrictive for some time,” and expectations for higher US interest rates may keep the exchange rate afloat ahead as the central bank appears to be on track to retain its current approach in combating inflation.
    In turn, USD/JPY may continue to track the positive slope in the 50-Day SMA (136.67) amid the diverging paths between the FOMC and Bank of Japan (BoJ), and it remains to be seen if the Fed will adjust the forward guidance at its next interest rate decision on September 21 as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).
    Until then, USD/JPY may continue to appreciate amid speculation for another 75bp Fed rate hike, while the tilt in retail sentiment looks poised to persist as traders have been net-short the pair for most of 2022.

    Source: DailyFX The IG Client Sentiment report shows only 21.58% of traders are net-long USD/JPY, with the ratio of traders short to long standing at 3.63 to 1.
    The number of traders net-long is 6.78% higher than yesterday and 0.85% lower from last week, while the number of traders net-short is 1.10% higher than yesterday and 14.73% higher from last week. The decline in net-long position comes as USD/JPY trades to a fresh yearly high (144.99), while the rise in net-short interest has fueled the crowding behavior as 24.40% of traders were net-long the pair last week.
    With that said, USD/JPY may attempt to test the August 1998 high (147.67) as it extends the series of higher highs and lows from earlier this week, and the overbought reading in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.
    USD/JPY rate daily chart

    Source: TradingView

    David Song | Analyst, DailyFX, New York City
    08 September 2022 

    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.
  2. ArvinIG

    Aston Martin shares fall on rights issue

    By ArvinIG,


    Analyst Article
    The luxury car manufacturer launched the fundraising to pay down its debt mountain

    Source: Bloomberg   Shares Aston Martin Debt Car Luxury car Interest   Shares in Aston Martin Lagonda slumped by 16% on Monday to 405p after the company priced its rights issue at a substantial discount.
    The luxury car manufacturer, favoured by James Bond, is launching a four for one rights issue to raise £575.8 million. As such, the company is issuing 559 million shares priced at a 78% discount to last Friday’s closing price.
    Aston Martin rights issue to pay down debt
    Half of the proceeds will be used to deleverage the company, which has £1.3 billion of debt, as well as invest in new car production. Existing investors Yew Tree Consortium and Mercedes Benz participated in the rights issue, which also brings in Saudi Arabian sovereign wealth fund PIF.
    Aston Martin Lagonda told investors that since the Yew Tree Consortium invested in early 2020, the company had made “significant progress to fulfil its vision of becoming the world's most desirable ultra-luxury British performance brand.” It said that the company has also managed to reduce manufacturing costs by 20% per unit and seen a “significant increase in brand awareness, expanding the Group's reach, with 60.5% of customers in the 12 months leading up to June 2022 new to the brand.” The return of Aston Martin to the Formula 1 grid also boosted sales.
    Aston Martin still reeling from Covid-19
    However, management also acknowledged that the Covid-19 pandemic also had “a significant detrimental impact on the business in 2020, which led to a refinancing at the end of that year,” leaving the company with a “significant debt burden and associated interest costs,” which it wished to solve. The effects of the Ukraine war and supply chain issues have also weighed on the company.
    At the half-year results in July, revenues rose by 9% to £541.7 million (from £498.8 million). However, total wholesale volumes fell by 8% to 2,676 units (from 2,901), while losses before tax tripled to £285.4 million from £90.7 million in 2021.
    Nevertheless, trading is expected to pick up for the full-year, with free cash flow forecast to turn positive in the second-half. Management anticipate “significant growth on 2021,” with an estimated 8% increase in unit sales and a 50% improvement in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), boosted by the Aston Martin Valkyrie and DBX707. Its first electric model is due for release in 2025.
    However, potential flies in the ointment include the Ukraine war, Covid-19 lockdowns in China, raw material price hikes and logistics and supply chain issues. Charles Coldicott, auto sector analyst at Redburn, told the FT the company may also face relegation from the FTSE 250 later this year.
    Shares in the car maker have fallen by 78% this year and currently trade at 434p. The rights issue should solve the debt burden, however even Aston Martin’s customers may not be immune from the cost of living crisis and rampant inflation.
    Piper Terrett | Financial writer, London
    08 September 2022
  3. ArvinIG
    VALUE AND GROWTH STOCKS:
    Value and growth stocks valuations will be impacted differently by a shift in the monetary policy outlook Value tends to outperform the growth factor when the Fed increases interest rates When interest rates fall in the economy, growth companies outperform their value counterparts   Most Read: How Does the Stock Market Affect the Economy? A Trader’s Guide
    When the Federal Reserve adjusts its monetary policy stance by either raising or lowering borrowing costs, the investment landscape changes, becoming more friendly or more hostile to the equity market. In this article, we will discuss how valuations and performance of value and growth stocks tend to be affected by rising and falling interest rates, but before we get to that, some context and definitions need to be established.
    GROWTH STOCKS
    Growth companies are often unprofitable and have speculative prospects, but investors are willing to pay a premium to own them because they have an innovative business/product that has the potential to deliver above-average returns over a long-term horizon, although there are no guarantees. They are riskier and therefore more volatile than the market in general, but their share prices usually rise faster than typical stocks because of their strong earnings growth outlook. Often, these high-flyers focus on increasing future revenue at the expense of delaying profitability, reinvesting their earnings into product research and expansion, so they do not frequently distribute capital to shareholders through dividends or buybacks.
    VALUE STOCKS
    Value stocks sit on the opposite spectrum. These are mature companies with a well-established business, solid balance sheets, proven history of financial performance and steadier but low growth over time. Despite their high quality and solid fundamentals, they have fallen out of favor and lost their “WOW” factor, so they trade a discount to the market and appeared undervalued based on various financial metrics such as price/earnings, price/book, cash flows, etc. Value companies typically pay dividends, offer lower volatility, and carry less risk than the market, but their share prices rarely experience explosive upward movements similar to those seen in the growth universe.
    It is clear from the above introduction that different stocks have different characteristics; they are not created equal, so they will be affected by changes in monetary policy in dissimilar ways, but to try to gauge the possible impact, it is first necessary to understand a little about valuations. Very simplistically, the value of a company can be thought of as the present value of expected earnings.
    By buying Apple’s shares, for example, a long-term investor has acquired an ownership claim in the company's profits over time. To assign an intrinsic value to the perpetual cash flows associated with the business’ operations, analysts first forecast earnings growth and then discount the sum of the projected income stream to today's dollars using a discount rate, usually a risk-free rate such as the 10-year U.S. Treasury yield. This is where interest rates play a huge role in equity investing.
    Related: Everything You Need to Know About Types of Stocks
    Let’s now analyze two imaginary companies, with different earnings profile over the next decade to determine how their value are affected by a changing interest rate environment. To do so, we’ll rely on a basic discounted cash flow model, using the formula below:
    The model is very basic and omits key variables for simplicity, but for our purposes is enough.
    1. Value Company: Company XYZ is a well-established oil producer. XYZ is expected to generate $1,000,000 in cash flows next year, and grow them by 4% every year for the next 10 years. Let’s now value this company with the U.S. 10-year yield at 0.25% and then at 3%.
    2. Growth company: Company ZZZ is a recently founded tech firm that launched an innovative cloud storage software. ZZZ is expected to generate $50,000 in cash flows next year, and grow them by 90% every year for the next 10 years. Let’s proceed to value this company with the U.S. 10-year yield at 0.25% and then at 3%.
    Related: How to Research Stocks - A Step by Step Guide
    CONCLUSIONS
    The tables above show that higher discount rates produce lower equity values, but the effects vary across investment styles. In general, however, growth companies will be more sensitive to rising interest rates because of the nature and path of their cash flows: little in their early stages, large later in their life cycle.
    Going back to the two hypothetical examples, growth company ZZZ lost 21.3% of its value when the discount rate used went from 0.25% to 3.0%. In real life, the less attractive valuation will likely coincide with a steep drop in the company’s stock price. Company XYZ was also affected by the change in the rate environment, but its present worth only fell by 14.3%, suggesting that companies with value characteristics may fare better when monetary policy becomes more restrictive.
    Focusing on real life examples, the charts below are composed of two panels. The upper panel shows the ratio between IWD (iShares Russell 1000 Value) and IWF (iShares Russell 1000 Growth), and the lower panel displays the U.S. 10-year yield by itself.
    Chart 1 is from January 2020 to May 2020. During this period, when the 10-year yield dropped from about 1.89% to 0.66%, the IWD/IWF ratio declined roughly 19%, pointing to strong growth outperformance.
    CHART 1 - IWD/IWF RATIO VS US 10-YEAR YIELD (JANUARY 2020-MAY 2020)
    Source: TradingView
    Chart 2 is from January 2022 to May 2022. During this time span, the 10-year yield climbed from 1.50% to about 2.85%. Simultaneously, the IWD/IWF ratio advanced roughly 20%, indicating strong value factor outperformance in an interest rate environment.
    CHART 2 - IWD/IWF RATIO VS US 10-YEAR YIELD (JANUARY 2022-MAY 2022)
    Source: TradingView
    EDUCATION TOOLS FOR TRADERS
    Are you just getting started? Download the beginners’ guide for FX traders Would you like to know more about your trading personality? Take the DailyFX quiz and find out IG's client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
    DISCLOSURES
    Diego Colman, Market Strategist for DailyFX
    07 September 2022
     
  4. ArvinIG
    Apart from Nvidia's share price falling 16% last week and experiencing worse-than-expected quarterly results, the US government has stepped in to restrict AI chip sales to China and Russia.

    Source: Bloomberg   Shares Nvidia United States China Integrated circuit Artificial intelligence   What happened to Nvidia?
    The end of August saw Nvidia state in an SEC filing that the US government is restricting the sale of its high-performance AI chips to China and Russia.
    The chips, created for the A100 and H100 servers, come from the company's fastest-growing sector, heralding $3.8 billion in sales last quarter, a 61% yearly growth. According to the recent preliminary financial results for the second quarter Fiscal 2023, Nvidia's total revenue of $6.7 billion was down 19% and only up 3% year-on-year.
    Based on the new export ban, Nvidia will lose $400 million in potential sales in China for the current quarter and more than one billion for the whole year. This loss further deteriorates the revenue outlook for the company.

    Source: Nvidia The main reason behind the US's sudden move is to prevent the world-leading graphics processors made by Nvidia and AMD to be used for China’s weapon development, facial recognition and other advanced military capabilities. The steps taken by the US are seen as an expected response to the recent rising tension between China and Taiwan.
    What to expect next?
    While it is not clear what actions the US government will take to restrict American businesses from exporting chips and other high-tech products, the message for Nvidia is clear: the company is caught in the cross-hairs between two global superpowers. The tricky political game will likely further complicate Nvidia's situation, leaving the company in uncertain territory.
    That said, even if the US government allows Nvidia to continue developing its H100 artificial intelligence chip in China, the damage has already been done. China will undoubtedly take this as a pre-warning sign of payback, meaning shareholders shouldn't expect the “tit-for-tat” to end anytime soon.
    Nvidia's technical analysis
    After last week’s nosedive, the stock price for Nvidia has fallen by over 50% this year and is 60% lower than its November peak. Given all the headwinds ahead including the slowdown in PC and gaming sales, inflation pressure, and the US restricting AI chip sales, it’s unlikely to expect a quick turnaround any time soon.
    However, for the long-term believer, Nvidia still enjoys market leadership in areas like the cloud gaming market, with the outlook to be worth $22 billion by 2030 to bolster the business’s sustainable growth in the long run.
    From a technical point of view, the stock price followed a steep descending track last week. The breach to the $144 level opened the floor from the yearly low and the current support sits around $135. If the price keeps moving below this level, the next support can be found at $125, not seen since March 2021.
    Meanwhile, a near-term breather might be at play if buyers take hints from the RSI indicator. Even so, traders must be aware that with the bears currently in control, any rebound from this level could leave the formation of a lower high on watch.
    Nvidia Corp daily chart

    Source: IG   Hebe Chen | Market Analyst, Melbourne
    06 September 2022
  5. ArvinIG
    The global oil market is hurtling into a new cycle of volatility with opposing catalysts feeding into a highly uncertain outlook. What will be impact after OPEC+ cut production and the G7’s planed price cap?

    Source: Bloomberg   Commodities Petroleum Price of oil OPEC Group of Seven Barrel   The price of oil: what happened?
    The global oil market is hurtling into a new cycle of volatility with opposing catalysts feeding into a highly uncertain outlook.
    On the geopolitical front, the Group of Seven (G7) countries plan to implement an oil price cap against Russian oil imports. The unprecedented move is designed to purchase Russian oil at a discount from prevailing market prices to limit Moscow’s profits to fund its war against Ukraine. According to a US Treasury official, the discounted rates could be regularly revised and calculated separately for crude oil and refined petroleum products.
    From the supply and demand perspective, the Organization of the Petroleum Exporting Countries Plus (OPEC+) met on Monday and agreed to a small production cut of 100,000 barrels per day to bolster prices. The group also decided they could meet any time in the following four weeks to adjust production before the next scheduled meeting on October 5.
    What will be the impact?
    Despite the fact that the oil price jumped after the OPEC+ decision, it's fair to say both moves are more symbolic than a fundamental shift.
    The proposed cap on the oil price may place some pressure on Russian export. However, the scale is limited. The G7 members that joined the new sanction include Britain, Canada, France, Germany, Italy, Japan, and the United States, all of whom have already limited or suspended their Russian petroleum purchases. But the most important export destinations for Russia's oil are China and India, which are unlikely to join.
    It is important to note that for the plan to be effective, the "discounted" price still needs to be above the cost of production to ensure incentive for its export. In other words, it's still profitable for Russia. Moreover, the trimmed margin to trade with G7 countries will accelerate flow to China and India, which will continue to benefit from a widening price gap.
    Similarly, the 100,000 barrels per day (BPD) reduction, which amounts to only 0.1% of global demand, is unlikely to reshape the demand and supply landscape in the oil space. Instead, it's more of a message with the intention to stabilize the price after retreating 20% in the past three months.
    Oil price technical analysis
    Brent Crude’s descent from mid-June seemly has reached its bottom with the price now moving above the previous trend line. Bolstered by the tailwind this week, the price is now heading towards a 20-day moving average and a 50% Fibonacci retreatment level at $96.73. Once breaking through this hurdle, buyers can expect the price to keep challenging the next resistance, the 50-day moving average sits at $98.36. On the flip side, a drop and daily chart close below the most recent low at $93.04 would engage the six-month low at $92.
    According to IG Client sentiment (September 6th data), 76.27% of traders are net-long with the ratio of traders long to short at 3.21 to 1. The number of traders net-long is 2.27% lower than yesterday and 32.29% higher than last week, while the number of traders net-short is 50.18% higher than yesterday and 41.05% lower than last week.
    Brent crude oil daily chart

    Source: IG
    Source: DailyFX

    Hebe Chen | Market Analyst, Melbourne
    06 September 2022
  6. ArvinIG
    We dig into the ASX-listed lithium miners to find out what’s driving demand and whether now’s the right time to invest.

      Australia is the world’s largest exporter of lithium - and miners of the mineral have popped up more and more on the ASX in the past decade as global demand has surged. In this week's Investor Spotlight, we charge into the lithium space to discuss what's driving demand for the mineral, which stocks to look at to get exposed to it, and whether it's a good time to invest.

    Source: IG What's driving lithium demand?
    In short: Lithium is the mineral of the future. Lithium is a core component in batteries, which as the move towards green energy gathers pace, has seen an almost exponential increase in demand. There’s scarcely a part of our modern lives that does not include lithium. Phones, laptops, watches, and medical devices all rely on batteries that contain lithium. Most important of all as the green revolution takes shape is electric vehicles.
    As business and government make strides in decarbonizing global energy sources, so too has the push toward electric vehicles and more complex batteries to power them. According to studies conducted by the US government, each electric vehicle contains 8 kilograms of lithium. Multiply that by the tens of millions of electric vehicles that will likely occupy the roads in the future, and the scale of demand is astronomical.
    Four ASX lithium stocks to watch
    Pilbara Minerals
     
    Pilbara Minerals is synonymous (for many) with Australian lithium, with the company boasting the world’s largest hard-rock lithium operation. It’s the largest lithium company on the ASX, with its $10.7B market capitalisation making it the sole large-cap play on the sector. Pilbara is the only lithium company to generate consistent profits; and has relatively extensive analyst coverage, with a consensus by rating and price target of $3.50.
    When looking at the charts, price action for Pilbara Minerals looks very constructive. The stock is in a long-term uptrend, with a recent rally pushing it towards fresh record highs. A break of resistance at $3.80 would be a very bullish signal. Demand appears strong around $2.50 and just below $2.00. Drops below the 20- and 50-week moving averages have proven strong buying opportunities.
    Pilbara Minerals weekly chart

    Source: IG Lake Resources
     
    Lake Resources explores and develops lithium brine projects - accumulations of saline groundwater that are enriched in dissolved lithium - with its operations based in Argentina, one of the world’s largest sources of lithium. Lake Resources is in the middle of lithium companies as far as size but has grown considerably in recent years, with a five-year return above 2000%. There’s less analyst coverage of the company; however, of the four that do, all recommend a buy, with a price target currently of $2.56.
    Although the long-term trend can be said to be to the upside, price momentum is pointing lower for Lake Resources shares. The weekly RSI is pointing lower, while the price is trading below the 20- and 50-week moving averages. Buying opportunities have emerged around the 100-week moving average, while support/resistance is around 0.50 per share.
    Lake Resources weekly chart

    Source: IG Core Lithium
     
    Core Lithium is a lithium exploration company, with the business positioning itself as one of Australia’s next largest lithium producers. It mines spodumene lithium - an ore in which lithium is extracted - and its main facility is located near Darwin Port. Core Lithium is one of ASX’s fastest growing Lithium plays, delivering a five-year return of 3130% to investors. The company is not yet profitable; and has limited analyst coverage, with only two brokers covering the stock. Both have a ‘buy’ rating, however, with a price target of $1.65.
    A look at the technicals shows a primary uptrend for Core Lithium; however, upside momentum has moderated, with the weekly RSI trending lower. Price has carved out a double top, with significant resistance just shy of $1.70 per share. Buying support has emerged in the past around the 20-week moving average and the 50-week moving average during deeper sell-offs. Technical support also appears at around $0.90.
    Core Lithium weekly chart

    Source: IG Sayona Mining
     
    Sayona Mining describes itself as an emerging lithium producer with operations in Quebec and Western Australia. Although it possesses a market cap of a mid-size company at over $2 billion, the company sits at the more speculative end of the market when it comes to lithium plays on the ASX. Sayona has delivered ample returns to shareholders, with the company increasing its value by more than 2520% in the past five-years. It’s not yet profitable, however, even despite strong revenue growth, and has no analyst coverage presently.
    Sayona shares are in a primary uptrend, but a failure to make new all-time highs points to slowing upside momentum for the stock. Price remains above all major moving averages. However, the weekly RSI is pointing lower, though is still above the 50-mark. Technical support could be around $0.20 while a major level of support and resistance is around $0.10.
    Sayona Mining weekly chart

    Source: IG Is now the time to buy lithium stocks?
    Getting exposure to lithium on the ASX is a play on a megatrend. As economies move to greener forms of energy and more advanced forms of energy storage - not to mention the shift to electric vehicles - the demand for lithium can only rise. Australia is arguably the best market to invest in lithium stocks, and there’s a spread of companies that an investor can choose to add lithium to their portfolio or create a wider portfolio of lithium investments.
    In the short-run, like any commodity exposed sector, lithium stocks are proving to be cyclical - and highly volatile due to the general immaturity of the market. Short-term plays on the lithium sector carry significant risk as a result, with a recent run-up in prices suggestive of unattractive entry points for a trade. The long-run trend is to the upside, and the decarbonization thematic is a powerful one. As long as the move towards greener energy continues, the outlook for lithium producers is bright.
    Kyle Rodda | Market Analyst, Australia
    06 September 2022
  7. ArvinIG
    Global equity markets tumbled last week, sending risk assets and gold prices lower. Central bank event risks fill the docket for the week, offering traders volatility.

    Source: Bloomberg   Forex Commodities Risk Central bank Stock market United States   Global equity markets closed the week with steep losses as traders shifted their money out of risk assets, worried by economic concerns and inflation-focused central banks that appear ready to continue tackling high prices even if it induces recessions. US stocks opened higher on Friday after the US non-farm payrolls report crossed the wires, which showed a gain of 315,000 jobs in August. That was slightly above the 315k Bloomberg consensus forecast, although wages didn’t rise as much as expected. The wage data was encouraging for the US inflation outlook, which weighed on gold-friendly breakeven rates. XAU/USD rose on Friday, but the yellow metal traded almost 1.5% lower throughout the week.
    The cooling wage growth helped ease the Fed’s perceived rate path. Traders appeared wary of holding risk over the long US holiday weekend. Yields across the Euro Area rocketed higher as bond traders ditched European debt. The European Central Bank is expected to deliver a 75-basis point rate hike at next Thursday’s policy meeting, with overnight index swaps (OIS) showing a 62.8% chance for the jumbo hike.
    Dutch European natural gas prices plummeted on Friday, bringing the total weekly loss to nearly 40% as supply fears eased. According to GIE’s AGSI data, the European Union’s gas storage rose to over 80% as of August 31, putting the 27-member bloc on pace to hit its storage targets before the winter, when energy demand will increase. The ECB’s incoming rate hike is seen as tempering demand.
    Risks remain. Russia’s Gazprom, on Friday, said it would not resume operations of the Nord Stream 1 Pipeline, a critical artery for Europe’s energy. The Russian state-backed energy company cited technical issues in extending the outage that started on Wednesday. Those issues may slow Europe’s progress on increasing storage, especially if flows don’t restart, which is a possibility that markets should consider.
    The Canadian dollar fell against the Greenback, with the Loonie weighed down by falling crude oil prices. USD/CAD was looking at its highest daily close since November 2020 during Friday trading. The Bank of Canada is seen raising its benchmark lending rate to 3.25%, according to cash market pricing. That would bring the BoC’s rate above what BoC Governor Tiff Macklem sees as the neutral rate (2%-3%). That said, Canada’s economy is likely to suffer, given the rate would be above neutral assuming a 75-bps hike does occur. The Canadian dollar is likely primed for further losses outside of a large recovery in oil prices.
    Elsewhere, the Reserve Bank of Australia (RBA) is set to deliver an interest rate decision on September 6. The Australian dollar fell around 1% last week as iron ore prices in China fell almost 10%, bringing the metal ore to its lowest level since November 2021. Rate traders have eased bets for continued aggression from the Australian central bank beyond next week’s meeting, which is expected to see a 50-bps hike. However, with the country’s inflation rate still well above target at 6.1%, the RBA may have to deliver an increase in its pace of tightening. China remains a massive headwind for Australia and the broader APAC region. Several cities locked down last week as Covid-19 cases increased.
    US dollar performance vs. currencies and gold

    Source: DailyFX 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.
    Thomas Westwater | Analyst, DailyFX, New York City
    05 September 2022
  8. ArvinIG
    Although China’s policymakers appear to step in provide economic support through tangible measures, the rapidly deteriorating power crisis and extreme weather continues to complicate and challenge the Chinese economy.

    Source: Bloomberg   Forex Indices Commodities United States dollar USD/CNH China   Asian stocks slid in the final week of August as fears of a sharp rate hike were ignited by Powell’s speech in Jackson Hole last week. Meanwhile, headwinds continue to come in from China as the power crisis and extreme weather challenge the nation's economy despite China's policymakers appearing to step in.
    Hang Seng
    Hong Kong stocks slumped to their lowest level in more than three months last week and apart from the possibility of an aggressive rate hike in the US, investors are also digesting the uninspiring domestic corporate earnings report.
    On Tuesday, Hong Kong-listed and China’s largest Developer Country Garden reported a record 96% profit slump, cementing the view that China’s property crisis is far from reaching the bottom.
    Despite some bright momentum to conclude the last week’s trading session, the downtrend has resumed for the Hang Seng index in the new week. Up to Tuesday, the price has broken a key support level from the 20-day moving average of 19594, with the potential to retest the three-month low level lying at 19158.
    Hang Seng daily chart

    Source: IG USD/CNH
    The strength of the greenback continues to push the USD/CNH towards its two-year high. On Monday, the price reached as high as 6.9329, a level last seen on August 17, 2020.
    Unsurprisingly, the USD is attracting the spotlight after the hawkish tone signalled by Federal Reserve chair Jerome Powell at Jackson Hole. As stated, the Fed will continue hiking interest rates at an aggressive pace to scale down the inflationary pressures and as a result, it’s not hard to see that the demand for the greenback will keep on an elevated level compared to the risk-perceived currencies.
    In the near term, the strong uptrend could see the USD/CNH pair keep on exploring the territory above the two-year high level. Hence, the 6.94 regions is anticipated to be the imminent target ahead of the 6.98 level recorded on July 2020.
    USD/CNH weekly chart

    Source: IG Gold
    The precious metal gave up all the gains from the past month after taking clues from the greenback’s strong return. On Tuesday, the price of Gold (XAU/USD) consolidated near $1,733, following a failed attempt to retest the 50-day MA. For the near-term view, the previous support line should stay valid to support the price above the $1714 level.
    However, the upcoming US jobs report may spark new inflation concerns to back up Fed Chair Powell’s determination to continue jumbo-sized hikes. The yearly low level at $1702 marked in mid-July is also a critical number to focus on.
    Gold daily chart

    Source: IG
    Hebe Chen | Market Analyst, Melbourne
    31 August 2022
  9. ArvinIG

    Trade of the Week: Short German DAX

    By ArvinIG,


    Analyst article
    In this week’s Trade of the Week, IG market analyst Josh Mahony looks to go short the German DAX with a stop-loss at 13,390 and a downside target at 12,705. He also looks at last week’s trade, which was short EUR/CHF.

      Forex EUR/CHF
      Joshua Mahony | Senior Market Analyst, London
    31 August 2022
  10. ArvinIG

    Banking on it: Breaking down the Big Four

    By ArvinIG,


    Analyst article
    As we roll to the end of Aussie earnings season, we look at Big Four banks.

      Shares Bank Price Interest rate National Australia Bank     The Australian earnings season is all but done. For the most part, it proved a solid reporting period for corporates, belying some of the pessimism market participants had coming into results. As always, the banking sector was under the microscope, with the Commonwealth Bank of Australia delivering its full year results, and the NAB delivering a quarterly update. So, what did we learn about the sector and the Australian economy? In this article, we go through the fundamentals and outlook for Aussie banks and weigh up whether it’s a good time to buy the sector.
    Margins are squeezed and an uncertain outlook
    We are in a rising interest rate environment but for the major banks, the benefits haven’t flowed through to net interest margins yet. Both the CBA and NAB reported a sizable drop in margins for the reporting period, with a rock-bottom cash rate squeezing net interest margins. Management from each bank talked up the outlook for margins going forward, as the benefits of RBA hikes and increases to standard variable mortgage rates, not to mention a slow pass-through of rate hikes to depositors – take effect.
    The outlook for the Australian economy was somewhat mixed, however. CBA CEO Matt Comyn spoke of the ‘challenging time’ the economy faces but said that the bank is optimistic that ‘a path can be found to navigate through these economic conditions’ and that the ‘medium-term outlook for Australia is a positive one’. NAB CEO Ross McEwan proved more sanguine in his company’s update, expressing confidence that low unemployment and healthy business and household balance sheets will mitigate the impacts of inflation and higher interest rates.

    Source: Bloomberg CBA
    As the only company to lodge official results, most of the focus this reporting season was on the CBA’s FY22 earnings.
    The bank’s results proved stronger than analysts had expected, with the bank handing down full-year results showing a $24.9 billion topline, and net income of $9.96 billion. The final dividend was $2.10 taking the full-year dividend to $3.85.
    The record result came despite the squeeze in margins. The net interest margin dropped 18 points to 1.90%, ‘due to a large increase in low yielding liquid assets and lower home loan margins. CBA said it expects margins to increase in a rising interest rate environment.
    The share price response was soggy following the FY22 numbers. Investors appeared to hook onto the cloudy outlook for the bank, as concerns build about a weaker economic environment that may impact house prices and credit growth.
    Analysts have become increasingly bearish on CBA stock, with consensus favouring a sell rating, according to data compiled by Reuters. The current price target is $US91.29.
    A look at the charts suggests slowing upside momentum for CBA shares, with the price carving out a series of lower-highs. As the stock slips back below $100 per share, the next buy zone looks to be around support at $90. The 200 WMA, currently around $85, will be a significant level of support.

    Source: IG NAB
    NAB’s quarterly update showed modest strength for the bank over the course of the 3rd quarter. Unaudited cash earnings were $1.8 billion for the quarter, marking a 3% increase compared to the 1H22 quarterly average.
    Net interest margins declined slightly for the period but excluding markets and treasury it was higher. NAB management also flagged a pick-up in margins courtesy of a higher interest rate environment.
    The analyst community is mixed on the outlook for NAB stock. The consensus recommendation is a hold from 15 brokers, with eight suggesting that course of action, but six suggesting either a buy or strong buy. The consensus price target is at a premium to the current share price of $31.19.
    The charts convey a similar loss of upside momentum for NAB’s shares, with sellers taking control of the price above $30 per share. The stock is finding some support above the 20-week MA, with a key level of resistance around the 50-week MA.

    Source: IG WBC
    There were no results reported from Westpac this earnings season. The bank will hand down its full-year earnings on the 7th of November.
    At this stage, Reuters data suggests analysts are expecting profits of $5.4 billion, roughly flat on the previous year, and a slight increase in the dividend to $1.21.
    Analysts are mixed on Westpac shares, with the consensus rating a hold. However, the share price trades significantly below the consensus price target, which is $24.06.
    Technically speaking, WBC shares are in a long-term downtrend, with the stock looking as weak as any of the Big Four on the charts right now. Price remains below all key weekly moving averages, and the RSI shows bearish price momentum. $20 is a major level of technical support.

    Source: IG ANZ
    ANZ didn’t deliver an update this quarter, with the bank set to report its full-year results on the 27th of October.
    Analysts are forecasting an increase in revenues for FY22, but a slight drop in profits for the year from the ANZ to $6.27b. The bank is tipped to lift its full-year dividend to $1.42.
    Amongst analysts, the ANZ possesses a hold rating, but a price target well above the current market price at $25.43.
    From a technical standpoint, ANZ shares are marked by downward momentum, with the weekly RSI below 50 and price below the 20, 50, 100 and 200-day moving averages. Significant resistance appears to be around $24.40 while support can be found at $21.20.
    Source: IG Summary
    Despite the obvious benefits that ought to flow through to the banks from higher interest rates and larger net interest margins, the outlook for bank shares remains uncertain. Slowing growth, higher inflation, and those higher interest rates pose a risk to profits and dividends, with bank management casting concerns over the short-term outlook.
    The investment case would appear mixed for bank stocks right now. Analysts are relatively bearish, advocating for ‘holds’ or ‘sells’ even as the likes of Westpac and the ANZ are trading at significant discounts to consensus price targets. The charts are showing a general lack of momentum, signalling that buying banks here offer an unattractive risk/reward.
    Kyle Rodda | Market Analyst, Australia
    31 August 2022
  11. ArvinIG
    The share price for ASX payments company Splitit could rise on new partnerships across diverse sectors in the North American market. Splitit has also reduced funding costs despite rising interest rates.

    Source: Bloomberg   Shares Cloud computing Mobile virtual network operator Interest Interest rates Customer   ASX-listed fintech company Splitit could see its share price rise on partnerships to provide its instalment payments services to companies in the telecommunications and rental property sectors. The agreements have the potential to expand Splitit’s Installments-as-a-Service (IaaS) business model as a subset of the buy-now-pay-later (BNPL) market.
    Telispire integrates Splitit platformUS telecommunications company
    Telispire has announced that it is integrating Splitit’s IaaS platform into its PHOENIX back office and billing system. The move will enable Telispire’s Mobile Virtual Network Operator (MVNO) customers to conveniently provide instalment payment services to their subscribers.
    The Splitit platform will be embedded into existing purchase procedures and will give customers the flexibility of choosing which products and product categories feature instalment payments.
    Telispire enables MVNO customers to offer wireless products and services to customers using turnkey private label solutions. These products can include provisioning, billing, eCommerce, fulfilment and customer support.
    Telispire COO Craig Andrew explained what the adoption of Splitit’s IaaS model means for its customers.
    ‘Splitit’s white-label installments gives [sic] us a valuable tool to offer our resellers that puts them on a more equal footing with larger competitors without having to manage the technical integration’, Andrew said.
    ‘The growth of 5G has many looking to upgrade devices, giving MVNOs a simple option to offer subscribers a great way to pay over time without the complexity of traditional financing options.'
    Splitit CEO Nandan Sheth said the partnership will expand the fintech company’s access to retailers undergoing rapid growth.
    ‘Their clients will have zero implementation burden, and Splitit benefits from distribution to many fast-growing retailers through a single connection to PHOENIX.’
    Splitit brings IaaS model to property sector
    Splitit’s business model allows consumers to access instalment payment services using their existing credit cards. According to Splitit, this ‘white label’ payment solution sets it apart from other BNPL providers on the market.
    The flexibility of its payment solution has enabled the company to expand into a diverse range of industries. In addition to the telecommunications sector, Splitit is also offering its IaaS option to the property rental market.
    At the start of August, Splitit announced that Canadian fintech company letus (formerly known as RentMoola) had chosen to integrate Splitit’s IaaS platform into its service offerings.
    letus operates a cloud-based payments platform that caters specifically to the needs of the property sector. The platform streamlines both the payment of rent by tenants and the collection of rent by property managers.
    Jean-Francois Brissot, CEO of letus, said the partnership with Splitit would further enhance its services.
    ‘Splitit helps us reach our objective to bring innovative technology and tools to alleviate some of the biggest hurdles for tenants and property managers alike,’ Brissot said.
    'The ability to integrate Splitit’s white-label solution into our platform ensures a seamless and simple experience helping foster a stronger relationship between tenants and landlords.'
    Splitit achieves interest rate reduction
    Splitit has seen improvements to its funding conditions thanks to amendments to its agreement with bulge bracket Wall Street bank Goldman Sachs.
    On 2 August, Splitit announced that it had amended its existing $150 million receivables funding facility with Goldman Sachs to reduce the interest payable by Splitit in the range of 15% to 20%, on the condition of achieving certain volumes.
    Splitit said that the improved commercial terms would make it more competitive internationally and help to drive its global expansion, especially in an environment of rising interest rates.

    Marc Howe | Financial Writer
    30 August 2022
    Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.* Learn more about share CFDs or shares trading with us, or open an account to get started today.
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  12. ArvinIG
    Crude oil prices have pushed higher with supply issues swirling; many oil producing nations face challenges or support cuts in output and a stronger US dollar couldn’t hold oil down but will WTI reclaim the high ground?

    Source: Bloomberg   Commodities Petroleum Price of oil OPEC Saudi Arabia WTI   Crude oil has recovered at the start of this week as supply issues continue to cause concern for energy reserves going into the Northern hemisphere autumn.
    This is despite a broadly stronger US Dollar in the aftermath of the Federal Reserve meeting last week that pointed toward higher rates for longer than the market had previously anticipated.
    Last week, Saudi Arabia and OPEC+ appeared to place floor on the price of oil. Saudi Energy Minister Prince Abdulaziz bin Salman said that production could be cut if it was deemed necessary.
    Then, Organization of Petroleum Exporting Countries (OPEC+) Secretary General Haitham Al-Ghais cited spare capacity as an ongoing issue for the oil market.
    On Monday, unconfirmed reports emerged that the United Arab Emirates, Oman and Congo support the views expressed by Saud Arabia last week, that being that production could be cut if prices fall.
    Compounding the problem, political unrest in Libya has flared up again and has the market guessing that their production may come under threat. Then there are reports of issues with Kazakhstan port facilities impacting exports of their oil.
    Additionally, hopes have been dashed of a prompt resolution in resurrecting the 2015 US-Iran nuclear accord.
    Exasperating oil price tension is the soaring costs of alternative energy, particularly for Europe, where Russia is pulling the strings on supply through the Nord Stream 1 pipeline.
    The lack of oil coming from Russia has seen natural gas prices rocket higher. The European benchmark Dutch Title Transfer Facility (TTF) natural gas futures contract has pulled back below 300 Euro per Mega Watt hour (MWh) after peaking just under 350 Euro per MWh. A welcome reprieve but still well above the June low of 80 Euro per MWh.
    This was due to the European Union getting close to meeting its gas storage filling target of 80% goal two months ahead of schedule, with reserves now at 79.4%. The structure of the oil market might support further gains with backwardation ticking up again while volatility remains subdued.
    WTI crude oil, backwardation and volatility (OVX)

    Source: TradingView   Daniel McCarthy | Strategist
    30 August 2022

    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.
  13. ArvinIG

    Best contrarian shares to buy in Q3

    By ArvinIG,


    Analyst article
    Which contrarian stock picks offer the best value?

    Source: Bloomberg   Forex Shares Contrarian investing International Airlines Group PayPal Investment   Ever looked at a major stock dip and thought it was an overreaction by the market? Have you been tempted to ignore the crowd and buy into it? Market sentiment is not always logical and often groups of investors overreact to negative or positive market news.
    Contrarian investors ignore the crowd and herd mentality and make their own investment decisions, based on which stocks could provide the best long-term value. Often they buy into shares that have experienced significant drops, but that still offer long-term instrinsic value and wait for things at the company to recover.
    However, this investment approach requires substantial research and patience, as it can often take several years for a company and its stock to turn around. It can also be high risk as some stock picks may not work out and investors will need to hold their nerve.
    Warren Buffett is probably the world’s greatest proponent of contrarian investing. Other famous contrarians include John Templeton, Benjamin Graham and Peter Lynch. IG has a useful article here on market sentiment and how to trade it.
    Here are three stocks which we think could be of interest this month to investors who prefer not to follow the herd.
    PayPal – looking oversold
    Tech stocks are firmly in the unpopular box at the moment as investors dump them in favour of more defensive sectors, such as tobacco, healthcare and consumer staples. Indeed, despite making a recovery this summer, the Nasdaq index is down over 20% this year.
    As such, the contrarian investor can pick up some bargains, as long as they are prepared to wait for the stocks to recover. Some US technology stocks, such as Meta – the owner of Facebook – and Paypal have more than halved this year. Shares in digital publisher Buzzfeed are down by as much as 94%.
    Contrarian investors could take a look at Paypal, which is currently trading at $92.70, having fallen in value by 66% this year. The fintech company, which provides online payment technology – most notably for eBay - has attracted the attentions of activist investor Elliott Management. The activist investment group has ploughed $2 billion into PayPal and persuaded management to return as much as $15 billion to investors.
    Jesse Cohn, managing partner at Elliott Investment Management, said at the second-quarter results he “strongly believes in the value proposition at PayPal [as it] has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near- and long term.” He said steps were “underway… to help realize the significant value opportunity” at the company.
    Second-quarter results were solid, with net revenues up 9% to $6.8 billion, although the company made a net loss of $341 million due to an exceptional tax charge relating to intellectual property. Free cashflow increased by 22% to $1.3 billion during the period and $900 million of cost savings expected to be realised in 2022. However, operating margins fell 684 basis points to 11.2% during the period.
    For the full-year, PayPal expects net revenues to reach $27.85 billion, up more than 10% on a spot basis. Total payment volume (TPV) is also anticipated to grow to by around 12% on a spot basis, while sales excluding eBay are forecast to increase by approximately 13.5% on a spot basis.
    Analysts at Daiwa Capital recently upgraded the shares to outperform from neutral, setting a price target of $116, while those at Barclays think they could hit $131. The company is set to hold an investor day in early 2023, which could help boost the shares. Over the short term, a drop in consumer spending could hit revenues but over the longer term, prospects for PayPal look positive.

    Source: Bloomberg IAG – on the flightpath to recovery?
    Shares in International Consolidated Airlines Group (IAG) have lost nearly a third of their value this year, and are down 34% to 108.48p. The company behind British Airways and Aer Lingus had a difficult time during the pandemic and has struggled with flight delays and reduced capacity this year.
    However, it returned to profit in the second-quarter – for the first time since the Covid-19 pandemic - after seeing strong demand from passengers over the summer. It posted pre-tax profits of €133 million for the second-quarter compared with a loss of €981 million in the same period last year. Losses for the half-year were also cut to €654 million from €2 billion in the same period in 2021.
    Going forward, IAG expects operating profit before exceptional items to be “significantly improved” in the third-quarter and positive for the full-year. Net cash flow is also forecast to be “significantly positive for the year,” assuming no further issues from the Covid-19 pandemic. In the second-quarter, passenger capacity levels hit 78% of 2019 levels, while according to May figures from the International Air Transport Association, international air traffic is up 326% compared to last year.
    IAG has €11 billion of debt on its balance sheet and capacity restraints could continue, plus further Covid-19 lockdowns could hit the company hard. However, the recovery looks to be underway and analysts at UBS think the shares could hit 170p.
    Persimmon – is housing market as gloomy as painted?
    The prospects for the UK housing market look mixed with some experts saying that the bubble is set to burst. A perfect storm of the higher interest rates, spiralling inflation and the cost of living crisis is expected to hit demand and house prices.
    However, things may not be quite as gloomy as some commentators suggest. Supply still remains low and demand high. While Rightmove says that reduced affordability and increased housing stock could see prices fall slightly in the second-half, it expects prices to end the year 5% higher than in 2021.
    Rival Zoopla expects a smaller rise of 3%. Plus, while estate agents Savills forecasts that the property market will slow in 2023, it expects prices to drop by 1%, while Knight Frank anticipates an increase of 1%.
    Shares in Persimmon are down 48% this year to 1497.5p and could be a recovery play. The housebuilder recently posted encouraging half-year results. Although revenues were down 8% due to strong comparative figures, selling prices were higher at £245,597 (compared to £236,199 in the first-half of 2021). What’s more the company’s forward order book is 90% sold with forward sales of 10,542 homes worth £2.32 billion.
    A major issue besides a softening in the housing market is likely to be the ongoing issues around building cladding following the Grenfell Tower tragedy. However, the shares look oversold and could surprise on the upside. Analysts at Liberum Capital have a price target on the shares of 2630p, while those at Citigroup have a target of 1930p.
    Piper Terrett | Financial writer, London
    30 August 2022
  14. ArvinIG
    As inflation roars, reliable FTSE 100 dividend stocks are few and far between. But Legal & General, Persimmon, and Imperial Brands could fit the bill.

    Source: Bloomberg   Indices Shares Dividend FTSE 100 Investment Imperial Brands   In this new inflationary reality, the best FTSE 100 dividend stocks are not just those which are highest yielding, but also those which are most likely to continue to pay their dividends through what could become a severe recession.
    The FTSE 100 is by its nature defensive, down a mere 1% year-to-date. But with the downturn almost upon the UK, this could change rapidly.
    And with the base rate already at 1.75%, the markets are pricing in an increase to 4.1% by mid-2023. This automatically rules out FTSE 100 dividend stocks with high net debt levels and irregular cash flow, as their dividends could fast become unsustainable.
    FTSE 100 stocks: recessionary environment
    CPI inflation is now into double-digits at 10.1%. The Bank of England has already warned this figure will exceed 13% by winter, and Citi predicts it will strike 18.6% in the new year.
    The primary inflationary factor is of course energy. High energy prices affect everything in the economic supply chain; from manufacturing, to services, to consumer demand.
    From October, the UK’s average household’s annual energy bill will rise to £3,549 a year. Consultancy Auxilione has predicted this will rise to an unaffordable £7,700 by April. And this prediction keeps going up, as wholesale gas prices bound on with no upper limit.
    In addition, there is no price cap for businesses. Many smaller companies will collapse this winter unless there is government intervention on the scale of the covid-19 pandemic response.
    Interestingly, this could be a net positive for some FTSE 100 companies that will benefit from a larger market share without any additional investment.
    Best FTSE 100 dividend stocks
    1) Legal & General (LON: LGEN)
    Down 15% year-to-date, Legal & General shares now boast an enviable 9.2% dividend yield and price-to-earnings ratio of just 7.6.
    This level of correction could imply the blue-chip financier is simply being affected by wider negative market sentiment, rather than specific sell-off pressures, such as those affecting Aviva and Direct Line.
    L&G is a £15.5 billion titan, with £1.4 trillion of assets under management. It now focuses on four complementary sectors: retirement planning, investment management, capital investment, and insurance.
    This diversification is a highlight for dividend investors, as it provides dividend protection against headwinds in any one sector. For example, the new laws aimed at stopping insurers from overcharging renewal customers that are damaging its insurance arm leave the other three sectors unaffected.
    Encouragingly, it remains the UK’s most popular life insurance provider, a sector which is likely to grow as the population demographic continues to shift.
    In half-year results earlier this month, CEO Nigel Wilson noted ‘we have delivered for our institutional clients and retail customers, while generating good volumes and margins in a buoyant PRT market...our balance sheet is strong and highly resilient, with a solvency ratio of 212% and with 100% of cash flows received from our Direct Investments.’
    Moreover, the financial services giant saw operating profit rise by 8% to £1.16 billion, while cash generation increased by 22% year on year to £1 billion.
    However, L&G operates in a hypercompetitive marketplace, with competition from the likes of RSA Insurance Group and Aviva. This makes maintaining profit margins difficult, especially as consumers are keenly incentivised to switch providers amid the cost-of-living crisis.
    Key risk: Strong companies with sustainable dividends are few and far between in recessions. Beware overvaluations as investors flood to safety.

    Source: Bloomberg 2) Persimmon (LON: PSN)
    With its dividend yield now at 15.7%, Persimmon has remained the highest-yielding FTSE 100 dividend stock for months. Housebuilders more generally, including Taylor Wimpey and Barratt Developments, have dominated the top yielding FTSE 100 dividend stocks for years.
    The reason behind this is simple: there is too little domestic housing supply for available demand, and since the 2008 financial crisis, interest rates have been held down to near-zero levels. This means that in addition to sustained owner-occupier demand, buy-to-let has (until recent legal and monetary changes) been an excellent investment for portfolio diversification.
    This housebuilder dividend trend has been accelerated by the pandemic-induced ‘race for space,’ and exacerbated by the stamp duty holiday. The average UK house price now stands at £286,000, up 7.8% over the past year.
    The group delivered 6,652 homes in H1, down from 7,409 in H1 2021. But it says ‘demand across the UK remains strong,’ and is 75% forward sold for the full year.
    However, the housing market is cyclical. Persimmon is down 48% year-to-date, as institutional investment exits, implying that the dividend is not sustainable amid tightening monetary policy. And for earlier investors, any dividend gains have been wiped out by capital losses.
    Moreover, further share price falls are very possible. Persimmon could well be a future exemplar of the dividend trap. Of course, a 15.7% dividend yield is hard to resist.
    Key risk: Further share price falls, especially if rocketing inflation, rising interest rates, and the coming cessation of help-to-buy conspire to cause a housing market crash at the lower end of the market.
    3) Imperial Brands (LON: IMB)
    Up 14% year-to-date to 1,880p, Imperial Brands shares are delivering an 8.5% dividend for investors prepared to overlook the ethical issues associated with investing in tobacco stocks.
    Further, it has a price-to-earnings ratio of 8.8, compared to the FTSE 100 average of 15. On the fundamentals, it still represents value for money despite recent share price growth.
    Imperial Brands possesses a quality that is highly sought after in recessionary environments; inelastic demand. Tobacco is addictive, and users will sacrifice every other non-necessity to acquire it regardless of discretionary income or price. Accordingly, Imperial Brands’ strategy to increase prices in line with inflation is working.
    In May’s half-year results, CEO Stefan Bomhard enthused ‘we are now 18 months into our five-year strategy to build a more sustainable Imperial capable of consistent growth – and I am pleased with the progress we are making... during the first half of the year, we increased aggregate market share in the five priority markets which account for around 70 per cent of our operating profit.’
    Unlike competitor British American Tobacco, the company has reduced its ambition to expand its non-cigarette division, and has sold off its premium cigars business. Instead, Imperials Brands is focusing on increasing its market share for cigarettes in key growth countries.
    Of course, this could backfire. Regulation is already tight for tobacco, and further restrictions can be brought in at any time. For example, the 2007 UK smoking ban was unthinkable in the 1990s, but now the country plans to be ‘smokefree’ by 2030.
    However, in the near term, Imperial Brands could be an excellent source of dividend income in this time of severe financial stress.
    Key risk: Tobacco, very reasonably, is a key ingredient in many defensive stock portfolios. This can make tobacco stocks overvalued in recessionary environments, and at risk when capital eventually deserts for growth.

    Charles Archer | Financial Writer, London
    30 August 2022 06:55
  15. ArvinIG
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 22nd August 2022. These are projected dividends and likely to change. IG cannot be held responsible for any changes made.
    Dividends highlighted in red include a special dividend, therefore some or all of the amount will not be adjusted. Amount in brackets is the expected adjustment after special dividends excluded (where shown on major indices). Dividend adjustments due to be posted on a bank holiday will usually be posted on the previous working day. 
    If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.
     

    NB: All dividend adjustments are forecasts and therefore speculative.
    A dividend adjustment is a cash neutral adjustment on your account.
     
    Special Dividends
            Index
    Bloomberg Code
    Effective Date
    Summary
    Dividend Amount
    UKX
    NWG LN
    30/08/2022
    Special Div
    16.8
       
    How do dividend adjustments work?  
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  16. ArvinIG
    Despite recent recovery, NVIDIA’s share price is still down close to 40% year-to-date. Can its upcoming Q2 results perform up to expectations?

    Source: Bloomberg   Shares Nvidia United States Price Revenue Share price   When does NVIDIA report earnings?
    NVIDIA is set to release its quarter two (Q2) financial results on 24 August 2022, after the US market closes.
    Nvidia earnings – what to expect
    Recent preliminary results came with a negative shock to markets, with Nvidia’s revenue guidance for Q2 at just US$6.7 billion. This is a significant 17.3% downward revision in less than three months from the US$8.1 billion being guided back in late-May this year. Year-on-year (YoY) growth will translate to a mere 3%,and coming from a hot-favourite growth company which has consistently delivered 40-60% double-digit growth since quarter three (Q3) 2020, a near-flat increase in revenue suggests that economic conditions may be moderating much worse-than-expected.
    Its two core business segments, gaming and data centre, are being placed under scrutiny, with the segments accounting for 43.7% and 45.2% of revenue share respectively. The revenue miss was largely due to softer demand for its gaming graphics processing units (GPUs), with gaming revenue guided at US$2.04 billion. This is down 23.8% from its previous forecast of US$2.6 billion and a 33.4% decline from the previous year. With the flat revenue growth for Q2, it may suggest that the Covid-19 induced prime for NVIDIA is behind us and the company is entering into a downcycle. Further moderation in economic conditions ahead could drive risk of subsequent downward revisions in forecast. The largely downbeat tone in the cryptocurrency market remains a risk as well, dampening a source of demand for its GPUs.
    The relief for NVIDIA is that its guidance for Q2 data centre revenue seems resilient at US$3.81 billion, which will be a 61.0% growth from the previous year but nevertheless, still slightly down 3.4% from its previous forecast of US$3.9 billion.
     

    Source: Nvidia Corporation  
    Guidance for Q2 gross margins to be at its lowest since Q3 2011
    The preliminary guidance for Q2 margins also brought no relief, with the expected 46.1% gross margin (non-GAAP) marking its lowest since Q3 2011. This may come as a reflection of some easing in supply chains, along with moderating demand, potentially driving some loss in pricing power. The management believed that the long-term gross margin profile remains intact, but with economic conditions set to worsen, the timeline does not seem to be anytime in the near future. That could drive markets to still remain cautious on its outlook, with the 21% shave off its gross margins coming just three months from its previous forecast.
    Higher expectation hurdle for NVIDIA to cross ahead
    With the 40% plunge in NVIDIA’s share price year-to-date, its share price still stands at US$37.4, which towers above its peer average of around US$19.6. The premium suggests that much expectations are still being priced for NVIDIA to outperform over the coming quarters in order to justify its more-lofty valuation. Failure to do so could drive a further re-rating in share price to a fairer value. On the other hand, with its valuation being a stand-out among its peers, its share price could be more sensitive to any move higher in bond yields.
     

    Source: Nasdaq  
    Nvidia shares – technical analysis
    With the recovery in risk sentiments over the past month, there has been an attempt for NVIDIA’s share price to recover after plunging 38% year-to-date. Near-term, an ascending channel pattern seems to be in place, with the higher highs and higher lows providing an upward bias for now. That said, the flat-lined moving average convergence divergence (MACD) over the past few days suggests some ebbing momentum as the broader market struggles to find a direction. Its share price is currently retesting the US$188.30 resistance line, where a key 23.6% Fibonacci retracement stands in place. Overcoming it could draw further upside to retest the upper channel resistance next.
     

    Source: IG charts

    Yeap Jun Rong | Market Strategist, Singapore
    19 August 2022
  17. ArvinIG

    Persimmon shares down 8% as sales fall

    By ArvinIG,


    Analyst Article
    Shares in the housebuilder have fallen 40% this year

    Source: Bloomberg   Shares Price Inflation Persimmon plc Profit Share repurchase   Shares in Persimmon fell 8% on Wednesday after the building firm posted lower revenues and profits for the half-year. First-half revenues at the housebuilder slipped 8% to £1.69 billion from £1.84 billion, while pre-tax profits fell to £439 million (from £480 million in 2021).
    Persimmon’s chief executive Dean Finch blamed strong comparative figures from last year and cost price inflation. New home completions dipped to 6,652 from 7,406 in the same period the previous year. However, selling prices were higher at £245,597 (compared to £236,199 in the first-half of 2021).
    Strong order book and earnings guidance intact
    Meanwhile, the housebuilder is 90% forward sold for the coming year – with forward sales of 10,542 homes worth £2.32 billion. The average private sales rate was 1% ahead of last year. Sales price inflation is also currently mopping up increased cost price inflation. However, average private sales rates for the first seven weeks of the second-half are down 11% year-on-year against strong comparative figures. The housing market tends to drop off in the summer months due to the school holidays.
    “We are making important progress in quality, service, land investment opportunities and efficiencies to build an even stronger business, while continuing to deliver the strong financial returns that Persimmon is renowned for,” Finch told investors. “Demand for our attractively priced, high quality homes has remained robust, with our average private sales rates for the period being c.1% ahead year on year. Our customer satisfaction score is currently 92%.”
    Finch added that company has some “exciting new sites coming into the business at industry-leading margins, with a land replacement rate for the period of over 130%,” while expanded production in Persimmon’s own brick, tile and timber frame factories, is boosting its “supply resilience and cost efficiency.”
    The company also returned £750 million to shareholders this year via a share buyback scheme.
    Recession could cast a shadow over the housing market
    Finch said that he reiterated the company’s year-end volume expectations of “delivering 14,500 to 15,000 units with forecast full year profit in line with… expectations” and that “while risks remain,” he expects to open around 70 new outlets over the second-half of the year.
    However, a big question remains over the future of the housing market with inflation at a 40-year high, rising interest rates and a possible UK recession looming. Analysts at Savills estate agents forecast a 1% fall in house prices in 2023, which could hit Persimmon hard. Meanwhile, other headwinds include the ongoing issue of building cladding and fire safety, following the Grenfell Tower tragedy, and the withdrawal of the government’s Help to Buy Scheme.
    Persimmon shares are down 40% this year and could have a choppy year ahead. However, analysts at Liberum Capital currently have a price target of 2,630p and a buy rating on the shares. With a strong forward sales book, and the shares trading at five-year lows, at 1,741p, they are a long-term buy.

    Piper Terrett | Financial writer, London
    19 August 2022
    Take your position on 17,000+ shares with the UK’s No.1 platform.* Learn more about trading or investing in shares with us, or open an account to get started today.
    * Best trading platform as awarded at the ADVFN International Financial Awards 2022
  18. ArvinIG
    Battery metals have yet to prove themselves, but recent political moves in the United States, with the Inflation Reduction Act, has brought the sector back into sharp focus.

      Lithium Metal United States   IGTV’s Jeremy Naylor caught up with Charles FitzRoy, the CEO of Bradda Head Lithium, a company that plays directly into the push by the US to source its own metals associated with the battery sector.
    Jeremy Naylor | Writer, London
    18 August 2022
  19. ArvinIG
    With a number of cryptocurrencies still entering the market today, interest in trading the asset is high as ever. Find the right cryptocurrency trading strategy for you by browsing our list of strategies below.

    Source: Bloomberg     What’s on this page?
    1. Crypto trading: what you need to know
    2. Trader’s maze: crypto trading strategies
    3. Moving Average Crossovers
    4. Relative Strength Index (RSI) 5. Event-driven trading
    6. Scalping
    7. DCA (Dollar Cost Averaging)
    8. How to apply strategies in your crypto trading Crypto trading: what you need to know
    Cryptocurrencies are traded on decentralised markets, meaning they aren’t issued or supported by a central authority like a government – they’re run across a network of computers (called a blockchain). Due to the decentralised nature of cryptocurrency, they’re free from many of the political and economic concerns affecting traditional currencies.
    However, this doesn’t mean cryptocurrencies are free from external factors. To the contrary, cryptocurrencies are unpredictable and are affected by factors like supply and demand, media presence, integration of e-commerce payment systems and key events.
    These factors make it important that your cryptocurrency trading strategies not only focus on a way to navigate volatility, but focus on diversification of your portfolio. Trading a wide variety of asset classes – including cryptocurrencies – allows you to diversify your portfolio. By solely trading one asset class or market, you are confining yourself to the conditions of one market out of thousands.
    By diversifying the types of trades you make, you can hedge against the risk of a market moving against you, as well as gaining the benefits of positive movements.
     
    Trader’s maze: crypto trading strategies
    Due to the volatile and unpredictable nature of cryptocurrencies, it is important to have a cryptocurrency trading strategy before attempting to trade the market.
    When we speak about crypto trading, we’re referring to the act of speculating on crypto price movements through a CFD trading. These are leveraged derivatives, which enable you to speculate on price movements without having to own the underlying asset.
    Find out more about trading CFDs
    Alternatively, you can buy cryptocurrencies via an exchange – meaning you’ll purchase the coins yourself. You’ll need to create an exchange account, fund the full value of the position and store the cryptocurrency tokens in your own wallet until you’re ready to sell. Buying cryptocurrencies directly can be complex and isn’t advised for beginner traders.
    Moving Average Crossovers
    Trading moving average (MA) crossovers requires an understanding of MAs, and crossover trading strategies. Let’s start at the beginning: a moving average is a lagging technical indicator combining the price points of a financial instrument over a specific timeline, dividing by the number of data points to give you a single trend line.
    This single trend line allows you to determine the direction of the current trend, while lessening the impact of random price spikes. It also enables you to examine the levels of support and resistance through analysing previous price movements.
    So, how do you incorporate this indicator into your cryptocurrency strategy? One of the main methods of utilising the moving average is called ‘crossovers’. A price crossover, or crossover, is when the price of the asset crosses above or below a MA to signal a potential change in trend.
    To trade a moving average crossover in cryptocurrency markets, you’ll need to wait for the price crossover before you go long or short on the cryptocurrency in question – by using a financial instrument like CFDs.
    Another strategy applicable is to apply two moving averages to a chart: one short term and one long term. When the shorter MA crosses above the longer MA, this shows the trend is shifting up – and is known as a golden cross, which can be considered a buy signal. When the shorter MA crosses below the longer MA, this indicates the trend is shifting down – and is known as a death cross.
    Read our complete guide to trading moving averages
    Relative Strength Index (RSI)
    The relative strength index (RSI) is a technical indicator, which is used to identify momentum, overbought and oversold market conditions. It can also be used to highlight signals of divergence and hidden divergence in the financial markets. This type of trading is also known as trend trading.
    The RSI is a calculation of the profitable price closes relative to unprofitable price closes – reflected as a percentage.
    It is calculated using the formula:
    RSI = 100 – (100 / [1+RS])
    The indicator is depicted as a percentage out of 100, with a lower percentage typically indicating an oversold position and a higher percentage reflecting and overbought position.
    So, what’s the best crypto strategy for trading RSI? Well, that depends on your risk appetite and trading style. The RSI can be used for trading both short and long signals when the price is rangebound in nature as well.
    However, as markets regularly move in trends, using an RSI indicator to highlight trends for entry and trends for exit will give you an idea of when to engage.
    Event-driven trading
    A strong media presence of a specific coin or crypto exchange can impact cryptocurrency markets. This cryptocurrency trading strategy focuses solely on taking advantage of these ‘events’. It’s a popular trading strategy for those new to trading.
    News coverage of current events can influence the prices of many things like forex pairs, stock indices and commodities – not just cryptocurrencies. This influence is not just speculation – many experienced traders will take advantage of this.
    You’d normally wait until the market shows a consolidation pattern before an expected news release (like an earnings report) and then act as soon as a market breakout occurs. Yet, due to the volatile and unpredictable nature of cryptocurrencies, you may have to wait until after such a news release is published before engaging in the trade.
    Simply put, you’d buy your chosen cryptocurrency when positive news is announced and short it when negative news comes out.
    Scalping
    Scalping is the practice of opening positions in line with a trend, often entering and exiting the market multiple times in a short period as it develops. Individual trades are held for just a few seconds – minutes at the most – so it is one of the most short-term strategies.
    This trading strategy works very well for active day traders. Scalping focuses on minute-to-minute price changes, which are driven by quantity. As soon as the trade becomes profitable, you’d exit the trade.
    There’s no ‘waiting for the market to depict trends’ as you’ll have to be quick, and close trades that are losing money instantly. The more volatile the market, the better it is to employ scalping.
    You may want to use tear-off tickets when you’re scalping. With them, you can set up a position in the opposite direction so that you’re ready to exit, either taking your profits or limiting your losses.
    Bear in mind that scalping can be risky if you’re placing multiple trades on a very short-term basis. It’s essential to manage your risk carefully.
    DCA (Dollar Cost Averaging)
    If you’re looking for a crypto trading strategy that doesn’t involve indicators, then dollar cost averaging (DCA) might interest you. DCA is a popular strategy for both beginner traders and experts alike.
    Instead of investing all your money into a specific asset at once, you divide your investments into smaller amounts. These amounts are then spread out over a predetermined timeline and are regularly invested on a particular time and day of the week – and only on that day and time.
    What does this look like in execution? Let’s say you decide you’d like to invest in bitcoin. You’ve set aside $15,000 for this purpose, and decide a DCA strategy will be the best way forward. So, you’d then divide your initial amount by the number of weeks you’d like the strategy to run for.
    For the purpose of this example, we’ll say that you’d like to invest your $15,000 over six months. You’d then divide the initial amount by 24 (the number of weeks in six months), giving you $625 per week. For the next six months, every Tuesday at 2pm you invest your $625 into bitcoin – until your initial amount is depleted.
    Why invest like this? Buying an asset in regular intervals helps alleviate the impact of market volatility, meaning you’ll typically receive more of the currency from your final investment than if you’d invested all your money at once.
    It’s important to note, to fully make use of this strategy you’d need to trade the specific coin through an exchange – and not through a broker like us.
    How to apply strategies in your crypto trading
    Now you know the basics of cryptocurrency trading strategies, how do you get started? Well, you can follow our easy guide to placing your first cryptocurrency trade:
    Open an account with us or log into your existing account. From there, you’ll be able to access the cryptocurrency market through our platform Learn how the cryptocurrency market works and choose a coin to focus on. With so many options, remember the importance of diversifying your crypto portfolio Build a trading plan from the above strategies. Choose one which aligns with your personality and risk appetite Choose your cryptocurrency trading platform. We offer an award-winning* and cutting-edge platform with around-the-clock support Open, monitor and close your first position. Or open a demo account to practice your cryptocurrency trading strategies with virtual funds Footnotes
    * Best trading platform as awarded at the ADVFN International Financial Awards 2021and Professional Trader Awards 2019. Best trading app as awarded at the ADVFN International Financial Awards 2021.
  20. ArvinIG
    Breaking down crypto’s biggest problem and exploring decentralisation, security, and scalability.

      Blockchain Cryptocurrency Decentralization Scalability Finance Ethereum   The value of cryptocurrencies has plummeted this year. Despite this, enormous amounts of research and investment are going into exploring the applications of crypto-assets and the blockchain. Innovations like decentralised finance, web3, and even central bank digital currencies remain of high interest, as the integration between digital and traditional finance deepens. Challenges remain, however; and the most significant of them is known as the Blockchain Trilemma. In this article, we explain the Trilemma and what it might be for the future of blockchain technology.
    What is the Blockchain Trilemma?
    The Blockchain Trilemma describes the trade-off a blockchain faces between ensuring decentralisation, scalability and security. Each project tries to achieve some level of all three but prioritises one quality over the others. The trilemma describes the issue that as a blockchain emphasises one feature, it compromises that of the others. It is suggested that only two of the three can be sufficiently achieved at any time.
    Let’s break down the three arms of the dilemma individually.

    Source: Bloomberg The three pieces of the blockchain puzzle
    Decentralisation Decentralisation is perhaps the essential feature of any blockchain technology. It’s the removal of traditional intermediaries that creates its appeal and differentiates it from legacy finance. Rather than assets being passed between counterparties via banks or similar entities, the blockchain provides the ability for counterparties to transact directly. In principle, this means that power throughout the network is less concentrated and individuals have greater control of their assets and information.
    Scalability Crucial to any network’s mass adoption is scalability - or the ability of the network to increase in size and scope without dramatically impacting its effectiveness. In the case of blockchain, and Bitcoin, in particular, the promise of a decentralised, intermediary-free financial transaction relies on its ability to withstand the growing demand for its use. A failure to achieve this means the network will lack the speed and reliability to replace any traditional infrastructure.
    Security Security refers to the need for the blockchain to safely and reliably protect assets and execute transactions. Security is core to trust in any network, especially one that promises to store and transact in things of large value. The risk of a decentralised network is a lack of a single entity to provide security oversight and protect the integrity of its function and assets. In addition, a network cannot become more porous and susceptible to attack.
      How could the problem impact crypto-assets?
    While there’s nothing in practice suggesting that a blockchain can’t achieve decentralisation, scalability and security, the trilemma both describes the issues existing projects have run into and provides a framework for developers to test the strength of their projects. The Trilemma is also a factor in driving the value of a coin. Far beyond the vagaries of market speculation or the use as a financial asset, a cryptocurrency’s utility depends on its ability to deliver decentralisation, scalability, and security.
    Could Cardano help solve the problem?
    One cryptocurrency that seeks to tackle the blockchain trilemma is Cardano. Cardano promotes itself as a proof-of-stake platform that has been established on ‘peer-reviewed research’ and developed through ‘evidence-based methods’. Like Ethereum, it aims at becoming a public blockchain for public commercial applications. Currently, Cardano has established a decentralised and secure network but is struggling for scale. It is introducing a layer 2 solution called Hydra that will process some transactions off Cardano's main chain, allowing for a great number of total transactions.
    Technical analysis of Cardano
    Cardano’s central challenge is to achieve scalability if it is to challenge Ethereum as the leader in the race to become a public blockchain for commercial applications. Its long-term utility and value will be determined by whether it can achieve this. From a price perspective, Cardano has seen its value fall by more than two-thirds during the so-called Crypto winter. In the shorter term, the technicals are pointing to a turnaround in momentum for Cardano, with the RSI trending higher, and price above the 20-, 50- and 100-day moving averages.
    Cardano daily chart

    Source: IG Summary
    The blockchain Trilemma is the biggest problem facing crypto-assets. Although in principle a solvable issue, current blockchain networks have experienced challenges in achieving all three of decentralisation, security or scalability at the same time. Cardano is one network which is attempting to crack the trilemma, as it tries to achieve scale. From a price perspective, Cardano is showing technical signals of bottoming.

    Kyle Rodda | Market Analyst, Australia
    18 August 2022
  21. ArvinIG
    Global payment solutions provider Change Financial wants to raise $5.72 million in funds to accelerate the development and growth of its flagship product offering Vertexon.

    Source: Bloomberg   Indices Shares Debit card Financial technology CFD Bank   ASX-listed fintech company Change Financial could see its share price rise on a fund-raising to accelerate improvements to key products. The global payments processor hopes to use the funds to drive growth in its Vertexon Payments as a Service (PaaS) platform.
    $5.72 million fund-raising for product enhancement
    On 3 August Change Financial announced a capital raising of $5.72 million primarily for accelerated product enhancement.
    According to an official statement, the capital raising will consist of a $4.97 million non-renounceable entitlement offer to eligible shareholders and a $0.75 million placement to new institutions, sophisticated and professional investors.
    The capital raising includes sub-underwriting from Altor Capital and $0.4 million from the board and management. It will also involve the participation of new institutional investors.
    ‘We are pleased to have completed a well-supported placement from our loyal existing shareholders whilst also welcoming several new institutional and sophisticated investors to the register’, said Alastair Wilkie, Change CEO.
    Change Financials’ product improvement plans will focus on its Vertexon PaaS solution – one of the company’s flagship offerings.
    ‘This capital raising will enable us to execute on our growth plans, specifically enhancing our Vertexon Payments as a Service… offering via increased issuing capability and connectivity along with targeted investment into sales and marketing strategies’, Wilkie said.
    Change directors agree to entitlement offer
    The $4.97 million entitlement offer will see the provision of one new fully paid ordinary share for every four existing shares held. The issue price for the offer is $0.05 per share, for a 10.0% discount to the close price of $0.055 on 16 August 2022.
    Four of Change’s directors - Ben Harrison, Alastair Wilkie, Tom Russell and Ian Leijer, have entered general sub-underwriting agreements for a total of approximately $400,000 of the entitlement offer. The offer will be made available on 8 August 2022 and will have a closing date of 25 August 2022.
    Change Financial said it had received unconditional binding commitments for the $0.75 million placement to institutional, sophisticated and professional investors.
    The placement will involve the issue of around 15 million new shares at an issue price of $0.05 per share.
    Settlement for the placement took place on Tuesday 9 August 2022, with the placement shares allotted through the ASX and starting to trade the following day.
    Vertexon the focus of product enhancements
    Vertexon Payments is Change Financial’s flagship payments solution, consisting of a PaaS platform that integrates with the core systems of clients to provide customers with digital card services. These integrations include Apple Pay, Google Pay, Samsung Pay and BNPL services.
    At the time of Vertexon’s launch in Australia in November 2021, Change said the platform had enabled it to manage and process over 16 million virtual, credit, debit and prepaid cards globally. Change was servicing 146 clients in 41 countries, with key clients including ME Bank, BDO Unibank and eftpos Australia.
    Cashless payment solutions like Vertexon could see rapid growth in popularity in years to come, especially as the Covid pandemic accelerates the digitisation of finance.
    While the digital payments landscape could be intensely competitive, Wilkie sees opportunities for Chance in partnerships with both established financial institutions and upstart fintech companies.
    ‘Banks and fintechs can tap into immense opportunities by partnering with Change from an integrated payment processing and card management perspective’, Wilkie said.
    ‘Change can help businesses to issue cards, digital wallets, BNPL services and access major card schemes like Mastercard, VISA and AMEX.’

    Marc Howe | Financial Writer
    18 August 2022
    Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.* Learn more about share CFDs or shares trading with us, or open an account to get started today.
    * Best trading platform as awarded at the ADVFN International Financial Awards 2021 and Professional Traders Award 2019
  22. ArvinIG
    The US equity markets delivered its fourth straight week of gains to end last week, with the rebound over the past month effectively recovering close to half of their bear market sell-off.

    Source: Bloomberg   Forex Indices China Stock market index S&P 500 EUR/USD   Market Recap
    The US equity markets delivered its fourth straight week of gains to end last week, with the rebound over the past month effectively recovering close to half of their bear market sell-off. The easing-inflation narrative riding on the downside surprise in recent US inflation data remains the trigger in unwinding the extensive short positions that were built up over the course of the bear market. Market breath suggests near-term overextended levels, with the percentage of S&P 500 stocks above its 50-day moving average (MA) pushing way past one standard deviation above its five-year historical mean. This may drive some de-risking to take place as we edge closer to the Jackson Hole Symposium next week. Although there was a retracement in the previous three instances where market breadth was at this level, the retracements on those occasions were to mark a new higher low for another subsequent up-move higher.
    To end last week, the sole economic data to note was the August reading for the University of Michigan (UoM) consumer sentiment index, with its outperformance (55.1 versus 52.5 consensus) providing a more optimistic take on economic conditions and another catalyst for risk sentiments to ride on. The median expectation of inflation a year from now came in at 5%, its lowest since February this year. Economic conditions will run the risk of further moderation as the Federal Reserve (Fed) is likely to continue on its path of rate hikes, with market forecast for US inflation to remain elevated at 7.5% in quarter four (Q4). But until signs of cracks appear, market participants are shrugging it off and basking in the improved risk environment for now.
    The US Tech 100 index continues to find support off its 12,900-13,000 region last week, which marked a confluence of key Fibonacci levels. A downward trendline since the start of the year has been overcome, with the short-lived retracement from the trendline resistance suggesting that equity bulls remain firmly in control. Next key resistance ahead for the index could be at the 14,000 level.

    Source: IG Asia Open
    Asian stocks look set for a positive open, with Nikkei +0.62%, ASX +0.55% and NZX +1.03% at the time of writing. The South Korean market, KOSPI, is closed for holiday today. Tensions between US and China are on watch, with another visit of Taiwan by a delegation US lawmakers led by Senator Ed Markey. The USD/CNH saw fairly muted moves, suggesting that market participants may be shrugging it off as a non-event for now.
    On the economic data front, Japan’s quarter two (Q2) gross domestic product (GDP) expanded 2.2% annualised, less than the 2.5% forecast. Nevertheless, it suggests that pent-up demand from Covid-19 reopening could continue to underpin growth ahead. Private consumption, which accounts for more than half of Japan’s GDP, rose 1.1%. While virus resurgences in quarter three (Q3) could dampen social activities, one may find relief that restrictions are not coming back in place, which should allow pent-up consumer demand to continue taking control into the summer holiday season.
    Over in China, new bank lending came in way less than expected in July while broad credit growth slowed, as Covid-19 restriction concerns and a deepening property crisis remain as obstacles in driving a more cautious borrowing environment. With seemingly no clear resolution in these headwinds anytime soon, credit growth could remain muted in the near term. The day ahead will provide further clues about China’s economic conditions with its release of July industrial production, retail sales and fixed asset investment. Current expectations are for all three indicators to trend higher year-on-year (YoY) from their June readings, but intermittent virus restrictions may pose downside risks to the figures. China stock indices have not been picking up over the past month, despite the bullish momentum in Wall Street. The S&P 500 is up close to 11% over the past month, while the CSI 300 and China A50 is down 1.4% and 3.8% respectively. On the four-hour chart, the China A50 index has broken above a descending channel pattern, along with a bullish divergence on its moving average convergence divergence (MACD). That said, market participants will want to see a more resilient picture for economic conditions in order to provide a more sustaining upside. Next level to watch may be at the 14,000 resistance.

    Source: IG On the watchlist: EUR/USD hitting key upper channel trendline resistance
    Recent US dollar weakness on the peak-inflation narrative has provided an uplift for various risk-sensitive dollar-crosses such as the EUR/USD but after coming in at its five-week high last week, an upper channel trendline resistance is currently in the way. Disruptions on the Rhine River shipping route due to low water levels are seeking to challenge the transport of fuel and other industrial goods for Western Europe, adding to the struggle in securing energy supplies triggered by the Ukraine-Russia tensions. The 1.037 level remains a key resistance to overcome near-term. Any failure to cross the level in the coming days may leave the descending channel intact and suggests a downward bias overall.

    Source: IG Friday: DJIA +1.27%; S&P 500 +1.73%; Nasdaq +2.09%, DAX +0.74%, FTSE +0.47%

    Yeap Jun Rong | Market Strategist, Singapore
    17 August 2022
  23. ArvinIG

    Could European inflation diverge from the US?

    By ArvinIG,


    Analyst Article
    UK inflation in focus as divergence with the US could highlight potential differences in monetary policy outlook.

    Source: Bloomberg   Forex Inflation Price United States United States dollar Pound sterling   UK inflation key to determining whether we will see Europe and US outlook diverge
    The UK economy has come under intense scrutiny of late, with Friday’s GDP release highlighting the continued stagflation underway in the face of rising costs and negative growth.
    Last week managed to provide a bullish resurgence for stocks in the wake of US consumer price index (CPI) and PPI data, lifting optimism that inflation had topped out.
    However, it is notable that the decline in US prices acme largely as a result of declining energy prices. For one thing, that raises questions over whether we will soon see energy prices rise again to dampen spirits amongst equity markets.

    Source: Refinitiv  
    Nonetheless, while we have seen US inflation rise, the pertinent question for traders comes when considering the different dynamic between US and European energy prices. The breakdown in relations between the West and Russia brings heightened risk that those countries heavily reliant upon imports from Russia.
    Baseload energy prices in Germany and France has been soaring as the restrictions of Russian gas are coupled with a whole host of other factors driving up prices. Elevated temperatures have been at the core of those alternate factors, with lower wind levels, and now a shrinking in the river Rhine which impacts coal transport and the ability to cool nuclear power plants.
    That highlights how Europe certainly does appear at risk of seeing elevated prices despite the hope brought by declining US inflation last week. For the UK, we have seen prices grow at the fastest rate of the three, with Brexit restrictions on movement of goods and people serving to exacerbate the plethora of issues causing prices to rise elsewhere.
    UK inflation in view
    Wednesday brings the notable UK inflation reading, with markets expecting to see Year-on-Year (YoY) CPI inflation reach 9.9%. The Bank of England (BoE) predictions that inflation will top out at 13.3% in October provides the basis for further upside to come. Of course, the wider decline in crude prices does raise the possibility of a lower-than-expected reading like the US.
    However, there is a chance that prices continue to rise, creating a wider gap between US and UK inflation. Such a move would inevitably cause markets to realign to adjust to any perceived shift in monetary trajectory.
    Notably, the cheap energy being provided by Russia to Asian nations doe mean that there is significantly less pressure on the likes of Japan and China to raise rates. We have seen that through the surprise China rate cut this weekend.

    Source: Refinitiv GBP/USD could turn higher if Federal Open Market Commitee-BoE outlook diverges
    GBP/USD remains within a downward trend despite the gains seen over the course of the past July. Wednesday’s inflation gauge could help lift the pair if we do see a substantial upside move for UK inflation as expected. The ability to break up through 1.2406 will ultimately be key if this trend is to reverse.
    However, it is also worthwhile noting that a bearish reversal for stocks would likely dampen sentiment around GBP/USD as traders head back into the dollar. Should GBP/USD strengthen, it would cause FTSE 100 underperformance given the fact that the majority of listed stocks earn revenues in foreign currencies.
    Thus risk-on sentiment for stocks could drive GBP/USD higher, bringing FTSE outperformance. Meanwhile, a decline in markets would likely drive GBPUSD lower and bring relative outperformance for the FTSE 100 compared with other major markets.

    Source: ProRealTime
    Joshua Mahony | Senior Market Analyst, London
    17 August 2022
  24. ArvinIG

    Have Disney shares won the streaming wars?

    By ArvinIG,


    Analyst article
    While Disney claims to have overtaken Netflix in subscriber terms, there is more to the numbers than first meets the eye.

    Source: Bloomberg   Shares The Walt Disney Company Netflix Subscription business model Streaming media Bob Chapek   Disney (NYSE: DIS) shares have shot up by 28% over the past month to $122, as the entertainment titan benefitted from strong results and an ever-so-slightly less hawkish Federal Reserve.
    However, Disney stock was at $197 as recently as March 2021, and the current recovery comes after more than a year of sustained share price falls.
    Disney share price: Q3 2022 results
    Disney’s Q3 results were a strongly positive affair. Total revenue increased by 26.3% year-over-year to $21.5 billion, 6% above the Refinitiv average analyst estimate. And encouragingly, net income rocketed by 53% to $1.4 billion, while diluted earnings per share was $1.09, up from $0.80 a year ago.
    Its Parks, Experiences, and Products division was the star performer, delivering $7.4 billion of revenue, 9% higher than analyst estimates. CEO Bob Chapek enthused ‘we had an excellent quarter, with our world-class creative and business teams powering outstanding performance at our domestic theme parks.’
    While it’s tempting to attribute the parks performance to post-pandemic demand, the company argued the strength of the results meant it was ‘far more resilient and far more long-lasting’ than just a temporary boom.
    Chapek’s was keen to highlight the ‘big increases in live-sports viewership, and significant subscriber growth at our streaming services. With 14.4 million Disney+ subscribers added in the fiscal third quarter, we now have 221 million total subscriptions across our streaming offerings.’

    Source: Bloomberg Disney vs Netflix: market share struggle
    Chapek’s focus on subscriber numbers is a thinly veiled reference to streaming rival Netflix. The trailblazer has lost nearly 1.2 million subscribers so far this year, and now has only 220.7 million, on paper fewer than Disney.
    Further, Netflix’s share price has suffered similarly to Disney’s, having collapsed from $690 in October last year to $174 a month ago, before recovering to $249 today.
    And while Disney has adjusted its predicted 2026 subscriber base down by 15 million to 245 million due to the loss of Indian premier league cricket rights, the company expects to grow far faster than its older rival.
    As PP Foresight analyst Paolo Pescatore posits, this is a ‘pivotal moment in the streaming wars... Disney is at a different phase of growth to Netflix. There are still millions of users to acquire as it continues to expand.’
    Given Disney’s massive back catalogue, rights to the world’s two largest cinematic franchises Marvel and Star Wars, and multi-billion-dollar revenue derived outside of its streaming business, it’s tempting to think the battle with Netflix is over.
    But before Chapek pops the champagne, there are four reasons to think otherwise.
    First, the way each company counts their subscriber numbers is very different. Disney tallies each service separately, so that one household paying for Disney+, Hulu, and ESPN+ is counted as three subscriptions. Disney has penetrated far fewer households than first appears, and certainly fewer than Netflix.
    Second, Disney generates only 39% as much average revenue per user (ARPU) as Netflix in its home market, the US and Canada, with an ARPU of $6.27 compared to Netflix’s $15.95. In the Asia Pacific region, it’s even worse, with Disney+ Hotstar’s ARPU at $1.20 per month, compared to Netflix’s $8.83.
    These low numbers are predominantly down to its 2019 launch strategy, when it undercut Netflix by charging subscribers only $6.99 a month for Disney+.
    Now Disney is attempting to increase the cost of all four of its services — Disney+, Disney+ Hotstar, Hulu and ESPN+ — to get its ARPU numbers up. From December, Disney+ subscribers can either accept adverts or see their costs increase by 37.5% from $7.99 to $10.99 a month.
    In this recessionary environment, Disney may struggle to get anywhere close to Netflix’s ARPU without haemorrhaging subscribers.
    Third, while Netflix has lost subscribers this year, Kantar research indicates ‘Netflix consistently has one of the highest Net Promoter Scores…there is a long-standing group of loyalists who are less likely to churn…the platform outperforms competitors on satisfaction with both content and interface related features.’
    While Netflix is irritating customers over account sharing, it holds massive reserves of goodwill that Disney may be underestimating.
    Finally, Netflix’s high ARPU means it made a healthy $5.1 billion profit in 2021. Disney’s streaming service is still loss-making and expected to be so until fiscal 2024. In fact, Disney’s direct-to-consumer (streaming) division lost over $1.1 billion in Q3, up from a $293 million loss in the same quarter last year. By contrast, Netflix saw Q2 net income of $1.44 billion.
    MoffettNathanson analyst Michael Nathanson notes the industry is pivoting to a ‘new wave of sobriety…the focus for streamers is return on invested capital and free cash flow generation.’
    And as debt becomes more expensive, Disney’s promises of streaming jam tomorrow may become harder to sell.
    Charles Archer | Financial Writer, London
    16 August 2022
  25. ArvinIG
    The RBA’s August policy minutes in focus ahead of wage data due out later this week and AUD/USD approaches the 0.7000 psychological level after a big overnight drop.

    Source: Bloomberg   Forex Commodities Australian dollar China AUD/USD Price of oil   Tuesday’s Asia-Pacific outlook
    A stronger US dollar weighed on the Australian dollar after poor US economic data added to recession fears. The New York Fed’s Empire State Manufacturing Index for August fell to -31.3 on weak new orders and shipments. US stocks opened lower but trimmed losses throughout the Wall Street trading session. The benchmark S&P 500 ended 0.40% higher as Fed pivot bets strengthened some.
    On Monday, China reported weaker-than-expected retail sales and industrial production data for July. China’s central bank, the People’s Bank of China (PBOC), unexpectedly lowered its 1-year medium-term lending facility rate by 10 basis points. The surprise move sparked demand for Chinese government bonds, sending China’s 10-year yield to its lowest level since January. The yuan weakened more than 1% against the USD.
    Crude oil prices fell in New York trading despite China’s signal of support for its economy. WTI crude and Brent crude prices slipped nearly 3%. Copper and iron ore prices also came under pressure, which weighed on the commodity-sensitive Australian dollar. In Europe, natural gas prices surged as the Rhine River saw its water level drop further. German 1-year ahead energy prices hit another fresh record high.
    The Reserve Bank of Australia (RBA) will release its August policy minutes today, which may provide markets with additional insight into the central bank’s thinking. Australia’s second-quarter wage price index is expected to climb from 2.4% y/y to 2.7% y/y later this week. A larger-than-expected increase would likely fuel some hawkish RBA bets to the Aussie dollar’s benefit. Melbourne-based BHP Group’s second-half earnings are also due this morning.
    Notable events for August 16:
    Philippines – Retail Price Index (May) Japan – Tertiary Industry Index MoM (June) India – WPI Food YoY (July) AUD/USD technical outlook
    AUD/USD pierced below its 100-day Simple Moving Average and prices look poised to test the 0.7000 psychological level at the current calculus. The 12-day Exponential Moving Average (pink line) offered some intraday support shortly above the psych level. A break below those levels would threaten to drag prices negative for the month. The Relative Strength Index (RSI) is tracking lower towards its centerline.
    AUD/USD daily chart

    Source: TradingView
    Thomas Westwater | Analyst, DailyFX, New York City
    16 August 2022 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.

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