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ArvinIG

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  1. ArvinIG
    EUR/USD, GBP/USD, and AUD/USD turn lower, but the uptrend seen over the course of the past month brings the potential for another upward move before too long.

      Forex United States dollar EUR/USD Euro GBP/USD AUD/USD   EUR/USD falls back into confluence of support
    EUR/USD has been on the back foot over the course of recent trading days, with the price retracing from Wednesday’s peak to fall back into trendline support.
    The upward trend seen over the course of the past month does still remain intact, with this pullback taking us into a zone that could see the price reverse upwards once again here.
    As such, the confluence of the 61.8% Fibonacci retracement, 200-simple moving average (SMA), 100-SMA, and trendline support all provide the basis for a potential upward turn from here. A break back below the $1.0122 support level would be required to negate that current uptrend seen over the course of the past month.

    Source: ProRealTime GBP/USD drops back into trendline support
    GBP/USD has similarly been reversing lower off the back of Wednesdays US consumer price index (CPI) reading, with the price heading back into trendline support this morning.
    Unlike EUR/USD, we have seen this latest high come in below the prior peak of $1.2293, thus raising the potential for a bearish reversal if we see the price break lower.
    With trendline support coming into play here, there is a good chance we see the bulls come back into play from here. A break back below the likes of $1.2063 and $1.20 would be required to bring greater confidence that the bears are back in charge.

    Source: ProRealTime AUD/USD turns lower from 76.4% Fibonacci resistance
    AUD/USD managed to outperform over the course of the past week, with the price rising into a fresh two-month high on Thursday. However, we are seeing the price reverse lower this morning, with Australian growth prospects dented by a raft of disappointing Chinese data points earlier this morning.
    We are subsequently seeing the price fall back into the first support level of $0.7063 after reaching the 76.4% Fibonacci resistance level at $0.7141.
    The ability to break back below $0.7063 would signal the potential for a wider pullback for the pair, with the 100-SMA and Fibonacci levels ($0.6992 and $0.702) bringing possible downside targets if we do see that breakdown. Below that, we would need to see a move below $0.6948 to negate the bullish trend that has been playing out over the course of the past month.

    Source: ProRealTime   Joshua Mahony | Senior Market Analyst, London
      Monday 15 August 2022
  2. ArvinIG

    Where do stocks go from here?

    By ArvinIG,


    Analyst article
    The summer rally has helped improve the outlook for stocks after a tough first half of the year, but both the bullish and bearish cases have powerful arguments supporting them.

    Source: Bloomberg   Indices Shares Commodities Inflation Market trend S&P 500   Global stocks bounceback from July lows
    The past month has seen global equity markets stage an impressive recovery.
    As of mid-June, the MSCI world index was down by almost 25% for the year so far. The rally from the lows of the year has witnessed a recovery of 15%, resulting in 50% of the losses for the year being recouped. This does not mean that the bear market for this year is over.
    Inflation, rising interest rates and slowing growth mean that a recession that hits earnings is still a definite possibility. But for the moment there are signs that stocks, led by US indices, might have a way out of the doom and gloom.
    S&P 500 breadth rebound provides hope
    The current bounce on the S&P 500 has resulted in a sea-change in breadth readings. Rallies in March/April and in May had seen the percentage of stocks above their 50-day moving average rise from around 25% to 65%, and from 20% to 45% respectively.
    But the surge over the last month has seen the reading go from a ‘washout’ low of around 7% to a remarkable 90%. This is a dramatic turnaround, and suggests that stocks have put in a floor on their declines, at least for the time being.
    Previous bear markets in 2001 and 2008 witnessed big rebounds, but none of them saw breadth rebound in the way that it has over the last month.

    Source: IndexIndicators.com  
     
    As the chart below shows, these high breadth readings usually occur in strong uptrends, with returns for the S&P 500 in the following year averaging at least 20%.
    Source: Carson, Stockcharts.com Inflation concerns fading
    The recession fears of the first half of 2022 were driven in a significant way by the surge in oil prices, along with other commodities.

    Source: ProRealTime  
    But since June the price of oil has fallen sharply, and it is not alone among commodity prices.
    Copper, wheat, lumber, corn and nickel prices have all dropped over the past three months, and with US consumer price index (CPI) growth easing in recent readings as investors are beginning to hope that inflationary pressures will drop, prompting the Federal Reserve (Fed) to at least ease off its pace of hiking, perhaps moving back to 50 basis point (bps) rate increases from the 75 basis points of the past few meetings.
    Earnings outlook crucial
    Perhaps the most important element for the next few months will be the third- and fourth-quarter (Q4) earnings seasons.
    Q2 saw earnings generally beat the (lowered) expectations held by analysts, and relatively rosy outlooks issued. But Q3 and Q4 expectations are still relatively elevated, and excluding the stellar performance from the energy sector, the S&P 500 still reported a year-on-year (YoY) decline of 4% for earnings.
    While slower inflation growth will help consumer spending hold up, investors will fret that this will feed through too late to help earnings for Q3 at least.
    Having rallied sharply from their lows, stocks are no longer pricing in so much bad news as was the case back in early July. This leaves them less well-placed for a fresh fall in earnings when Q3 reporting season begins.
    Seasonality risks ahead
    Historically, markets tend to run into problems in August and September. The historical pattern for the S&P 500 shows a period of weakness from the end of August until the beginning of October, when the traditional Q4 rally begins to start.
    In addition, mid-term years such as this one usually witness a fresh drop for the S&P 500 during the months of August and September. From there the picture brightens considerably, with the usual Q4 rally augmented by further gains into years three and four of the presidential cycle.

    Source: IG Market outlook evenly balanced
    While the broad expectation in recent weeks had been for a fresh move to the downside for stocks, the strength of the rally and signs of easing inflation have bolstered the case that the market has seen its lows for the year.
    But there are still powerful arguments on the other side of the hill, and it is by no means certain that we will see further strength from here. And it is important to remember, whichever view you take, to make sure that the correct risk management is in place to help you navigate the coming months.
    Chris Beauchamp | Chief Market Analyst, London
    16 August 2022
  3. ArvinIG
    Investors are keen to glimpse the outlook from BHP’s upcoming annual report after rival Rio Tinto disappointed investors due to heightened uncertainties.

    Source: Bloomberg   Shares Commodities BHP Rio Tinto Iron ore Share price   ASX: BHP release date
    BHP Group Limited (ASX) is expected to release its earnings report on Tuesday, August 16, 2022.
    Expectation:
    NPAT: US$ 16.4B EPS: 5.935 (48% up from FY21) DPS:4.49 (25% yearly increase) BHP earnings key watch:
    The markets are anticipating that BHP will report an underlying net profit of US$20.4 billion, up 19.3% on the year in 2021. During the first half of the financial year, BHP announced a jaw-dropping margin of 64% thanks in part to higher iron ore, copper, coal, and nickel prices and “near record production at Western Australia Iron Ore (WAIO).”
    The operations profit was recorded at US $14.8 billion, an increase of 50% from the same quarter in the previous financial year.

    Source: BHP BHP’s mining exports broke records during the first quarter of 2022 due to the invasion of Ukraine by Russia. By April, the company’s commodity prices had lost steam as the price of iron ore fell 35% and copper fell 25%. It is expected that the fluctuation in prices will impact BHP’s earnings results.
    Starting from the second quarter of the year, rising interest rates and the prospect of a recession have weighed heavily on the commodity outlook. This was recently seen when Rio Tinto, BHP’s major rival, declared it would be discounting its dividend pay-out due to an uncertain future ahead. It is due to this reason that BHP investors are keen to get a glimpse of the future outlook from the impending report.
     
      Share price and technical analysis:
    BHP’s share price has fallen from the April double top of $47.90 to around $37 in August, losing more than 25% of its value in three months. The break of support at $40.00/$39.00 leaves the share price vulnerable to a retest of the July $35.85 low.
    Looking ahead, the price may test the level of $39.95 first (23.6% retracement from the April peak) as it defends the opening range for August, with a move above the 50-day SMA (around $40) bringing the July high to $42 on the radar. On the other hand, the price may find temporary support from the level of $38 if breaching through the moving trajectory.
    BHP daily chart

    Source: IG

    Hebe Chen | Market Analyst, Melbourne
    15 August 2022
  4. ArvinIG
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 15th 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
    SPX
    TDG US
    18/08/2022
    Special Div
    18.5
       
    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.
  5. ArvinIG
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 8th 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
    TOP40
    AMS SJ
    10/08/2022
    Special Div
    4000
       
    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.
  6. ArvinIG
    S&P 500 and Nasdaq 100 decline for the second day in a row on fragile market sentiment and July’s U.S. inflation data due for release Wednesday will set the tone on Wall Street in the coming days.

    Source: Bloomberg   Indices Shares Inflation Nasdaq-100 S&P 500 Nasdaq   U.S. stocks were subdued on Tuesday on jittery sentiment amid heightened uncertainty about the economy in the face of slowing activity and sky-high inflation. At the closing bell, the S&P 500 slipped 0.42% to 4,122, losing ground for the second day in a row, with consumer discretionary and information technology leading the retreat among the major sectors. Elsewhere, the Nasdaq 100 slumped 1.15% to 13,008 as Tesla and Nvidia, two companies with large weightings in the tech index, suffered heavy losses on fears that their earnings could worsen going forward.
    Aside from Wall Street's cautious tone, many traders opted to remain on the sidelines ahead of key economic data that could either bolster the mood or kill the recent equity market rebound in its tracks: the latest inflation report.
    The U.S. Bureau of Labor Statistics will release the July Consumer Price Index on Wednesday morning. Headline CPI is expected to advance at 0.2% month-over-month after having risen 1.3% in June. With this result, annual inflation is seen easing to 8.7% from 9.1% previously, a slow but welcome directional improvement.
    For stocks to resume the vigorous recovery seen late last month, inflationary forces must show convincing signs of moderation, as this is the only way for the Fed to adopt a less hawkish stance later this year or in 2023. This means the lower the CPI print tomorrow, the better for risky assets. On the other hand, if data surprises to the upside, as has happened numerous times in 2022, equities could sell-off violently as traders begin to price in a steeper path of interest rate hikes.
    NASDAQ 100 technical analysis
    The Nasdaq 100 rallied strongly in recent weeks, but it has now begun to pull back after failing to clear channel resistance in the 13,350 area. While the recovery bias has not been nullified yet, the situation could change if sellers manage to push the index below the psychological 13,000 mark in the coming days. If this bearish scenario plays out, we could potentially see a move towards 12,600, followed by a retest of the 12,250 floor near the 50-day simple moving average.
    On the flip side, if buyers resurface and push the index higher, initial resistance appears at 13,350. If prices breach this ceiling decisively, bullish momentum could accelerate, paving the way for an advance towards 13,550.
    NASDAQ 100 technical chart

    Source: TradingView

    Diego Colman | Market Analyst, New York
    10 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.
  7. ArvinIG
    Asia-Pacific traders brace for volatility after stocks fall in New York; China’s July CPI print is seen rising to the highest since April 2020 and USD/CNH traders around 20-day SMA as bears eye trendline support.

    Source: Bloomberg   Forex Shares China USD/CNH United States dollar Consumer price index   Wednesday’s Asia-Pacific outlook
    Asia-Pacific markets look poised for a risk-off session after stocks fell overnight in New York. The tech-heavy Nasdaq-100 Index (NDX) posted a 1.15% loss as traders sold chip-maker stocks following a downgraded revenue forecast from Micron, the largest US memory chip producer. The US dollar posted small gains against the risk-sensitive Australian dollar.
    Iron ore prices fell in China after briefly trading above $110 a ton. The metal-making ingredient fell after China reported 828 local Covid cases for August 8, spanning more than ten provinces. The southern Hainan province and Tibet province contained a large chunk of those cases, forcing local authorities to order mass testing along with the closure of some public establishments.
    Traders are bracing for inflation data out of China for July. The July consumer price index (CPI) is expected to rise to 2.9% on a year-over-year basis. That would be up from 2.5% in June and the biggest increase since April 2020. A hotter-than-expected print would challenge China’s 3% inflation target, which could complicate easing efforts by China’s government and central bank to support growth. The Chinese yuan may weaken on the data print, but much of those gains are likely from hog prices that surged in July. That said, markets may not punish the yuan or other China-related assets if CPI beats estimates.
    The United States consumer price index for July is seen easing to 8.7% from 9.1% y/y. A drop in gasoline and crude oil prices has likely helped cool the price basket gains. Still, the core number—a gauge that strips out food and energy prices—is forecasted to rise to 6.1% from 5.9% y/y. That gauge may have a greater influence on Fed rate hike bets. A hotter-than-expected number could further degrade Fed pivot bets for 2023 and cause equity prices to fall.
    The Bank of Thailand is seen hiking its benchmark rate today, which would be the first in nearly five years. USD/THB fell over 0.5% overnight, bringing the pair to the lowest level since early July. The Chinese e-commerce company Alibaba received approval for its primary listing on the Hong Kong Stock Exchange, according to the company. The news may be supportive of Chinese equity prices.
    Notable Events for August 10:
    Japan – PPI YoY (July) Philippines – Retail Price Index YoY (April) Thailand – Consumer Confidence (July) Thailand – Interest Rate Decision USD/CNH technical outlook
    USD/CNH is around 0.10% lower this week, with prices trading around the 20-day Simple Moving Average (SMA). A supportive trendline from the June swing low may underpin prices if bears break below the 61.8% Fibonacci retracement. A break lower may see prices start to chip away at the gains made through the last five months.
    USD/CNH daily chart

    Source: TradingView This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
    Thomas Westwater | Analyst, DailyFX, New York City
    10 August 2022
  8. ArvinIG
    Walt Disney earnings see traders focus on parks demand as the cost-of-living crisis starts to bite. With the majority of stocks outperforming the earnings season, could Wednesday provide a buying opportunity?

    Source: Bloomberg   Shares The Walt Disney Company Revenue Market trend Stock Disney Media and Entertainment Distribution   When will Walt Disney report their latest earnings?
    Walt Disney report their earnings for their fiscal third-quarter (Q3) post market on Wednesday 10 August 2022.
    What should traders look out for?
    Disney have come under pressure over the course of the past year, with the shift out of high growth names hurting the big hitters in the US. For many, the concern over spending habits in an environment of higher inflation and lower disposable income does bring question marks for the parks segment of the business.
    However, reports of strong visitor numbers at their parks does bring the potential for outperformance thanks to growing subscription numbers for their Disney+ streaming service. With the stock having lost 47% from the record highs of 2021, traders will be paying close attention to whether the company have the ability to weather the storm as the economy weathers a recession.
    Interestingly, Q2 saw revenues from the Media and Entertainment Distribution segment contract, with parks expanding to account for a greater proportion of the overall company. While Covid-19 pandemy understandably dampened demand for the physical experiences in 2020, we have seen parks revenue up to up to 33% of total income (from Covid-19 low of 9%).
    However, while parks do provide greater margins (26% vs 14%), there will be questions over how much they can growth given that revenues are roughly back up to pre-Covid-19 pandemic levels. The key here is whether we can see stability for Parks revenues, and growth for Media and Entertainment as we push through a tough period for businesses.
    Walt Disney earnings – what to expect
    Revenue – $20.96 billion vs $17.02 billion (Q3 2021), and $20.27 billion (Q2 2022).
    Earnings per share (EPS) – $0.97 vs $0.80 (Q3 2021) and $1.08 (Q2 2022).
    Walt Disney earnings – valuation and broker ratings
    Analysts are largely positive for Walt Disney shares given the declines seen over the past year, with zero ‘sell’ recommendations heading into Wednesday’s earnings. Instead, out of 32 analysts, there are 25 ‘strong buy’ or ‘buy’ recommendations, and seven ‘hold’ recommendations.
     

    Source: Eikon Walt Disney shares – technical analysis
    The weekly Walt Disney chart highlights the dramatic decline seen over the course of the past year, with the price falling back down towards that crucial $79.65 support zone. That level marks the bottom for both 2020 and 2016 lows, with a break below that threshold required to truly bring the long-term trajectory of the stock into question. Instead, we are seeing the price rally back up towards the important $112.84 swing high. A push above that level should form that basis of a potential bottom for the pair.
    Utilising the Bollinger Band also brings greater importance to this level of resistance, with the middle band coming into play for the first time six months. The previous occasion saw the price return lower, thus highlighting how important a break through this $112.84 would be. It also highlights the potential for a bearish turn from here to continue the bearish trend should earnings disappoint.
     

    Source: ProRealTime What is the wider earnings backdrop?
    Thus far we have seen an undeniably positive earnings season, with many companies managing to overshoot market expectations. That is important as we move into the back end of this period, with the wider market gains reflecting the pricing in of better-than-expected numbers from a majority of firms.
    That can mean Disney have a tough time on Wednesday, with outperformance potentially already priced in, and underperformance thus bringing a more volatile market response. Below we can see the breakdown of earnings and revenues from the 87% of S&P 500 firms that have already reported. Notably, we are yet to see any sector without a majority of firms outperforming on both earnings and revenues.
     

    Source: Eikon

    Joshua Mahony | Senior Market Analyst, London
    09 August 2022
  9. ArvinIG
    Dear IG Community,

    As we are approaching the statements period. We would like to share some information on UK Consolidated Tax Certificates (CTC) statements. The aim of this post is to provide you with some key information on UK CTC statements release and hopefully clear out some questions you may have.


    1) What is a CTC ?

    It is a document for UK fiscal resident clients and is used to show the dividends received in a tax year and the breakdown of the different types of instruments that have paid them (shares, ETFs, REITs)

    2) Will I receive a CTC ?

    You will receive a CTC if you have received dividends during the tax year. If you haven’t received any dividends during the tax year you won’t receive a CTC.



    CTC's will not be generated for ISA or SIPP accounts. ISA and SIPP accounts are not tax reportable, so we don’t send out any tax documents for these accounts.
    For non-UK tax residents, an Income Summary can be provided on request

    3) Where can find my CTC ?

    You will be able to view and download your CTC (in pdf format) by going to My IG > Live accounts > Statements > Annual



    4) When will the CTC be available?

    Your CTC will ideally be ready around by end of July but it can be released later on. The reason why we can’t give a clear ETA is because there is delay between the end of financial year and when the statements are ready.

    This delay is due to the wait time for incomes to reach IG, for example US ETFs incomes tend to take longer before we receive the data. IG needs to receive incomes on our extensive list of international security types . The certificates are sent once all incomes has been received at IG and classified. 


    5) What will the statement contain?

    The format this year will be the same as previous year, a line by line and summarised description of domestic and overseas income received in GBP-equivalent.
    Please be aware that we do not provide any capital gains (sometimes called P&L) statements for share dealing accounts.
    We do not generate tax statement for spread betting accounts since spread betting does not attract capital gains tax or stamp duty in the UK
    You can find further information on the link here https://www.ig.com/uk/help-and-support/accounts-and-statements/statements/what-statements-will-i-receive


    For Australian clients:

    The process is similar. We will provide you with further information once the AUS office update us on the 2022 statements.

    If you need further information please comment below.

    All the best - Arvin
     
  10. ArvinIG
    Shares Commodities Iron ore Mining Iron BHP   This issue of Investor Spotlight is brought to you by IG, with Kyle Rodda, Market Analyst and ausbiz presenter.

    For better or worse, the ASX is dominated by companies that mine one of Australia’s most abundant resources: iron ore. In this piece, we dig into the investment case for owning iron ore stocks, what’s driving these companies' shares right now, and the fundamentals of the three best ASX-listed iron ore companies.
    Should your portfolio hold iron ore miners?
    The materials sector of the ASX200 makes up over 20% of the index’s total market capitalization. Of that 20%, the iron ore miners dominate, with three – BHP, Rio Tinto and Fortescue Metals Group – amongst the biggest companies in the overall market. In fact, at its recent peak, BHP was more than 10% of the total index weight, after the company ended its dual-listing on the London Stock Exchange. For Australian investors, investing in one of the country’s biggest and best companies is an inescapable choice. But just like when making any investment, timing, price, risk and reward all must be considered. And as a cyclical stock, the investment case is heavily informed by the economic cycle - and the outlook for iron ore prices.
    What’s driving the iron ore price?
    Since the beginning of the pandemic, iron ore prices have scaled record highs as the global economic recovery roared. The spot price of the commodity hit as high as $US220, with hot steel demand from China, as the country’s policy makers pump-primed its economy out of lockdowns, underpinning the move. Demand has cooled markedly over the past 12-months however, as actions by China’s central government to deleverage its property sector, stop-start lockdowns, and so-so monetary and fiscal stimulus push iron ore prices to current levels around $US100 per tonne. The outlook is also uncertain, as China’s dynamic-zero policy remains in place and the global economy shows signs of slowing.

    Source: Bloomberg The three best ASX iron ore miners
    BHP
    BHP is the largest miner in the world, and after ending its dual listing on the London Stock Exchange, safely the biggest company on the ASX, with a market capitalization of just below $A200 billion.
    Although a diversified miner, in the business of mining a variety of metals, minerals and petroleum, iron ore makes up more than half of the company's profits - a figure that hit a record high in financial year 2021 of over $17.1 billion.
    Profits are expected to climb again this financial year, with consensus forecasts for profits tipped to rise to $24.5 billion, and earnings per share to increase from $3.37 to $4.07, according to data compiled by Reuters.
    This will amount to a dividend increase from $3.01 to $3.43.
    The issue for investors when it comes to BHP shares is looking further ahead. Earnings are tipped to remain robust, but are likely to slow. Current estimates for the companies’ dividend is expected to moderate to pre-pandemic levels of around $1.87 by 2024.
    BHP’s price-to-earnings ratio of 6.55 is low by historical standards. Nevertheless, cyclical stocks tend to see multiples reach their most attractive at the peak of the cycle. It is also more rich than its industry peers.
    Broker analysts remain bullish on the stock, despite the uncertain outlook for demand for its most profitable commodity. Of 20, ten either have a strong buy or buy, and the other ten a hold, with a media price target of $44.50 per share.

    Source: IG Rio Tinto
    Rio Tinto is the second largest metals and mining corporation, with its market capitalization currently $143.5 billion. Roughly $36 billion of that is its ASX-listed business.
    Like BHP, Rio Tinto is a diversified miner, but generates the majority of its profits from the production of iron ore.
    Rio Tinto recently posted its half-year results, with the company’s financials better representing the acute fall in iron ore prices. Profits fell by nearly 30%, and its dividend slashed by half to $2.67 per share.
    The stock trades at a more attractive multiple than its larger counterparts though it does point to a company that has seen profits peak for this cycle. The company’s full year dividend is tipped to moderate to $6.38 then to $5.45 in the next two financial years.
    Analysts are positive on the outlook for Rio Tinto, though. Three recommend a strong buy, eight a strong buy, and seven a hold with a price target of $115.50 per share.

    Source: IG Fortescue Metals
    Fortescue Metals Group is a pure iron ore play, with the company’s business’ operations focused on the mining of the commodity.
    The miner's competitive advantage comes from its relatively low-cost base, higher adaptability to changing demand and operating efficiency. Conversely, the iron ore it produces is of lower quality, and because it is almost solely an iron ore miner, lacks diversified revenue streams.
    Like its larger counterparts, Fortescue posted record profits in its last financial year. Net profit rose by more than double to $US10.4 billion and earnings per share leapt to $3.35 for a dividend pay-out of $3.58.
    Consensus forecasts compiled by Reuters are projecting a drop in profits and dividends this financial year and going forward. Earnings per share is tipped to contract to $2.04 and decline over the following two financial years, as profits revert to long-term trends.
    The broker community is more pessimistic on the outlook for Fortescue, largely due to its concentration on iron ore. It has a consensus sell rating amongst 19 analysts, with 11 recommending that action, seven suggesting a hold, and just one a buy. The consensus price target is $17.00.

    Source: IG Summary
    The iron ore majors are a staple investment for many Australian investors. Some of the biggest and best mining companies in the world are listed on the ASX, and offer exposure to great management, cyclicality and long-term value. However, as with any cyclical stock, timing is everything; an investor must be confident of when it is time to buy, or be prepared to hold throughout the fluctuations of the economic cycle to see full value.

    Kyle Rodda | Market Analyst, Australia
    09 August 2022
  11. ArvinIG
    Asia-Pacific markets face rocky start after a mixed session on Wall Street; Australia’s Westpac consumer confidence eyed as potential risk to AUD and AUD/USD retakes 50-day SMA after overnight gain, but momentum looks fragile.

    Source: Bloomberg   Forex Indices Shares Commodities AUD/USD United States dollar   Tuesday’s Asia-Pacific outlook
    The Australian dollar is searching for direction in Asia-Pacific trading after rising more than 1% overnight. Stocks closed mixed on Wall Street. The tech-heavy Nasdaq-100 Index (NDX) fell, and the small-cap Russell 2000 rose. Rising oil prices helped support energy stocks, with WTI crude oil and Brent oil prices rising more than 2%.
    Copper and iron ore prices are higher, aiding the commodity-sensitive Aussie dollar. China’s trade balance data showed a renewed appetite for many commodities in July. Goldman Sachs cut its Brent crude oil price forecast for the third quarter from $110 to $140. Energy traders are watching for monthly reports from OPEC and the International Energy Agency this week, along with inventory data from the API and EIA.
    OZ Minerals rejected an unsolicited offer from BHP Group worth A$8.34 billion. The CEO of OZ Minerals appeared unimpressed with the offer, but it is unknown if BHP will adjust its bid. Overall, however, it’s a positive sign for the copper industry. The recent drop in prices does favor the position of larger companies that are likely better capitalized.
    New Zealand’s electronic retail card spending fell 0.2% from the prior month in July. NZD/USD climbed above its 50-day Simple Moving Average during New York hours. A move higher in iron ore prices helped support AUD, but prices face a potentially volatile session today, with Westpac consumer confidence due shortly. The gauge has fallen since January, and the RBA’s recent rate hike may have dragged sentiment further.
    Notable Events for August 09:
    Philippines – Balance of Trade (June) Australia – NAB Business Confidence Philippines – GDP Growth Rate QoQ (Q2) Thailand – Consumer Confidence (July) Japan – 30-Year JGB Auction Indonesia – Retail Sales YoY (June) AUD/USD technical outlook
    AUD/USD is trading back above its 50-day Simple Moving Average (SMA) after rising from its 20-day SMA. A break above the 0.7036 level may clear a path for more gains. However, RSI and MACD, while positive, have started to moderate. A pullback would aim for support around the 20- and 50-day SMAs.
    AUD/USD daily chart

    Source: TradingView

    Thomas Westwater | Analyst, DailyFX, New York City
    09 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.
  12. ArvinIG

    ASX earnings preview: REA, CBA and Telstra

    By ArvinIG,


    Analyst article
    This week Australia’s top companies present their annual result for the previous financial year. Today’s preview focuses on the REA, CBA and Telstra.

    Source: Bloomberg   Indices Shares Telstra Price Technical analysis Australia   The upcoming FY 2022 report is expected to show some level of slowdown as Australian businesses are not immune to the shifting market, rising interest rates and a tight job market.
    REA Group (ASX:REA)
    Earnings date:
    Tuesday, 9 August 2022 at 8.30am (AEST)
    Expectation:
    EPS: $3.11 representing an 27% yearly growth For fiscal years 2022 and 2023, analysts are estimating that the average annual growth will increase to 19.45%. Key watch:
    The REA Group Ltd has delivered a strong result for the first three quarters of the 2022 financial year. In Q3, the group reported a 23% yearly revenue growth driven by Australian residential businesses and the inclusion of Mortgage Choice, with EBITDA up 27%.
    While the fundamentals of the residential property market remain positive, the impact of the rapidly rising interest rate is poised to stay for the next financial year. Hence, investors will presumably interpret the result more as an indicator for the business's next chapter instead of celebrating what has been achieved.
    However, even regarding all the macro headwinds, shareholders still have good reason to be confident in Australia’s top one property platform thanks to its exceptional robust balance sheet and unbeatable market share. The company’s free cash flow is growing at a mouth-watering 68%, and its website traffic is three times more than its rivals despite admitting to a moderate decline recently.

    Source: REA Technical analysis:
    REA’s share price has managed to ride the ascending trendline, bottoming out from the July low over the past four weeks. The decent support by all three major SMA raises the likeliness of a wider bullish trend to send the price back to $130+, the highest level in four months. On the other hand, any potential pullback should see the support near $120 at play.
    REA weekly chart

    Source: IG Commonwealth Bank (ASX: CBA)
    Earnings date:
    Wednesday, 10 August 2022
    Expectation:
    EPS: $5.11, representing a 9.7% YOY growth Revenue: up $9.3 billion Key watch:
    The Commonwealth Bank of Australia is expected to report success, likely carrying on the momentum from the first half of the financial year when the company delivered a jaw-dropping 26% increase in Net profit after tax from the previous year.
    Investors are particularly keen to get a glimpse of how much May and June’s interest rate increases will bolster the banking sector’s earnings. While the brutal rate increase cycle is expected to translate into interest margin for the near term, the likely tail risks also come from stagnant housing loan growth and emerging cost pressure.

    Source: CBA Technical analysis:
    For the year to date, the share price for the CBA has outperformed the board stock market with marginal change (-0.8%) while the ASX 200 has dropped by 10%. The CBA share price has enjoyed a strong rebound from mid-June and has been up by more than 17% since then. Based on the daily chart, the price is attempting to consolidate the position above the $100 threshold with $103 set to be the next destination. On the other hand, the RSI is nearly reaching the overbought territory, suggesting a near-term breath could be on the cards first before moving on to the next challenge.
    CBA daily chart

    Source: IG Telstra
    Earnings date:
    Thursday, 11 August 2022
    Expectation:
    EPS: $0.14, representing an 40% yearly decline Revenue: $21.85 billion, up 4% from last year Key watch:
    Over the past decade, Australia’s leading telecommunications company has been surrounded by headwinds and investors are looking forward to the forthcoming result with optimism that Telstra is ready to move on to the next chapter. The hope not only stems from the welcome of a new CEO after seven years but because the company has recently projected to deliver profit growth.
    Outside of the business’s outlook, as a long-regarded 'defensive stock', Telstra’s dividend yield will be another focus. Telstra is aiming to pay an annual dividend of 16 cents per share which would translate into a fully franked dividend yield of four per cent.
    Technical analysis:
    The share price for Telstra has climbed from the bottom of the year at $3.7 during the past month. The level of $4 is set to be a significant challenge as a notable fail at this level in April triggered two months of selling. Moreover, the gap between $4 to $4.1 has proved to be a key hurdle should the price attempt to return to its level early this year. On the flip side, the price should find solid support from its 20- and 100-days moving average at around 3.95.
    Telstra daily chart

    Source: IG   Hebe Chen | Market Analyst, Melbourne
    08 August 2022
  13. ArvinIG
    Walt Disney is set to report its third quarter (Q3) earnings on Wednesday.

    Amusement park Disney+ Walt Disney Income Streaming media   Walt DisneyWalt Disney Co (All Sessions) is set to report year-on-year (YoY) growth in its third quarter (Q3) earnings release on Wednesday, likely focusing on the growth of its subscription service Disney+ and the outperformance of its amusement parks.
    But will management have to lead with caution in their guidance as consumers are likely to have started to feel the pinch of higher costs of living, reducing their spending on discretionary items like amusement parks?
    (Video Transcript)
    Walt Disney Q3 earnings: what to expect
    Walt Disney will be reporting its third quarter earnings on Wednesday, and analysts are expecting the entertainment company to produce earnings of just under $1 per share on revenues of almost $21 billion.
    This would, in fact, be higher than the third quarter of 2021. But the streaming service's Disney + is definitely going to be attracting a lot of attention from investors, especially as their second quarter (Q2) numbers beat expectations in terms of new subscribers and setting a path to Netflix Inc (All Sessions), who saw a little bit more of a gloomy outlook in the same quarter.
    Disney chart
    Let's pull up a chart of Disney to see how their shares are performing, because we have seen consumers prioritising entertainment after being deprived of this for almost two years because of the pandemic.
    But there's definitely something to keep an eye out for in the future, and that's, of course, the increase of the cost of living. That might mean that people are spending less on discretionary items and their disposable income would be reduced, which means potentially their amusement park visits will also be reduced in the next few months.
    That's definitely where we might see a little bit of a guidance there from the management at Disney. So, watch out for that guidance.
    But for now, we are seeing a little bit of an uptick in Disney shares. Again, a lot of this having to do with the performance of Disney plus outperforming expectations in terms of analysts.
    So focus on these three things for the earnings: watch out for Disney + and its subscription numbers, watch out for the park entrances for the session, but also watch out for those announcements from Disney management as to what they're expecting in the next few months as people start to feel the pinch of these higher costs of living.
    Daniela Sabin Hathorn | Presenter and Analyst, London
    08 August 2022
  14. ArvinIG
    The Australian dollar continues to bump around in a two cent range; RBA rate hike not enough to support AUD but trade numbers can’t be ignored and China and Taiwan make the news, but a hawkish Fed might drive AUD/USD.

    Source: Bloomberg   The RBA rate decision has come and gone with the widely anticipated 50-basis point hike to 1.85% that sent the Aussie south.
    The move lower was compounded by a number of Fed speakers later that day, re-iterating the hawkish stance of the central bank, boosting the US dollar.
    AUD/USD then recovered going into the end of last week, maintaining a comfortable position within the two-week range of 0.6860 – 0.7050.
    That recovery was helped by another astonishing trade surplus of AUD 17.67 billion for the month of June. This beat the forecasts of AUD 14 billion and May’s surplus of AUD 15 billion. The charts below from the RBA tell the story of Australia’s commodity boom.
    The unemployment rate of 3.5% is as low as it has been in generations. First quarter GDP was 3.3% year-on-year and second quarter GDP will be released early September.
    Inflation aside, the Australian economy has rarely been in as good a shape as it is right now. Yet, AUD/USD continues to languish, and this highlights the impact of the external environment on the currency.
    The visit of US House Speaker Nancy Pelosi to Taiwan provided many headlines for media outlets to sell copy.
    Someone with an extravagant affection for all things communist is Hu Xijin. His twitter feed reads like a script from Saturday Night Live without any punch lines, but it does provide an insight into the propaganda that mainland Chinese citizens experience on a daily basis.
    The communist party needed a distraction from domestic issues and what better fireworks than a few ballistic missiles to stoke nationalistic fervour.
    Hu Xinjin is in his element, stoking the flames of xenophobia with such gems as, 'in the event of a maritime conflict between the US and China, the US carrier formation would be wiped out.'
    Of course, the western media are also known to make more of a story than perhaps is there. The communist party have enjoyed media story lines that are not about a property sector that is spiralling toward an unknown outcome. In any case, markets are mostly ignoring the Taiwan situation for now. The war in Ukraine continues to impact.
    The focus for the week ahead will be Fed speakers and market interpretations of the rhetoric.
    All Fed speakers since the Federal Open Market Committee (FOMC) meeting have so far spelled out quite clearly that more rate hikes are coming. The US Dollar and the rates market reflect this perspective.
    Equity markets and high yield bonds are pricing in the opposite. As one pundit quipped about the equity market reaction to the FOMC rate decision last week, it is ‘dove at first sight’.
    The RBA released their Statement on Monetary Policy (SMP) on Friday, but there were no surprises. They expect inflation to peak at 7.75% later this year. Without a CPI read until late October, the central bank may as well put the cue back in the rack. Jumbo hikes seem to be off the table for now and 25-basis point rate rises appear to be a safe option for the September and October meetings.
    Looking ahead for AUD/USD, it is the USD side of the equation that appears likely to drive the price action. If the ‘big dollar’ resumes it ascending trend, that may see the Aussie lower.

    Source: TradingView
    Daniel McCarthy | Strategist, | Publication date: Monday 08 August 2022 11:35 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.
  15. ArvinIG
    Asia-Pacific market sentiment lags despite rosy economic data out of China; China’s city of Yiwu sees partial lockdown after Covid cases identified and AUD/USD struggles to maintain itself above the 20-day SMA.

    Source: Bloomberg   Forex China AUD/USD United States dollar Australian dollar United States   Monday’s Asia-Pacific outlook
    Better-than-expected Chinese trade data, driven by strong export growth, may provide some fuel for markets to climb higher in today’s Asia-Pacific session. China posted a $101.26 billion surplus for July, beating the $90 billion consensus forecast. An 18% rise in exports—seen as a proxy for global economic demand—helped drive China’s surplus to a record figure. However, imports rose at a 2.3% year-over-year pace, disappointing analysts’ expectations of a 3.7% y/y increase and signaling that China’s domestic consumption remains soft.
    The Australian dollar is trading slightly lower versus the US dollar this morning despite the rosy economic data.
    AUD/USD fell over 1% last week as the Greenback climbed into the weekend after a red-hot US nonfarm payrolls report that showed over half a million jobs added in July, dragging the unemployment rate down to 3.5% from 3.6%. The still-strong labor market weakened the market’s ‘Fed pivot’” thesis, evidenced by overnight index swaps that showed 2023 Fed rate hike bets firming.
    China’s city of Yiwu, located in Zhejiang Province, announced a partial lockdown after several positive Covid cases were identified. The key manufacturing hub has seen access to and from the city restricted, as well as the closure of gyms and restaurants, though factories remain open. That may change however, if cases continue to climb. China’s ‘Zero-Covid’ strategy remains vital to broader market sentiment. The longer it remains in effect, the more internal damage it risks inflicting on the world’s second-largest economy.
    Meanwhile in the United States, lawmakers passed a key part of President Joe Biden’s agenda, likely marking the last major piece of legislation before US midterm elections start later this year. The vote threatens the Democrats’ majority in Congress. The bill focuses on environmental policy and includes nearly half a billion dollars in spending for energy and climate-related measures. It also removes a tax credit limit on electric vehicles (if they are built in North America), which should provide a boost for American-based EV companies. More broadly, the measure could be a tailwind for metals that are heavily used in EVs, such as copper, cobalt, and lithium.
    Notable Events for August 08:
    Philippines – Retail Price Index YoY (April) Indonesia – Consumer Confidence (July) New Zealand – Business Inflation Expectations (Q3) Japan – Eco Watchers Survey (July) Taiwan – Balance of Trade (July) AUD/USD technical outlook
    AUD/USD prices are holding above the 20-day Simple Moving Average following several intraday attempts to break below the key MA. If bears succeed in piercing lower, prices may return to around 0.6700, where a Falling Wedge breakout started last month. The Relative Strength Index (RSI) cut under its midpoint recently, a bearish momentum signal.
    AUD/USD daily chart

    Source: TradingView

    Thomas Westwater | Analyst, DailyFX, New York City  08 August 2022 11:09 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.
  16. ArvinIG
    Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 1st 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
    N/A
        Special Div
       
    How do dividend adjustments work?  
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  17. ArvinIG
    Asia-Pacific markets set for a mixed open ahead of tonight’s US non-farm payrolls report; the RBA’s statement on Monetary Policy eyed in focus for APAC and AUD/USD direction likely hinges on ability to hold above the 50-day SMA.

    Source: Bloomberg   Forex Australian dollar Inflation United States United States dollar AUD/USD   Friday’s Asia-Pacific outlook
    US stock indexes closed mixed overnight on Wall Street as traders prepared for the United States non-farm payrolls report. The jobs report is a vital component to help gauge Federal Reserve policy as rhetoric amongst policymakers pushes back against softening rate hike bets. Cleveland Federal Reserve President Loretta Mester reaffirmed the central bank’s commitment to fighting inflation. Short-term Treasury yields rose but failed to lift the Greenback.
    The Bank of England’s policy announcement sent the British Pound lower against its major peers. The central bank sees a recession taking hold in the fourth quarter until 2023. That, and a stronger inflation outlook, clouds the United Kingdom’s economic outlook. The sterling fell more than half a percent against the Euro despite a 50-basis-point rate hike from the BOE. That was somewhat surprising, seeing as how Europe is subject to the same energy-driven cost pressure, perhaps even more so than the UK.
    Gold prices rose, hitting the highest level since July 5 after gaining over 1.5% overnight. The weaker Greenback helped support bullion even as US Treasury rates. Rose. The VanEck gold miners ETF closed 3.48% higher, the biggest daily gain since June. Bitcoin fell following Chinese missile strikes around Taiwanese water, which revived geopolitical risks stemming from the US House Speaker's visit. While a direct military conflict is unlikely as of now, the strikes represent an increase in hostility between China and Taiwan.
    The Reserve Bank of Australia’s Statement on Monetary Policy may elicit a strong Australian dollar response. Traders will analyze the economic assessment and inflation outlook updates to help gauge future policy actions. RBA Governor Philip Lowe was less hawkish than many expected after his institution hiked its rate by 50 bps earlier this week. Mr. Lowe's rhetoric disappointed policy hawks and punished the AUD. The market believes the RBA is behind the curve on inflation. That puts AUD prices at risk, should today's report temper rate hike bets further.
    The Indian rupee is at risk of falling to a fresh low against the US dollar if the Reserve Bank of India (RBI) delivers a rate hike below the expected 35-bps increase. Australia’s Ai Group Services Index (Australian PSI) rose to 51.7 in July from 48.8 in June, putting the performance of services index back into expansion, a bright sign for economic growth.
    Notable events for August 05:
    Japan – Household Spending YoY (June) Japan – Foreign Exchange Reserves (July) Philippines – Inflation Rate YoY (Jul) Indonesia – GDP Growth Rate YoY (Q2) AUD/USD technical outlook
    AUD/USD is trading above the 50-day Simple Moving Average (SMA) after the second day of gains, strengthening the currency's posture. If prices hold above the 50-day SMA, a retest of the wedge target at 0.7036 would be on the cards. Alternatively, falling back to the 20-day SMA is another possible outcome.
    AUD/USD daily chart

    Source: TradingView     Thomas Westwater | Analyst, DailyFX, New York City 
    05 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.
  18. ArvinIG
    The US jobs report provides markets with a key update for markets as they seek to gauge whether the US economic decline is impacting the jobs market.

    Source: Bloomberg   Indices Unemployment Employment Inflation United States Market trend   The July US jobs report is due to be released at 1.30pm, on Friday 5 August (UK time). Coming at a time when markets are enjoying a welcome boost from a largely better-than-expected earnings season, we see the focus come back to the current state of the economy on Friday. Traders will be wondering whether this recent rebound in stocks marks the bottom for markets, yet much of that will be determined by the inflation and wider economic statistics that determine how the Federal Reserve (Fed) reacts going forward.
    With the US recently entering a ‘technical recession’ of two consecutive negative gross domestic product (GDP) readings, some stipulate that we will only enter a real recession once we see a significant uptick in unemployment. For traders, the fact that a stronger economic picture allows for greater monetary tightening from the Fed means that the reaction to a better-than-expected jobs data could be negative for stocks, yet positive for the dollar.
    With markets fearing a worrying that we could be on the cusp of a collapse in the jobs market, traders will be watching this report closely across a number of factors. Taking a look at some of the secondary surveys can give us an insight into exactly what we might see when the headline figures emerge on Friday.
    What do other employment surveys tell us?
    It is often useful to look out for clues within alternate employment readings, with the Conference Board survey, jobless claims, and ISM purchasing managers' index (PMI) surveys all worth analysing ahead of the main event.
    Conference board survey
    Let's look at the latest ‘Conference Board’ survey for July, with the ratio between those finding it difficult to obtain work vs easy to obtain work providing a good proxy for unemployment. As the chart shows, the Conference Board ratio has been reversing upwards over the past four months. With that ratio up to the highest level in almost a year, there is a clear risk that we will soon see unemployment turn upwards.
    ADP payrolls
    ADP are taking a break from publishing their employment report, with the firm expected to return to action next month.
    Initial jobless claims
    Initial claims have been on the rise over since bottoming out in April, with that trend continuing to take place. The push higher in jobless claims does bring expectations that we could see payrolls drift lower and unemployment could tick higher.
    ISM PMI surveys
    The latest ISM surveys have seen a welcome rise across both manufacturing and services employment readings. It is useful to utilize the ISM survey owing to the fact that they do separate out the employment element unlike the headline release. While both readings have managed to push higher in July, we can see that they remain in contraction territory. Nonetheless, with the contraction in manufacturing and services employment apparently easing, it could signal that the decline in payrolls could be less severe than expected.
    US employment breakdown
    It is important to understand the relative importance of the services and manufacturing sector when gauging the two ISM surveys above. We can see below that service-related jobs account for almost 75% of all US jobs, with manufacturing representing just 10% of employment in the country according to the latest jobs report. With that in mind, it makes sense to attach greater importance to the services sector employment outlook over those elsewhere. This has become increasingly the case over the course of the Covid-19 pandemic.
    Non-farm Payrolls
    The headline non-farm payrolls figure is expected to fall back this month, with markets predicting a figure of 250,000 after the last reading of 372,000. Coming off the back of four readings within the 300,000 - 400,000 range, a figure of 250,000 would be a notable shift from the recent norm.
    Unemployment
    From an unemployment perspective, markets are expecting to see the rate remain at 3.6% for the fifth consecutive month. However, the move higher for both the Conference Board ratio and unemployment claims do signal a potential uptick before long. When that does finally break, markets will likely pay close attention as it would signal the potential beginning of an employment crisis that we are yet to see.
    US earnings
    US wages will be keenly followed as a proxy for cost push inflation going forward. We have seen wild swings across this metric throughout Covid-19 pandemic, but much of that has been associated with the sharp decline and rise in jobs throughout the services sector. This time we are looking out for whether businesses will be seeking to compensate their workers for the rising prices seen throughout the economy.
    The second section within the chart highlights the gap between headline inflation and wage growth, with the current relationship providing the widest divergence in more than 15 years. That highlights the historical squeeze we are seeing on disposable income in the US. Markets are expecting to see wage growth to remain at 5.1%, but any significant divergence could be taken as a clue over inflationary pressures going forward.
    Participation rate
    The recent cost of living crisis has ramped up pressure on households as disposable income levels are squeezed in response to rising costs. However, this looks like it could help drive workers back into employment, pushing the participation rate higher. The chart below highlights how we have seen the participation rate move upwards after the initial collapse around the inception of the Covid-19 pandemic.
    Markets are expecting to see the participation rate remain at 62.2% at this meeting. Notably, we can see that the ratio between U-6 unemployment (% of those looking for work) and U-3 unemployment (% of all workers) provides method of measuring participation in the jobs market.
    Dollar index technical analysis
    The dollar index has been on the back foot of late, with risk assets on the rise at the expense of havens like the greenback. While Nancy Pelosi has done her best to hamper that move, we are seeing the bears come back into play at the 76.4% Fibonacci resistance level here. With the stochastic rolling over from overbought territory, there is a good chance we see some weakness for the dollar. A break through the 107.14 level would be required to negate that bearish short-term outlook.

    Source: ProRealTime DJIA technical analysis
    The Dow continues to climb as we head up towards the crucial 33461 resistance level. A break above that point would bring about a wider bullish outlook for the index. To the downside, we would need to break below the 31694 level to negate the recent bullish trend.

    Source: ProRealTime   Joshua Mahony | Senior Market Analyst, London
    05 August 2022
  19. ArvinIG
    US dollar rises as US House Speaker’s Taiwan visit spurs risk-off move; Chinese economic woes weigh heavily on crude prices and AUD/USD drops below 50-day SMA after hitting wedge target.

    Source: Bloomberg Wednesday’s Asia-Pacific outlook
    A risk-off move that intensified overnight in New York may see Asia-Pacific stocks open lower. The benchmark S&P 500 closed 0.67% lower, extending losses from Monday. US House Speaker Nancy Pelosi’s arrival in Taiwan spurred some risk aversion as investors fear the visit may increase tensions between Washington and Beijing, perhaps to the point where a military conflict is a tangible tail risk.
    The geopolitical implications sent the safe-haven US dollar higher, with the USD DXY Index gaining almost a full percent during New York trading. EUR/USD fell nearly 1%, trimming gains from the past two sessions. The Japanese yen was another big loser against the Greenback. USD/JPY rose over 1%, although the cross remains sharply lower from its multi-decade July high.
    The Australian dollar is the worst performer against the US dollar. The impact on AUD/USD stems from haven flows boosting the USD and a disappointing Reserve Bank of Australia rate decision that occurred yesterday. Softer iron ore prices in China are another factor likely weighing on the Aussie dollar. And of course, given Australia’s geographic positioning, Nancy Pelosi’s Taiwan visit may be posing an additional headwind.
    Gold prices were another victim of USD strength. Spot gold fell more than 0.5% despite the geopolitical concerns, including announced Chinese military exercises. Crude oil and Brent oil prices surrendered early gains, trading flat shortly after the Wall Street closing bell. The American Petroleum Institute (API) posted a surprise build in crude stocks for the week ending July 29.
    Australia’s Ai Group Construction Index for July fell to 45.3 from 46.2 in June. The New Zealand dollar extended losses after the island nation’s second-quarter employment figure showed a 0% q/q print for employment change. That put the unemployment rat at 3.3%, above the 3.2% in Q1. The weak jobs data may temper RBNZ rate hike bets, explaining some of the downside reaction in Kiwi dollar this morning.
    Notable Events for August 03:
    Hong Kong – S&P Global PMI (July) Japan – Jibun Bank Composite PMI Final (July) Singapore – S&P Global PMI (July) China – Caixin Composite PMI (July) AUD/USD technical outlook
    AUD/USD pierced below its 50-day Simple Moving Average (SMA), clearing a path for further downside. The Relative Strength Index (RSI) crossed below its centerline, amplifying the bearish risk to prices. A drop to the 0.68 handle, where prices exited the Falling Wedge, may be on the table. Alternatively, recapturing the 50-day SMA would help bulls to reenergize.
    AUD/USD daily chart

    Source: TradingView   Thomas Westwater | Analyst, DailyFX, New York City
    03 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.
  20. ArvinIG
    What is next for equities following July’s market rally?

      Indices Shares Central bank Market trend Stock Market sentiment   What's next for equities?
    After July’s market rally many investors are likely wondering what is next for equities?
    Historically, when markets are trapped in a bear market there are often rallies that make investors feel like it’s the right time to buy, before being trapped once again in a selloff.
    If we look at both charts of US indices and European indices we see the same technical pattern - a sustained break above a key area of resistance. As mentioned, this is not uncommon to see and usually precedes another downturn.
    But the performance in July has been quite something, with most indices managing to achieve a follow-through to the initial reversal. This has likely left many investors feeling like it’s the right time to buy again, but is that the case?
    Well, in other instances when market sentiment has taken such a sharp turn during a bear market, it has usually involved central banks cutting rates and loosening monetary conditions. This hasn’t happened yet, and will likely not happen for a while, but markets seem to be very convinced central banks will start cutting soon and are therefore trying to front run the market. This is likely going to be a costly mistake if it turns out to be another rally within a bear market.
    The belief that inflation has been handled and the key focus of central banks is aiding economic health has likely been the cause of many of those who think the lows in June were the bottom of the market.
    But the Federal Reserve (Fed) has in fact reiterated that bringing price stability is more important than avoiding a recession in the US, a key takeaway that seems to have been overlooked.
    We have also seen the central bank abandoning forward guidance and focusing on incoming data to make its policy decision, meaning there is likely more volatility up ahead for equities.
    We’re also seeing companies cutting their growth forecasts and warning about staff cuts, which will in turn lead to a weaker third quarter (Q3), something investors don’t seem to be considering.
    Technical outlook: S&P 500 and the DAX 40
    The technical outlook for both the S&P 500 and the DAX 40 is still showing the longer-term trend to be bearish.
    Despite having broken above key resistance at their respective descending trendlines, the momentum over the last two sessions is showing buyers are struggling to find further upside in the short-term. This means that both the S&P 500 and the DAX 40 could start to return to their longer-term bearish trend over the next few days.
    Daniela Sabin Hathorn | Presenter and Analyst, London
    02 August 2022
  21. ArvinIG

    Coinbase Q2 earnings preview: what to expect

    By ArvinIG,


    Analyst article
    Find out what to expect from Coinbase’s earnings results, how they will affect the Coinbase share price, and how to trade Coinbase’s earnings.

    Source: Bloomberg   Shares Coinbase Price Cryptocurrency Volatility Market sentiment   When is Coinbase’s results date?
    Tuesday, August 9, after the market close, is when we get the 2022 second quarter results for Coinbase.
    Coinbase share price: forecasts from Q2 results
    All eyes are on whether Coinbase will negatively surprise once more after its first-quarter results where expectations of a positive reading suffered a loss of $1.98 per share. Revenue was a miss at $1.17bn instead of an expected $1.5bn. The total trading volume dropped massively, suffering a drop in retail monthly transaction users, yet it remained optimistic and 'focused on the long-term' and not just on aspects of crypto trading, with hopes it would emerge as a key and trusted player regardless of the path the overall segment takes.
    Costs will remain an item in focus, even after Coinbase announced layoffs thus altering its prior plans for an increased headcount and signifying a phase of slower growth if not contraction as the sphere remains in a ‘crypto winter'. Crypto prices are trading at lower levels since mid-May and Coinbase’s share price though little changed after the big plummet following its 2022 first-quarter earnings release.
    Such is the nature of Coinbase's share price. It can experience significant moves based on not just where the overall cryptocurrency market moves but on how immune it is to what have been successive stories of failures, concerns over liquidity, and withdrawals for financial institutions within the crypto sphere.
    Investors can breathe a sigh of relief following Coinbase's clarification in July regarding its lack of exposure to insolvencies among clients and counterparties. Coinbase's financing book hasn’t recorded any losses, and it isn’t falling into the trap of lending out customer funds. It might not mean as much for the retail sector which accounts for a clear portion of its revenue, but is a crucial one for institutions looking for trust and reliable counterparties who lead on volume. That news was followed by negatives with reports of an SEC investigation being dropped from the ARK fund.
    While investors will be noting any plans in light of the crypto atmosphere and given that Coinbase is trading amongst the crypto majors that drive its revenue, investors are worried over how Coinbase will fare against rising competition from crypto exchanges attempting to move up the volume rankings. With news in June that Binance.US was cutting fees for plenty of Bitcoin trades to zero, and worries that it’ll eventually carry over into other exchanges over time if it causes an exodus of traders.
    In all, monthly transacting users might find it more difficult to transact when prices are in retreat, as profits usually drive more trading, and losses mean they’re in a wait-and-see mode. Lower crypto prices combined with expectations of lower participation and trading sizes can only translate into lower fees that the crypto exchange can take in (and taker/maker fees as a percentage), and given it makes the bulk of its revenues means it’s expected to be much lower this time around at around $830m.
    As for earnings, expectations are for another loss, and for it to widen to -$2.68 per share, an estimate that’s suffered lower revisions over the past few months. Longer-term estimates are usually more difficult as it requires a more stable underlying crypto market.
    As for analyst ratings, it remains the majority buy amongst them, with the notable downgrade from Goldman Sachs shifting from neutral to sell in late June. The average target price is still very much above its current share price.
    Coinbase weekly chart with key technical indicators

    Source: IG Trading Coinbase’s Q2 results: technical overview and trading strategies
    A glance at the chart above (and that of nearly anything crypto-related on the weekly time frame really) and it doesn’t take much to realize that even after oscillations over a couple of months or so and it’s still a bearish picture, with prices at the upper end of its long-term bear trend channel.
    When it comes to its DMI (Directional Movement Index), its DI- is still above its DI+ by a healthy margin, but that margin is dropping, and so too is the ADX (Average Directional Movement Index). The reading is still in trending territory but past its peak figure can be found around mid-July. Positives include its RSI (Relative Strength Index) is no longer in oversold territory, and prices are moving closer to the middle of the Bollinger Band and away from the lower extremes.
    Since the weekly time frame incorporates historic bearish moves that we saw in March through mid-May, the technical narrative gets less negative when zooming into shorter-term time frames like the daily. With prices recently coming off the upper end of far more narrowed Bollinger Bands in that time frame where they’ve ‘acclimatized’ to more rangebound sessions since the last earnings release, and a positive DMI here as opposed to negative on the longer-term weekly time frame.
    Classifying the technical overview depends on which time frame you’re looking at, with the daily more ‘consolidation – volatile’ (volatile on any underlying updates that include next week’s earnings, but moving back towards an average absent), while the weekly thus far averaging lower, provided its bear trend channel can hold.
    That makes it a bit more bear average than a bear trend (an ADX reading in trending territory usually gives more weight to a trend, but a wider channel combined with weeks of oscillations means trend-like moves haven’t been the rule rather the exception), but as always it needs pointing out that we’re looking at technicals ahead of a major fundamental event that can easily cause prices to experience more volatility even in the ‘safest’ of more established companies.
    There’s also the matter of levels, with an RSP (Relative Starting Point in the table below) to 1st level difference that’s over 20% of the value of the RSP. A common theme amongst prices of cryptocurrencies and crypto-related shares where higher historic pricing means emulating average weekly moves that now constitute a larger percentage of current lower prices becomes a more difficult task. A $15 move when it was $300 translates into a 5% price change, but the same $15 price change on a lower $70 is over 21%. The daily time frame’s RSP to 1st level difference where it doesn’t incorporate the price action pre-June is only $3.
     

    Source: IG IG Client sentiment* and short interest for Coinbase shares
    Retail trader bias remains in extreme buy territory, dropping a notch from 88% two weeks ago to 87% as of this morning. As for short interest, it’s at over 22% with 33m shares shorted of roughly 148m floating. In comparison, the companies where we’ve done earnings previews usually have sub-1% short interest readings.

    Source: IG *The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from two weeks prior.
     
    Monte Safieddine | Market analyst, Dubai
    02 August 2022
  22. ArvinIG

    Investing in quality and defensive stocks

    By ArvinIG,


    Analyst article
    High quality and defensive companies can help protect wealth during a market downturn.

    Source: Bloomberg   Shares Stock Investment Dividend Company Microsoft   The economic and investment backdrop is shifting, pushing investors to reallocate capital and rotate their portfolios to adjust. Today, we look at the case for investing in ‘quality’ and ‘defensive’ stocks as a way of protecting or growing wealth in the current market environment.
    What is a quality stock?
    Quality stock is a stock belonging to a company of higher quality. When it comes to assessing whether a stock fits this bill, an investor must know what it means for a company to be ‘quality’. The term is commonly referred to in factor-investing. According to the website Investopedia, quality stock is one with ‘low debt, stable earnings, consistent asset growth, and strong corporate governance’. Typically, these companies are large-cap (or even mega-cap) and have strong stable cash flow generated from their operations, a highly sophisticated and competent management team, and often a large ‘moat’ that gives them dominance in their market. In the US, big tech-names like Apple, Amazon, Microsoft, and Alphabet are synonymous with quality. In Australia, a company like CSL is often said to fit the bill.
    What is a defensive stock?
    As the name suggests, a defensive stock is one that defends an investor’s portfolio. But what is an investor trying to defend themselves from? Generally, defensive stocks refer to ones that either maintain their value during an economic downturn – or sometimes thrive within it. Investopedia defines a defensive stock as one that ‘provides consistent dividends and stable earnings regardless of the state of the overall stock market’. For this reason, defensiveness refers to the performance of a company in the context of the economic cycle – and therefore may be contrasted with cyclical stocks, which outperform in stronger economic environments. These companies are found in the health care, utility and consumer staples sectors - or areas of the market that derive profits from things consumers can’t easily go without.
    Why look at these companies now?
    Investing in defensive and quality companies is becoming more popular now because of changes in the economic cycle. After a period of very strong growth powered by the extraordinary amounts of stimulus pumped into the global economy during the pandemic, a subsequent period of high inflation has forced central banks to begin the process of slowing the economy by aggressively raising interest rates. In addition to several economic shocks, including the war in Ukraine and rolling COVID-19 lockdowns in China, which are leading to rising business costs, the global economy is confronting a period of weakness and tighter financial conditions. This environment is seeing investors seek out relatively less risky investments and are more likely to protect wealth from any downturn.
    Three quality or defensives stocks to watch

    Source: Bloomberg CSL
    CSL is one of the largest companies on the ASX with a market capitalization of around $140 billion. It sits in the healthcare sector and specialises in the research, development, and manufacturing of biotechnology products.
    Being in the healthcare sector, the company fits the bill of a defensive stock but also possesses several features of a quality company. It also gets tagged with the label of ‘growth’ company due to its long-term growth prospects.
    The company is a leader in the market and boasts a strong balance sheet with $US6.3 billion in cash and cash equivalents. CSL’s earnings did take a hit during the pandemic, and its revenue growth slowed due to difficulty collecting plasma for the company’s immunoglobulin product during the COVID-19 pandemic. However, the company managed to remain cash flow positive and maintain low debt levels throughout that period, with recent updates from management suggesting collections are normalising.
    The outlook for CSL is looking more promising going forward as the world exits the pandemic. Current multiples are around long-term averages, with a P/E multiple hovering just below 40. But data according to Reuters suggests that the company is likely to increase its dividend by 16% from an estimated $1.05 this financial year to $1.22 the financial year after.
    Analysts remain very optimistic about the stock according to Reuter data, with 14 out of 15 covering it ascribing a ‘buy’ rating. The current consensus price is $319.

    Source: IG Transurban
    Transurban is an ASX20 stock which builds and operates toll roads. It has a market capitalization of around $44 billion, and although is classified within the industrials sector, is considered a stock with strong defensive qualities.
    The major appeal of Transurban is its market dominance and ability to pay out a predictable and consistent dividend to shareholders. As a toll road operator, it has strong pricing power and the ability to pass on higher costs to customers. The company’s management is also committed to paying out a dividend to shareholders. Despite the company posting a loss in its 2020 and 2021 financial years as revenues collapsed because of mobility restrictions during the pandemic, it still managed to pay out dividends of 46 cents and 30 cents respectively. According to data compiled by Reuters, Transurban ought to pay out a dividend of 40 cents this financial year and increase that by approximately 50% to 59 cents the following.
    Transurban generally won’t deliver strong capital gains for investors like some ‘quality’ stocks might. However, its relative lack of share price volatility is a part of its appeal as a place for investors to park money in an uncertain economic environment. The company’s shares have traded in a tight $2.50 range throughout the most part of the post-pandemic period, with the price nearer to the top of the range at present.
    According to data compiled by Reuters, analysts are lukewarm towards the stock. Of 14 brokers surveyed, seven recommend buying, but six suggest holding, and one selling. The share is trading relatively rich versus the consensus price estimate of $14.19.

    Source: IG Microsoft
    Microsoft is a ubiquitous name in the business world. One of Wall Street’s largest tech players, Microsoft is often labelled as simultaneously defensive, quality and growth.
    Technology shares have dropped considerably from the record highs registered in 2021. The combination of the so-called ‘reflation trade’ that saw long-dated bond yields rise and money flow into cyclical stocks hammered the sector and sent the NASDAQ deep into a bear market. Despite Microsoft’s investment appeal, it was no exception to this dynamic, losing nearly 30% of its value, from peak to trough.
    However, with the shift in the macroeconomic environment, the company’s share price is showing signs of recovery, with tighter financial conditions, a potential recession in the US, and falling long-term bond yields pushing money towards many of Wall Street’s old reliables.
    Microsoft’s products are embedded in most people’s lives, while the shift towards cloud computing means the company maintains strong growth prospects and stickiness amongst existing customers.
    From a financial standpoint, Microsoft couldn’t be more secure. It boasts $US104 billion of cash on its balance sheet. And although its cash position has been worn down in the past 12 months, much of that is to do with generous share buyback programs that the company has implemented to return money to shareholders. Debt to equity remains very low at roughly 0.3.
    Much like its fellow Wall Street tech counterparts, the appeal of a stock like Microsoft is not only its quality and defensiveness but also its long-term growth prospects. Despite missing earnings and revenue in its recent results, Microsoft’s management painted a positive picture of the company’s outlook, with growth in its cloud computing arm Azure a large driver of this. That has analysts expecting a nearly $US2.60 full-year dividend from the company come next financial year.
    Out of 52 analysts surveyed, 49 rate it either a buy or a strong buy, with the remaining three favouring a hold. The consensus price target is at a nearly 15% premium to its current price at $350 per share.

    Source: IG Summary
    Investors are confronting a more challenging financial and economic environment. As a result, understanding where money might be best allocated given this backdrop gives an investor the best opportunity to ride out this period of weaker growth. Companies that have qualities such as stable earnings and dividends, competent management, and strong balance sheets often outperform in times like these. While there’s never a guarantee any investment will deliver its desired outcome, defensive and quality stocks can protect or even grow wealth during a market downturn.
    Kyle Rodda | Market Analyst, Australia
    02 August 2022    
    This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  23. ArvinIG

    Best FTSE 250 shares to buy in August 2022

    By ArvinIG,


    Analyst article
    Centamin, Greggs, and easyJet shares are three FTSE 250 stocks to buy in August as inflation starts to bite.

    Source: Bloomberg   Shares Commodities Greggs EasyJet Inflation Centamin   Some of the best FTSE 250 stocks appear to be trading at a discount relative to their true value right now. These include Centamin, Greggs and easyJet.
    Of course, CPI inflation is at 9.4% and rising. The bank rate is at 1.25%, and Bank of England governor Andrew Bailey has cautioned another 50-basis points rise is ‘on the table’ for August.
    BFY has warned annual energy bills could hit £3,850 in January, and EON CEO Michael Lewis has warned that 40% of households could be in fuel poverty by winter.
    Simultaneously, current PM favourite Liz Truss is promising policies that the Institute for Fiscal Studies warn could send inflation even higher. Further, the International Monetary Fund thinks that the UK will experience the lowest growth of G7 members in 2023.
    Investors are no longer in a bull market. After the initial pandemic crash, it was arguably difficult for diversified investors to lose money. But this is no longer true; and the due diligence required to pick out the best FTSE 250 shares has increased dramatically.
    However, it’s also true that a down market is often the best time to invest in solid companies that have been hit by the wider market rout.

    Source: Bloomberg Best FTSE 250 shares to buy now
    1) Centamin (LON: CEY)
    One of the best FTSE 250 shares to buy now, Centamin represents a contrarian choice for the investor with a healthy risk appetite. Investors have used gold, and gold miners by proxy, as an inflation hedge since investing began.
    While many gold miners have performed well in 2022, Centamin reported a big decline in profit in 2021, due to lower revenue and impairment of assets in Burkina Faso. But the spot gold price is at a near-record high, and only likely to rise as the recession worsens.
    For perspective, Centamin expects full-year production of between 430,000 oz and 460,000 oz, above the 415,370 oz it mined in 2021. And in Q2, production rose by 11% year-over-year to 110,788 oz.
    Moreover, it’s taken over as owner-operator of the Sukari underground, the largest gold mine in Egypt, saving $19 million a year in operating costs from 2023 onwards.
    The miner spiked to a record 220p in August 2020, as investors fled to the safety of gold in the wake of the pandemic crash. Now down to 83p, Centamin shares could see a similar spike if investor fears further begin to recrystallize.
    And currently boasting an 8.6% dividend yield, it’s a FTSE 250 share to buy.
    2) Greggs (LON: GRG)
    Reporting earnings on 2 August, Greggs shares are down 39% year-to-date to 2,044p. But in anticipation of results, the high street baker’s share price has risen by 13% over the past month. And a further recovery could be imminent.
    In its May trading update, Greggs saw 27.4% like-for-like sales growth in the first 19 weeks of the year. While this was due to a strong pandemic era comparable, it expects this figure to ‘continue to normalise’ as time goes on.
    With a ‘strong pipeline’ of openings, Greggs also opened 43 net shops, bringing its total to 2,244. And while it’s seeing ‘cost pressures increasing,’ it was trading in line with previous full-year expectations. This indicates the share price crash is not a fair reflection of the company’s true value.
    Greggs does generate a significant proportion of its income from office workers, and the long-term trend towards hybrid working means ‘sales levels in larger cities and in office locations continue to lag the rest of the estate.’ According to the ONS, ‘the proportion of workers hybrid working has risen from 13% in early February 2022 to 24% in May 2022.’
    But Greggs noted it had already ‘made a good start to 2022, with sales in line with our plan.’ While cost pressures and decreasing customer discretionary income were noted as ‘considerable uncertainties’ for H2, Greggs could stand to benefit from cash-strapped consumers as an excellent value choice.
    And it helps to have an on-the-ball PR team, whether with advertising staff bonuses, the vegan sausage roll launch, or Primark tie-up.
    3) easyJet (LON: EZJ)
    easyJet is August’s final FTSE 250 stock to buy. Demoted from the FTSE 100 during the worst days of the pandemic, the airline almost made a comeback to the premier index earlier this year before Russia’s invasion of Ukraine brought volatility back into the market.
    At 399p, easyJet’s share price is now worth less than a third of its pre-pandemic value. Of course, the promised summer boom hasn’t gone exactly to plan. Striking staff in Spain, the loss of COO Peter Bellew in July, and the ongoing airport chaos have all seen the stock driven to its lowest in a decade. However, this could also be an exceptional price point.
    In its Q3 update last week, the FTSE 250 airline posted a headline loss before tax of £114 million, down significantly from £318 million a year ago. And as it lost £133 million to staff shortages and disruption, and £36 million from balance sheet FX revaluations, its profitability looks much worse on paper than in reality.
    Revenue rose to £1.755 billion, up from just £213 million in Q3 2021. And easyJet flew 22 million passengers, representing 87% of pre-pandemic capacity levels. Further, Q4 is already 71% booked, and 83% hedged for jet fuel.
    And despite the disruption, it’s worth noting that the airline operated 95% of its planned schedule last quarter. CEO Johan Lundgren argues ‘we have taken action to build the additional resilience needed this summer and the operation has now normalised. Despite the loss this quarter due to the short-term disruption issues, the return to flying at scale has demonstrated that the strategic initiatives launched during the pandemic are delivering.’
    With net debt of only £200 million, ‘one of the lowest net debts in European aviation,’ this FTSE 250 stock may not be this cheap for long.
    Charles Archer | Financial Writer, London
    01 August 2022
  24. ArvinIG
    It was a stunning quarter from a company that two weeks ago was looking at what it was doing and whether it was going to have to shed 8,000 staff.

      Shares Ford Motor Company Electric vehicle Trade Automotive industry Inflation   With the move to electric vehicles (EVs) it makes sense to shift the focus from building combustion engines to EVs, but last night's second quarter (Q2) earnings came as a pleasant surprise.
    Ford shares soar following Q2 earnings
    In extended trade last night on the IG platform, Ford MotorFord Motor Co (All Sessions) saw its shares rise around about 10% as a result of earnings coming through for the most recent quarter, which impressed investors.
    Let's take a look at the numbers we saw: $0.68 per share at the earnings per share (EPS) level. That was against an estimate of $0.45, beating that up from $0.12 last year. Automotive revenue came through at $37.9 billion, also beating estimates of $34.3 billion, which is a tripling of its profit line because according to the company's statement it was able to deliver more of its products to customers.
    But the company said as well that inflation, specifically higher prices for key commodities and transportation, offset some of those gains. Nonetheless, it was a good night last night.
    Ford's share price chart
    Let's take a look at the share price chart, which is down from the highs that we saw back in January this year. That was at a 21-year high for Ford Motor. Since then, we've seen this pullback because of concerns once again about what's happening with supply chains and, of course, the war in Ukraine keeping a lot of the automotive products out of Ukraine, which is a big supplier of a lot of rubberised items especially, and plasticised items that the auto sector uses.
    But since then, we've seen Ford source more of its products from other areas, and we've seen this rebound. That trade last night was extended trade up, and indeed, significantly, it rose above the highs that we saw back on the 3rd of June to take us to levels there not seen since the first couple of weeks of May this year, and we're building on that today. All-sessions on the IG platform this morning it was up a further 1.3%.
    So, we're gaining across the board for Ford Motor to stop looking as though it could well rise at the start of today's cash session on the New York Stock Exchange.
    Jeremy Naylor | Writer, London
    29 July 2022
  25. ArvinIG
    Lloyds Banking Group has generally pleased investors while EU pressures have been highlighted by Deutsche Bank as it warned about an incoming drop in investment banking profits. Credit Suisse has issues all of its own.

      Shares Bank Credit Suisse Switzerland Lloyds Banking Group Deutsche Bank   European banks outlook
    European banks were in the crosshairs today. Traders on the IG platform have been watching for any signs that a weaker economy, higher interest rates and the war in Ukraine are weighing on any of their operations.
    One of the best performers has been Lloyds Banking Group PLC here in the U.K. It's domestically orientated, so pretty much insulated from what is happening further east across Europe. But despite setting aside £377 million to cover a possible bad debt pile, it said pre-tax profits came in at £3.7 billion at the first half, better than forecast, but down from last year's £3.9 billion.
    Lloyds share price
    Let's take a look at what's happened to the share price, because it has been one of the best performers in the European market. It's currently up 3.8%, we're off the highs. But interestingly enough, we have risen past this prior line of resistance which was established as a line of support back in December last year at 44.3 pence, currently trading at 45.23.
    I was talking about this in the Early Morning Call this morning about going along with a stop-loss below the 40. And that so far is making money.
    Deutsche Bank
    Meanwhile Deutsche Bank AG - ADR also posted a better-than-expected earnings number a 51% rise in second quarter profit as investment banking revenues rose, though the lender was less optimistic about the division's prospects for the full-year and warned about the economic outlook.
    German banks are feeling the heat of the geopolitical environment more than others across the EU because of the historical ties Germany has had with Russia. Also the country particularly is dependent on Russian energy and so its economy will be hit hard by any supply shortages.
    A quick update on its trading pattern that we've seen so far today. On the IG platform. Deutsche Bank is currently losing 3.2% on its way down to this line of support at 752, currently down at 789.
    Credit Suisse
    Finally, Credit Suisse, the Swiss banking giant, has all sorts of problems.
    It posted a mammoth second quarter loss on this 1.6 billion CHF. And the immediate resignation of the chief executive, Thomas Gottstein, who will be replaced by asset management CEO, Ulrich Körner, but the outlook is very unclear with the bank still facing higher litigation provisions.
    One positive is that the company has confirmed that there are no plans to merge with another bank - that was taken positively in the market this morning. Speculation had been in the markets that the US bank State Street may be lining up an offer for the business.
    Let's take a look at what's happening with Credit Suisse, which in the session today is only up by a margin of 0.6%, but I think the fact it has risen is interesting, bearing in mind the recent declines, you see not too far away from a line of support at 498. The stock is currently trading at 520 on the Swiss markets.

    Jeremy Naylor | Writer, London
    28 July 2022

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

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

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

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

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