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ArvinIG

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  1. ArvinIG
    We dig into the ASX-listed lithium miners to find out what’s driving demand and whether now’s the right time to invest.

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

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

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

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

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

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

    The four-hour trader, a full trading plan

    By ArvinIG,


    Educational
    Traders can implement a well-heeled plan taking only four hours per week; the four-hour chart can be ideal for Forex traders looking to trade around the clock and we outline a full plan based around Price Action.

    Source: Bloomberg   Forex Market trend Price Speculation   All of the sudden, the world has gotten very small; and life is moving faster than ever before.
    The internet presents a lot of benefits to the human species; but time management is not one of them. As competition for page views, viewer numbers, and attendance continues to heat up, very little in this life emphasis a slow and steady approach.
    But to the trader, in many cases, that is the best way to go about speculation in markets: Slow, steady, and consistent.
    But being there as a trader, and getting there as a new speculator are completely different markets. In this article, we’re going to outline a complete trading plan that will take less than four hours of a trader’s time each week. And further, this is an approach that can be focused on longer-term moves, and swings.
    If you have a day job, or any other pre-existing commitments that limits your time on charts, this is an approach that can offer quite a few benefits.
    The center of the approach
    The four-hour chart plays a special role in the FX market.
    Most equity markets are open between eight and nine hours each day, and as such, the four-hour chart might take on less importance. After all, a four-hour chart just shows two bars for each trading session, so traders might as well just look at the daily chart.
    But in the Forex market, the four-hour time frame takes on special importance. The market never closes, and traders are literally Trading the World. The four-hour candle represents half of each geographic trading session. Each of these sessions can take on markedly different tones, and that is where traders can look for potential opportunities.
    In the FX market, traders are truly ‘Trading the World’

    Source: Trading the World Traders can use the price movements and gyrations on these four-hour charts to analyse markets and find potential pockets of opportunity.
    Watch for the close of each four-hour candle that you can.
    Using the New York close to define ‘financial time’ means that we’re seeing candles close at 5, 9, and 1 AM and PM (based on ET). If you’re using Central Time, that’s 4, 8, and 12 AM/PM while Pacific Time is 2, 6, and 10 AM/PM.
    If you’re busy at the time, mobile applications can generally offer you what you need to perform the analysis at the close of each of these candles.
    Traders can then take a ten-minute block of time upon the close of each of these four-hour candles to look for potential trade setups, while also using this as an opportunity to manage risk.
    If the trader is awake for four of the six four-hour candles that form each day that would mean that the trader would need approximately 40 minutes per day to analyse charts. If time permits, an additional 10-15 minutes can be used at or around the daily close.
    The total time commitment required is 40-50 minutes each day, for a total of 200-250 minutes per week (240 minutes is 4 hours).
    Use price action to locate the strongest trends
    Trends in markets can be easily graded and seen with price action… by simply looking for charts to make progressively higher-highs, and higher-lows (in the case of an uptrend), and lower-lows, and lower-highs (for downtrends).
    Price action can help traders locate the strongest trends
    In the article Price Action, an Introduction we look at a way that traders can grade trends without the use of any indicator at all, using just past prices.
    Traders want to look to trade in the direction of these trends; buying up-trends, and selling down-trends. But, is it enough to just buy up-trends or sell down-trends and ‘hope’ that they continue? No. Traders can use price action to appropriate their entries into these positions.
    Use price action to buy up-trends cheaply, and sell down-trends expensively
    Once a strong trend has been located, the trader can then look to plot their entry by looking for a ‘trigger’ into the position via price action.
    Once again, traders want to look to efficiently buy up-trends when price is cheap, or near support. We looked at how traders can find this support in the article, Price Action Swings.
    Traders can look to buy up-trends after a recent swing low
    Traders can look for additional confirmation of the entry by looking to the price action candles that form at or around those swings.
    We looked at quite a few of these triggers in Trading Bearish Reversals (for down-trends), and The Hammer Trigger for Bullish Reversals (for up-trends).
    Traders can look for bullish triggers at or around recently printed new lows

    Source: The Hammer Trigger for Bullish Reversals Use stops and limits to enforce favourable risk-reward ratios
    One of the main premises of our price action education is that future prices are unpredictable, and as such, there is no such thing as a ‘holy grail’ or ‘can’t lose’ strategy.
    By adding a stop and limit, and letting the trade work – the trader eliminates the possibility of making a knee-jerk reaction that they may end up regretting. It also enforces a favorable risk-reward ratio, and puts traders in the most promising spot to avoid the number one mistake that Forex traders make.
    Trade management
    Since traders are looking at their charts for each four-hour bar, they have built-in trade management for each position that they take on.
    Traders can use the close of each four-hour candle as an opportunity to adjust stops (particularly the break-even stop), or to take profits while also looking to trigger new positions.
    Traders can take this a step further by trailing their stop in an effort to lock in gains in the event that the trend gets especially built-in. We looked at this premise in Trading Trends by Trailing Stops with Price Swings.
    Traders can lock up gains to maximize trends

    Source: The Hammer Trigger for Bullish Reversals  
    James Stanley | Trading Instructor, DailyFX, New York City
    29 September 2022
  3. ArvinIG

    Best 10 ASX lithium stocks to watch in 2022/23

    By ArvinIG,


    Analyst piece
    A brief examination of ASX lithium stocks, their advantages and drawbacks, and a rundown of the 10 best lithium stocks to watch in Australia this year.

    Source: Bloomberg   Indices Shares Lithium Mining Electric vehicle ASX   ASX lithium stocks: what you need to know
    Lithium is a silvery-white alkali metal, with special properties that make it extremely useful in the production of lithium-ion batteries that act as the power source for Electric Vehicles.
    Because lithium is both the least dense metal and least dense solid element, it is highly unlikely to be replaced in modern EVs by alternatives such as nickel. While nickel has been used in the past, it has 40% lower energy density, meaning more of the metal is required to create an EV battery.
    However, lithium’s chemical disadvantage is its inherent instability. Lithium is highly reactive and must be stored in an inert atmosphere or vacuum such as oil. This makes it expensive to produce, transport, and store.
    As the Electric Vehicle revolution gathers pace, by dint of the increasingly scarce and costly oil, or because of environmental concerns, lithium mining is likely to become ever more profitable in the long term.
    Of course, it does come with significant environmental concerns of its own, which the industry is taking steps to address.
    Best 10 ASX lithium stocks to watch
    1) Pilbara Minerals (ASX: PLS)
    Pilbara Minerals is ‘ready for the global energy transformation,’ and well-positioned to be a low-cost, long-term sustainable lithium producer. It describes itself as the ‘leading ASX-listed pure-play lithium company, owning 100% of the world’s largest, independent hard-rock lithium operation.’
    Its Pilgangoora mine in the Pilbara region produces both spodumene and tantalite concentrate, and it counts Ganfeng Lithium and General lithium as partners.
    Its long-term strategy is to become an ‘integrated lithium raw materials and chemicals supplier in the years to come,’ in an attempt to be a major player in the lithium supply chain, underpinned by increasing demand for clean energy technologies.
    2) Core Lithium (ASX: CXO)
    Core Lithium is developing one of Australia’s most capital-efficient spodumene lithium projects, the Finniss Project in the Northern Territory. The prospector’s definitive feasibility study concluded that the mine has 173,000tpa of lithium concentrate, with a 10-year mine life.
    Managing Director Stephen Biggins ‘prime directive is to deliver first production of high-quality lithium concentrate from the Finniss Project this year in the midst of a very high lithium price and high operating margin environment.’
    A key advantage is that the mine has ‘arguably the best supporting infrastructure and logistics chain to Asia of any Australian lithium project.’ It’s only 88km from Darwin Port, the closest port to Asia.
    3) Piedmont Lithium (ASX: PLL)
    Piedmont Lithium aims to ‘develop a world-class integrated lithium business in the United States.’ It owns interests in the Carolina Tin Spodumene Belt in North Carolina, ‘the cradle of the lithium industry.’ The miner could become one of the lowest-cost producers of lithium hydroxide and is strategically placed to insert itself into the US electric vehicle supply chain.
    Alongside its partner Sayona, it’s also developing interests in Quebec.
    4) Sayona Mining (ASX: SYA)
    Sayona Mining is an emerging lithium producer with projects in Quebec, Canada and Western Australia. It’s in a strategic partnership with Piedmont Lithium in Quebec, having acquired North American Lithium.
    And it plans to integrate nearby Authier and Tansim projects, as well as its 60% ownership of the Moblan project, to create a world-scale hub.
    The miner is ‘committed to downstream processing in Quebec to supply the fast-growing North American battery and EV market.’ And it also holds a large tenement portfolio in Western Australia for gold and lithium.
    5) Ioneer (ASX: INR)
    Ioneer is expected to be the first new lithium chemical producer in the US in over 60 years. The miner owns a 100% interest in the Rhyolite Ridge Lithium-Boron project in Nevada, the only known lithium-boron deposit in North America, and one of two in the world.
    In its 2020 feasibility study, it confirmed the site as a world-class project with a globally significant deposit that could set it up as a major lithium supplier for decades.
    It’s signed a deal to supply NexTech batteries from the mine and has been invited by the US Department of Energy to begin due diligence for a key loan programme.

    Source: Bloomberg 6) Mineral Resources (ASX: MIN)
    Mineral Resources operates a growing world-class portfolio of operations across multiple commodities but its core activities are iron ore and lithium mining throughout Western Australia and the Northern Territory.
    Key sites include Wodgina Lithium, which as the largest hard-rock lithium deposit in the world is expected to have a 30-year mine life. It operates the project in partnership with US giant Albemarle, and despite a production pause, is set to resume mining in Q3. It also owns 50% of the Mount Marion lithium project in partnership with Ganfeng Lithium.
    Its diversification into iron ore and partnerships with global players makes MIN a safer choice for risk-averse investors.
    7) Liontown Resources (ASX: LTR)
    Liontown Resources aims to ‘find, develop and supply battery minerals required by the rapidly growing Electric Vehicle and Energy Storage industries.’
    It controls two lithium deposits in Western Australia and is expanding its portfolio through additional exploration, partnerships, and acquisitions. Its cornerstone is the Kathleen Valley project, one of the world’s largest and highest-grade hard rock lithium deposits.
    The project is expected to supply 500,000 tonnes of 6% lithium oxide concentrate per year when production starts in 2024, with a mine life of 23 years. Its second project, Buldania, has over 15 million tonnes of 1% lithium oxide.
    😎 Allkem (ASX: AKE)
    Allkem was formed from the merger of two lithium giants, Orocobre and Galaxy Resources last year. It now controls a global portfolio of diverse, high-quality lithium chemicals. Headquartered in Buenos Aires, it operates lithium projects across Argentina, Australia and Japan, with development underway to meet significant expected market growth.
    The company has partnerships with Toyota, the Jujuy provincial government and Prime Planet Energy & Solutions. And it plans to expand production 3-fold by 2026, mining 10% of the world’s lithium over the next decade.
    9) Lake Resources (ASX: LKE)
    Lake Resources is a lithium developer which uses proprietary clean extraction technology to create high-purity battery quality lithium carbonate. Its tech partner, Lilac Solutions has designed a ‘benign water treatment’ which returns all water (brine) to the source without changing its chemistry, making it far more environmentally friendly than conventional brine evaporation or hard rock mining. Lilac is backed by the Bill Gates-led Breakthrough Energy Fund.
    LKE’s flagship Kachi project together with three other lithium brine projects in Argentina covers 2,200 square km in a prime location in the lithium triangle, where 40% of the world’s lithium is produced at the lowest cost.
    10) AVZ Minerals (ASX: AVZ)
    AVZ Minerals is entirely focused on developing its Manono project in the Democratic Republic of the Congo, potentially one of the world’s largest lithium-rich LCT pegmatite deposits. The miner’s objective is to leverage its DRC, financial and project development expertise to advance its 75% ownership of the project up the value curve.
    However, it’s facing a legal battle. Chinese Zijin Mining, the country’s largest gold miner, is claiming a 15% share of the project, which AVZ has called ‘spurious and immaterial.’ This issue has been running for four months now, though AVZ is ‘confident of a positive outcome.’

    Source: Bloomberg How to trade or invest in ASX lithium stocks
    1. Learn more about ASX lithium stocks
    2. Find out how to trade or invest in ASX lithium stocks
    3. Open an account
    4. Place your trade
    You can open a position on ASX lithium stocks either through share trading or derivatives trading. Share trading means that you take direct ownership of the stock. By comparison, derivatives trading – such as CFD trading – allows you to speculate on the price movement of a company’s shares without actually taking ownership of them.
    For a complete breakdown of the benefits and drawbacks of each strategy, please click here.
    ASX lithium stocks: further important information
    The best current alternative to lithium is nickel-based batteries. But lithium batteries charge quicker, and have no memory issues, meaning their maximum charging capacity isn’t affected by each charging cycle. And nickel batteries run hotter quicker, so usually require a cooling system.
    On the other hand, lithium’s instability makes it around 50% more expensive to manufacture lithium batteries, which impacts the cost of an EV. Lithium batteries also usually have a shorter shelf life than nickel batteries before needing replacing. And because nickel is used more widely, the metal can already be recycled profitably.
    But fundamentally, lithium is likely to be the metal that will power the EV revolution, unless there is a giant technological leap forward.
    And to understand the potential the EV revolution has, market leader Tesla’s market cap, while volatile, currently hovers around $900 billion, comparable to the sum of every other auto manufacturer in the world combined. And it produced less than one million vehicles in 2021, while the OICA estimates 57 million passenger cars were produced in total.
    Indeed, in the past CEO Elon Musk has likened lithium mining to ‘minting money,’ and has hinted plans to start his own lithium company to gain some control of the supply chain.
    The global shortage is pushing lithium prices beyond record levels, threatening to arrest its so far rapid growth. Lithium carbonate stands at a record $71,315/tonne in China, tripling in a year, and more than 1,150% higher than pandemic lows.
    And according to the IEA, the number of EVs produced more than doubled in 2021 to 6.6 million. Analysts expect lithium demand to increase tenfold by 2030, as legislation prohibiting the manufacture or sale of ICE cars in the future is being passed across vast swathes of the world, including in the EU, UK, USA, and even China.
    Currently, China controls 80% of battery cell production and maintains a market-leading position in lithium refining. The war in Ukraine, combined with the Shanghai pandemic lockdown has forced companies worldwide to examine the strength of supply chains and perhaps pay more for higher security of supply.
    Already, US President Biden has invoked emergency Presidential powers under the Cold-War era 1950 Defense Production Act. He aims to increase production of key metals including lithium, ‘to reduce our reliance on China and other countries for the minerals and materials that will power our clean energy future.’
    Further demand is likely to be awoken by the recently passed Inflation Reduction Act, which offers $370 billion of investment into clean energy including extending the $7,500 consumer income tax credit for the purchase of a new EV, and eliminating the per-manufacturer limit on these tax credits.
    One lithium concern is that it is relatively abundant worldwide. However, supply is restricted for two reasons. The first is that it needs to lithium needs to be concentrated enough to be worth mining and exploratory projects are often expensive with a high failure rate.
    The second is that lithium is difficult and time-consuming to mine, with new mines taking up to ten years to begin extraction. While corporations worldwide are trying to set up their own mining and processing operations. the demand for lithium is likely to eclipse the supply ramp-up. The International Energy Agency (IEA) estimates that demand for lithium will rise by 900% by 2030, and by 4,000% by 2040.
    Indeed, Rivian CEO R.J. Scaringe believes that ‘all the world’s cell production combined represents well under 10% of what we will need in 10 years…90% to 95% of the supply chain does not exist.’
    Of course, lithium prices are as volatile as the metal itself. For example, a recent influencing factor is China’s ‘zero-covid’ strategy which is has seen lithium processing halt in some areas of the country, while EV manufacturers like Tesla have been forced to suspend factory production at times.
    Finally, there are multiple ways to invest in ASX lithium stocks. It’s worth noting that lithium is mined from three types of deposits: brine, pegmatite lithium and sedimentary, with Australia accounting for most of the sedimentary lithium worldwide. Many lithium investors prefer to invest across all three types.
    More widely, many investors choose to buy shares in a diversified miner like Rio Tinto to gain exposure to lithium while limiting overall risk. Of course, this cuts both ways, with diversified miners unlikely to feel the full benefit of any future price rise. And most of the stocks on this ‘top 10’ list are large-cap miners, with the potential for share price hikes in the long term with rights to exclusive projects. But small-cap lithium stocks can be more lucrative, despite carrying more risk.
    And long term, pure-play ASX lithium stocks are exciting prospects for the adventurous investor.
    Charles Archer | Financial Writer, London
    28 September 2022
  4. ArvinIG

    What, where, and why: Chainlink

    By ArvinIG,


    Analyst article
    Chainlink aspires to be the nexus between the crypto and outside worlds. We describe what Chainlink is, what influences its prices, and how its charts are looking.

      Forex Chainlink Cryptocurrency Blockchain Smart contract Ethereum   In this week’s piece, we take a look at a slightly lesser-known token, Chainlink.
    What is it? What drives its price? And how are the charts currently set up?
    What is Chainlink?
    Chainlink is another decentralized ledger that is designed to provide a secure record of ownership. However, unlike other cryptos, which are defined by their inflexibility in order to ensure security, Chainlink is a decentralized network that feeds off-chain data, think asset prices, for example, to smart contracts on its blockchain.
    Chainlink describes itself as 'decentralized oracle networks provide tamper-proof inputs, outputs, and computations to support advanced smart contracts on any blockchain'. An oracle network simply means one that connects blockchains to external systems.
    The token came to life in 2014 and was conceived by Sergey Nazarov, who developed a passion for smart contracts and their ability to provide a self-regulated, verifiable and trustworthy 'legal system'. The network token Link was launched in 2019 and was hosted on the Ethereum blockchain.
    At its core, Chainlink looks to build a nexus between the crypto-universe and external infrastructure. It might be thought of as the bridge that connects the systems we use every day to store information or our digital property, with that of a blockchain. As we discussed here in the past, Chainlink’s usefulness comes as a way of addressing one part of the Trilemma - scalability.
    The intricacies of Chainlink, like many crypto networks, are complex. However, its essential benefit is to improve how we use decentralized applications. Up to September 2022, Chainlink has validated $US20 billion of smart contracts.
     
    Source: Bloomberg What drives Chainlink’s price?
    As we outlined here in the past, Chainlink’s value, which is currently around $US4 to $US5 billion, is driven just as much by sentiment and speculation as other crypto assets.
    Chainlink is part of a generation of networks that go beyond bold aspirations of wanting to replace existing financial systems and is instead attempting to solve an everyday problem. For this reason, investing in Chainlink is more like buying a small and risky stock, which looks to derive its value from a service it provides.
    Like any business, Chainlink is operating in a competitive market environment. It is seeking to market itself and grab market share so as to become the pre-eminent oracle network. Currently, Chainlink is facing competition from the likes of Band Protocol, Nest Protocol and API3, amongst others.
    While its place in the crypto world is full of commercial adversaries, Chainlink has more than 20 times the partnerships and integrations than its largest competitors combined.
     
    Source: Bloomberg Technical analysis of Chainlink
    Relative to its peers and larger counterparts in the crypto space, Chainlink’s price action is looking more constructive than the likes of Bitcoin, and more recently, Ether. The asset's primary trend is clearly to the downside. However, signs of bottoming are emerging as price momentum turns around.
    The daily RSI is trending higher and is above 50, which price is above the 20, 50, and 100-day moving averages. As far as the shorter-term trend goes, price is carving out a series of higher highs and lower lows. Support from here might be found at the upward trendline support formed by this price action.
    While on the upside, resistance could come at $8.10, a level Chainlink recently failed to break, before the 200-day MA and resistance at $9.50 come into view.
    Chainlink daily chart

    Source: IG  
    Kyle Rodda | Market Analyst, Australia
    28 September 2022
  5. ArvinIG
    We take a look at what’s driving the gold price and investing in Newcrest Mining and Northern Star Resources.


    Forex Shares Commodities Gold Inflation Investment Kyle Rodda | Market Analyst, Australia | Publication date: Tuesday 27 September 2022 10:48 This issue of Investor Spotlight is brought to you by IG, with Kyle Rodda, Market Analyst and ausbiz presenter.
     
    Is all that glitters gold? Well - not this year.
    Gold prices have plunged, leaving investors scratching their heads as to why the yellow metal has underperformed in this high inflation environment. In this week’s Investor Spotlight, we take a look at what’s driving the price of gold, what that means for Aussie gold miners and the investment case for the likes of Newcrest and Northern Star.
    What’s driving the gold price?
    Gold as an inflation hedge is something of a fallacy. Although inflation, or more accurately, inflation expectations is one driver of the gold price, it is only half the story. The other half is interest rates and expectations about future monetary policy.
    The best way to describe gold is as a store of value. It sees its demand increase at times when safe-haven assets – specifically, US government bonds – are delivering a negative real yield. Rather than buy an asset that will lose value, investors will instead buy gold and although the metal yields nothing, relatively speaking it is a more attractive investment than the one that will lose you money.
    Over the last year, real yields have been gradually moving higher and into positive territory as the US Federal Reserve pivoted to tighter monetary policy settings. The real yield on the US ten-year Treasury note is closing in on four-year highs which largely explains why gold has recently pushed to more than two-year lows.
    Of course, there is also the currency element to what drives gold. Gold is priced in US dollars, meaning that as the US dollar appreciates gold faces headwinds from the stronger Greenback.
    Gold price technical analysis
    The price of gold has fallen through a major level of technical support in recent weeks at around $US1670. On top of that, there are signs of the commodity is entering a longer-term downtrend, with price pushing below the 200-week moving average. The weekly RSI is approaching technically oversold territory; however, it remains above 30 and momentum is clearly to the downside.
    Spot gold weekly chart

    Source: TradingView Comparing the Aussie dollar gold price
    When it comes to ASX-listed gold miners, another factor is important to consider when it comes to the gold price: Australian dollar. The exchange rate can buffet some of the impact of a stronger US dollar on the global gold price, and sometimes support the profits of Australian gold miners. Currently, the Australian dollar gold price is trending lower.
    However, the impact of the exchange rate is observable, with the price still above the year’s lows, as the AUD/USD falls into the low 65-cent handle.

    Source: Reuters A look at Aussie gold miners
    ASX-listed gold miners have underperformed the broader market over the last year, falling more than 27% versus the ASX which is down around 12%. The gold miners have multiple headwinds to deal with - both macro and micro. From a macro standpoint, the lower gold price is reducing the topline of miners.
    But another hit to profits is the higher cost environment that’s driven up the price of inputs, labour and energy. The subsequent squeeze on earnings has pushed the share price of the big gold miners lower, even if the impact has been more modest than global counterparts due to a favourable exchange rate.

    Source: Market Index Newcrest Mining (NCM)
    Newcrest is the ASX’s largest gold miner with a market capitalization of around $15b. The company’s stock is arguably the most popular way for Australian investors to get exposure to local gold miners, as a result.
    It has been a tough 12 months for investors. After a brief run-up in April, the drop in gold prices has pushed Newcrest Mining shares to four-year lows. Despite the poor run, the analyst community is bullish on Newcrest shares. It has a consensus “buy” rating amongst 17 surveyed brokers, with a consensus price target at a heavy discount of around $24.73.
    The stock’s price-to-earnings is also at a discount to its long-term average. And it’s a relatively safe investment compared to the broader market, with a beta of 0.75.
    Looking at the charts, Newcrest Mining shares are evidently in a downtrend, with momentum heavily skewed to the downside. However, there are some signs that the stock has capitulated and is becoming oversold, with the weekly RSI falling below 30. Price is finding support at around $16 per share, which if broken, may trigger further selling. On the upside, resistance can be found at around $18.50.
    Newcrest Mining weekly chart

    Source: IG Northern Star Resources (NST)
    Northern Star Resources ranks number two in terms of market capitalization, with a valuation of just over $8 billion.
    The company is facing the same headwinds as its larger counterpart. However, the drop in its market value has been less severe, with the stock down over 19% in the past 12 months. Brokers are even more bullish on Northern Star Resources, with a strong consensus buy rating amongst 15 analysts covering the stock. It also boasts a price target at a very hefty premium to current prices of around $10.70. It is a slightly more volatile stock, with a beta of 0.95.
    However, that is still relatively safe compared to the broader ASX.
    The trend is to the downside for Northern Star Resources. Price is below all key moving averages, although the weekly RSI is perking up. The 20-week moving average is one key level of technical resistance that if broken could open up greater upside, with $8.30 another beyond that. Support is at $6.70.
    Northern Star Resources weekly chart

    Source: IG
  6. ArvinIG

    Apple stock: is now the time to buy?

    By ArvinIG,


    Analyst article
    Even though September is often when Apple shines but things are a bit different this year.

    Source: Bloomberg   Shares Apple Inc. iPhone Market sentiment Technical analysis Smartphone   Apple’s new strategy
    September 7th, 2022 saw Apple Inc unveils its 2022 lineup of smartphones and digital assets. The launch includes a base model iPhone 14, a larger Plus version, the 14 Pro, and the 14 Pro Max.
    The gap between the base and the Pro model is apparent with the Pro models receiving a 48-megapixel camera upgrade, a much faster A16 Bionic chip, a new always-on-display feature and a 35% higher charge. The upgrades and improvments in the iPhone are all designed to fit into Apple's new strategy.
    What does the new strategy mean for Apple?
    This new strategy has the potential to be a game changer for Apple.
    Over the previous years, the lower-priced iPhones usually did well in sales and this was evident during the second quarter of 2022 when Apple sold about 37% more of the base model iPhone 13 and 13 Mini than the two Pro versions.
    But for the new series, the expectation is that the iPhone 14 Pro and iPhone 14 Pro Max will account for 50 to 60% of total shipments for the rest of the year with the iPhone 14 Pro Max, the most expensive version, anticipated to make up 30 to 35% of sales alone.
    This new product strategy, if successful, will not only help Apple to seize more market shares, an area where Samsung is leading at the moment but more importantly, will help the company enjoy higher margins to combat the inflation headwinds.
    Apple’s share price and technical analysis
    Over 2022, Apple's share price has declined 18% and only a further 15% since August 18th.
    However, despite a slightly questionable performance, it is still safe to say Apple remains a company investors can count on. Given its robust business and financial performance, the recent dip in prices doesn't change the fact that shareholders have received enviable returns over the last five years, at around 300%.
    The share price for Apple has been working hard to stabilize the ground around the 100-day moving average after the recent decline to a two-month-low. That brings the price back to the crucial $150 level signalling the potential for further downside.
    However, with the price dipping deep into the oversold territory, we could see the possibility that selling pressure should ease soon.
    Even so, with an overall bearish sentiment in play, it may be too optimistic to expect a quick turnaround. A rise through the $154 level, where the 20-day MA sits, would be required to negate this bearish short-term view.
    Apple daily chart

    Source: IG

    Hebe Chen | Market Analyst, Melbourne
    27 September 2022
  7. ArvinIG
    The Reserve Bank of Australia created record amounts of money during the pandemic, that could be stoking inflation. It may be worth adding inflation-benefitting shares to the portfolio.

    Source: Bloomberg   Inflation Interest rates Interest rate Shares Commodities Bank   From February 2020 to February 2022, the Reserve Bank of Australia (RBA) expanded the money supply by an unprecedented 375%. Of the $549.5 billion in currency and call accounts, over $400 billion didn’t exist three years ago.
    Increases in the money supply of this magnitude tend to create inflation, and we’re seeing some right now.
    In June 2022, the Consumer Price Index (CPI) hit a 30-year high of 6.1%. The last time CPI exceeded this level was December 1990, after Saddam Hussain invaded Kuwait.
    The RBA forecast back in May that the CPI would remain above 4% at least until the end of 2023.
    Some components of inflation are rising even faster:
    Weekly rents in Sydney rose by 23.7% in September 2022 compared to a year ago, according to SQM Research Weekly rents nationally rose by 14.8% over the same period The average spot price of electricity (excluding WA and NT) for August 2022 increased by 221% compared to August 2021 So, who will benefit from increased inflation over the next 12-24 months?
    Here are the three stocks to watch:
    Origin Energy – energy production Commonwealth Bank – banking Insurance Australia – floating rate note  
    Origin Energy Limited
    Origin Energy Ltd is involved in the exploration and production of natural gas in Australia, electricity generation, wholesale and retail sale of natural gas and electricity, and the sale of liquefied natural gas in Australia and for export.
    Origin’s share price suffered during the pandemic, as did its bottom line. The company recorded impairment losses in 2020-22 totalling $4.9 billion and net losses of over $2.3 billion and $1.4 billion in 2021 and 2022, respectively. Of the $2.6 billion in impairment losses in 2022, $2.2 billion were hedging losses due to higher electricity and natural gas prices.
    In 2020 and 2022, Origin also recorded operating losses of $0.2 billion and $0.7 billion, respectively.
    However, things are looking up for Origin.
    Wholesale electricity prices have risen significantly over the past year. For the 2022 financial year ending in June, Origin made a $713 million profit despite hedging losses, compared to a $348 million loss in the prior year.
    Origin made a $92 million profit in its oil and gas division due to rising gas prices for the 2022 financial year ending in June, compared to a $231 million loss the previous year.
    As long as inflation continues to affect natural gas and electricity prices, Origin appears to be well positioned to benefit.
    Commonwealth Bank Limited
    In terms of banks benefiting from inflation, there isn’t a lot to differentiate between the big four banks: Commonwealth Bank of Australia, Westpac Banking Corp, Australia & New Zealand Banking Group Ltd, and National Australia Bank Ltd.
    The reason for singling out Commonwealth Bank is its portfolio weighting towards mortgages – it has the highest exposure.
    Mortgages as a percent of total exposure at default:
    Commonwealth Bank 54.50 Westpac 50.31 ANZ 40.48 NAB 37.33 Source: Fitch Ratings
    Banks benefit from rising inflation in two ways:
    Higher asset prices reduce loan losses from mortgages As the central bank reacts and raises interest rates, bank interest margins rise  
    Higher asset prices reduce loan losses
    A simple calculation for a profit from a mortgage is:
    Profit = interest margin + fees - costs - loss at default
    Interest margins are fairly constant as most bank loans are adjustable within five years. Fees and costs, too, are fairly standard as mortgages are standardised products.
    In the event of a default, the bank can lose money when the costs associated with taking possession of the mortgaged asset and selling it exceed the initial deposit and capital payments received. These losses expand rapidly if housing prices fall – as happened in the US in 2008. However, if housing prices rise, then the chance of recording a loss in the event of default falls.
    Commonwealth Bank appears to be best positioned to benefit from lower loan losses. Over the past two years, the bank’s provisioning losses turned around from $2.5 billion loss in 2020 to a profit (reversal in provisionings) of $357 million in 2022. Further housing price inflation could contribute to lower provisioning losses in the coming 1-2 years.
    Interest margins may rise
    Banks benefit from rising interest rates when lending rates outpace deposit rates. While term deposit interest rates appear to be rising in tandem with RBA rate rises, as are variable rate mortgages, interest rates on call accounts and chequing accounts remain close to zero.
    As of 30 June 2022, Commonwealth Bank had only $158 million in term deposits and Certificates of Deposit (CDs) out of $745 million in total Australian deposits. The rest were in lower interest short-term deposits and zero interest deposits.
    Meanwhile, home loans totalled $556 million.
    Commonwealth Bank appears to be well positioned to benefit from rising interest rates if loan rates rise faster than deposit rates and increase net interest margin.
    Insurance Australia Floating Rate Note
    The Insurance Australia Floating Rate Note (ASX:IAGPD] is more of a fixed-income investment than equity. IAG issued $300m in these shares in 2016 and they convert into ordinary shares on 16 June 2025. These are subordinated unsecured notes, which means they are higher risk than other IAG debt, but lower risk than equity. IAG issued this floating rate note to improve its Tier 1 Capital adequacy ratio.
    IAGPD is not a direct beneficiary of inflation. However, it will benefit from the consequent rising interest rates because it has floating rate payments – similar to a floating rate mortgage. The interest (dividends) paid on these notes is paid quarterly at an annualised rate of 4.7% above the 90-day bank bill swap rate. So as interest rates rise, so too will the dividend yield.
    The September 2022 dividend was $1.242 (annualised at $4.968, or 4.968% for the $100 par value), reflecting the previous 90-day bank bill swap rate of 0.268. Now that interest rates are rising, and the 90-day swap rate has risen to 2.9% as of 26 September, these yields should climb towards 7.6%, based on the $100 par value. IAGPD generally trades slightly above par, with a 52-week range of 100.01 to 105.50.
    This appears to make IAGPD a beneficiary of the rising interest rates the RBA is using to fight inflation.
    Peter Keusgen | Financial Writer
    Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.* Learn more about share CFDs or share trading with us, or open an account to get started today.
    * Winner of ‘Best Multi-Platform Provider’ at ADVFN International Finance Awards 2022
  8. ArvinIG
    The Australian dollar sunk in the aftermath of the Fed’s rate rise; the RBA has signaled a less hawkish approach to monetary policy and the Fed’s jumbo hike has given USD some backbone. Will AUD/USD go lower?

    Source: Bloomberg   Forex Shares Australian dollar United States dollar Bond Inflation   Australian dollar forecast: bearish
    The Australian dollar appears captive to the machinations of the US dollar for now.
    The fallout from the Fed’s decision during the week has seen Treasury yields roar higher. This has seen the US dollar strengthen across the board with the US dollar index (DXY) jumping to a 20-year high.
    The US central bank raised its Fed funds target rate by 75 basis points as anticipated during the week, but it was the post-decision press conference that got the hawks screeching.
    Fed Chair Jerome Powell said, “we will keep at it until the job is done,” in reference to fighting sky-high inflation (8.3% year-on-year to the end of August). The market has now priced in another 125 basis points of lifts by the end of the year.
    Conversely, the less hawkish stance of the RBA was confirmed during the week with the release of the RBA meeting minutes for the September meeting.
    By in large, they re-iterated the opinion expressed recently by RBA Governor Philip Lowe that the RBA will be considering a hike of either 25 or 50 bp at their next meeting on 4th October.
    He has also said that as rates become elevated, the case for further large boosts decreases. So, while rates are being tightened, they are being done so at a slower pace than the Fed and other global central banks.
    This pace of reining in previously loose policy places the Australian dollar under pressure as yields in other developed markets rise.
    The tightening of monetary policy is to allay fears of inflation becoming entrenched. The last read of year-on-year CPI to the end of the second quarter came in at 6.1%, well above the RBA’s target of 2-3% on average over the business cycle.
    So, while price pressures are stronger than desired, they are not as pronounced as in other parts of the world, hence the less aggressive tightening stance.
    2- and 10-year bond spread yields illustrate the relative outperformance of Treasuries to Australian Commonwealth Government Bonds (ACGB). With the RBA’s dovish tilt compared to Fed, the ‘big dollar’ continues to climb, pushing AUD/USD down.
    AUD/USD against 2- and 10-year bond spreads

    Source: TradingView
    Daniel McCarthy | Strategist
    26 September 2022 13:27 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.
  9. ArvinIG

    Best UK shares to buy in October 2022

    By ArvinIG,


    Trading hour changes
    ITM Power, Harbour Energy, and Howden Joinery could be some of the best UK shares to buy next month as the political situation develops.

    Source: Bloomberg   Forex Shares United Kingdom Profit Stock Recession   Some of the best UK shares bosting excellent long-term investment cases, but which have been beaten down by the wider recessionary environment, may soon start looking attractive.
    Best UK shares to buy in October 2022
    On Friday, newly appointed Chancellor Kwasi Kwarteng will present Parliament with a ‘mini-budget,’ which is likely to include a reversal of the previous Chancellor’s increase in National Insurance contributions, and a freeze in corporation tax at 19%, a reduction from the previously pencilled-in rise to 25% in April 2023.
    Further cuts to VAT, income and dividend taxes, and even inheritance tax are also on the table. Alongside PM Truss’ £150 billion energy bills freeze, Bank of England Governor Andrew Bailey is now under pressure to increase the base rate by 75 basis points to 2.5%. And the markets are pricing in a further rise to 4.5% by mid-2023 as the Federal Reserve responds to hotter-than-expected inflation.
    This leaves two important considerations for UK stocks. First, the Chancellor’s focus ‘entirely on growth’ means that highly-indebted companies may be given lifelines even as interest rates rise. Rate rises may even have an unofficial ceiling regardless of inflation, as the Chancellor and Governor begin their political sparring contest.
    And second, the falling value of Sterling — down to $1.14 from $1.37 a year ago — means UK stocks are now intrinsically cheaper for international investors.
    1) ITM Power (LON: ITM)
    ITM Power shares were a darling of the pandemic era, rising from 110p in February 2020 to a high of 682p by January 2021. However, the hydrogen stock has now seen all its pandemic gains erased, falling by 45% in the past month alone.
    However, the Financial Times calls the FTSE AIM company ‘one of Britain’s big hopes for homegrown hydrogen power.’ ITM is one of the only pure-play domestic hydrogen stocks, and is backed by the likes of JCB and Snam.
    But it’s fighting multiple headwinds, not least delays in production plans caused by ‘cost escalation, supply constraints and time delays.’ And long-term CEO Graham Cooley is leaving once his successor has been found, acknowledging that the company needs ‘a CEO with international manufacturing experience who can expand us from where we are today.’
    In last week’s FY22 results, pre-tax losses nearly doubled in the fiscal year to £46.7 million on revenues of just £5.6 million. And the electrolyser manufacturer announced that it is scrapping key targets, including prior plans to have 5GW of production capacity by 2024, and to build a second UK factory. Instead, it hopes to ramp up capacity at its sole UK facility from 1GW to 1.5GW per annum by 2025.
    But the company sits on a £366 million cash pile, having raised £250 million from investors in November 2021. And long term, hydrogen proponents view the net zero solution as key to decarbonising the economy.
    Cooley is already seeking government support, a request likely to enjoy a warm reception given recent promises to better UK energy independence and Kwarteng’s previous enthusiasm for hydrogen, wind, and solar power. The government has already announced a clean-hydrogen subsidy scheme targeting 10GW by 2030.
    RBC analysts think the new market dynamics have ‘significantly de-risked' the stock, though cite ‘a number of uncertainties related to the timing of large purchase orders and ramp-up costs potentially affecting near-term profitability.’
    This could leave ITM Power shares as a high-risk, high-reward FTSE AIM stock to buy.
    Key risk: Berenberg cautions it is ‘not out of the woods,’ citing scale-up challenges and weak FY23 revenue guidance, and has slashed its price target to 100p from 185p.

    Source: Bloomberg 2) Harbour Energy (LON: HBR)
    Harbour Energy shares could be a FTSE 250 stock to buy in October. The oil and gas company is the largest London-listed independent producer in the UK and largest commodity extractor in the North Sea.
    The stock is up 33% over the past year, benefitting from the sky-high prices of the commodities it produces, despite sinking in late May after former Chancellor Rishi Sunak announced a windfall tax — the energy profits levy— on North Sea oil and gas profits.
    While the tax came with a generous 91% rebate conditional on further reinvestment in the North Sea, CEO Linda Cook argues the plan ‘seriously flawed’ as it will disproportionately impact independent companies like Harbour Energy at the benefit of globally operating oil majors like BP and Shell.
    However, having already recovered most of this lost ground, Harbour Energy shares could also be boosted by the new political status quo. The new PM has categorically ruled out further windfall taxes, providing investment clarity. While a U-turn is possible, danger from this front has receded.
    In addition, Truss has promised to speed up licence approvals of further North Sea oil and gas drilling. Harbour Energy could well be a primary beneficiary. The FTSE 250 company is spending $1.2 billion in capital expenditure over the next year, with new projects at Tolmount, Everest, and J-Area.
    In August’s half-year results, revenue increased to $2.67 billion, up from $1.5 billion in the same period last year, boosted by the falling value of Sterling. Accordingly, pre-tax profits rose to $1.49 billion from just $120 million in H1 2021, and it’s increased its share buyback to $300 million.
    In addition, the company has cut its £2.15 billion debt pile by more than 50% to $992 million, and expects to be debt-free by year-end 2023. This is a good sign in times of rising interest rates.
    Key risk: Demand destruction in the event of a global recession. Harbour Energy barely turned a profit in the decade before the pandemic, and those days could return if energy prices fall.
    3) Howden Joinery (LON: HWDN)
    Perhaps a contrarian FTSE 100 stock pick, Howden Joinery shares have fallen by 42% over the past year to 547p, erasing the pandemic gains which saw it strike a record 963p in September 2021. The company is now trading at an attractive price-to-equity ratio of just 9.7.

    The company is a designer and supplier of fitted kitchens, selling materials and plans to tradespeople across the UK and France. But with recession expected and consumer confidence falling, average UK house prices are predicted to fall by 4.5% in 2023 according to the Centre for Economics and Business Research. This could put Howden Joinery in a difficult position.
    However, most of its top-line growth comes from existing homeowners seeking to renovate. And despite its share price fall, half-year results saw revenue rise by 16.3% year-over-year, and 39.9% on a pre-pandemic basis, to a record £913.1 million. Moreover, despite double-digit CPI inflation, profit margins actually increased, sending operating profits up by 20%.
    Given the rising cost of living and weaker prospects for the housing market, Howden Joinery could simply be suffering from wider negative investor sentiment. But house prices are still rising according to the most recent ONS statistics, and the company may continue to post record revenue even in a downturn.
    This is because its business model relies on consumer carrots and sticks. A homeowner wishing to upgrade their property must either move or renovate. As the average UK house now costs £292,000, moving costs include stamp duty of £4,600, and then even more in the form of legal fees, surveys, and estate agency fees.
    Alternatively, a homeowner can choose to renovate their kitchen for a fraction of the cost of moving, while also seeing an investment return as their home value rises.
    Key risk: More negative sentiment or a worse-than-predicted recession could see buyers and renovators tighten their belts further.

    Charles Archer | Financial Writer, London
    20 September 2022
  10. ArvinIG
    We review the events of the week and where Ethereum goes from here.

      Forex Ethereum Cryptocurrency Bitcoin BTC/ETH Ethereum Classic   Last week was a historic one for Ethereum and the cryptocurrency industry more broadly. As we discussed here in the past, Ethereum has undergone its so-called “merge”, where the network went from proof-of-work to proof-of-stake.
    In this week’s Crypto Verse, we review the event and what means for Ethereum, then take a look at recent price action for Ether and the Bitcoin/Ethereum cross.
    The merge - reviewing the event
    To put it simply: the merge was successful. The act itself was described as being like trying to change the engine of a jumbo jet mid-flight. If that was the favoured metaphor for the event, then it all went smoothly. Ethereum founder Vitalik Buterin to Twitter on Thursday last week to laud the success.
    “And we finalized! Happy merge all. This is a big moment for the Ethereum ecosystem.”

    Source: Twitter Where to from here for Ethereum?
    The purpose of the merger was to make the Ethereum network more sustainable and eco-friendly. It is estimated that the move to proof of work will cut the network’s carbon emissions by almost 99.99%, addressing one of the major objections to cryptocurrencies’ viability.
    That puts it at a possible competitive advantage against its main rival, Bitcoin, which continues to operate in a far more energy-intensive fashion.
    It’s a matter of content whether the cryptocurrency industry’s overall emissions will be reduced by virtue of the merger. While the Ethereum network will be far less “dirty”, it’s expected that profit-seeking miners will shift focus to other crypto-currencies which operate based on a proof of work model. On the day of the merge, the hash rate - or the computing power used by a cryptocurrency network - surged for the likes of Ethereum classic, Ergo and Ravencoin.
    Nevertheless, given Ethererum’s prominent role in facilitating transactions of smart contracts, including NFTs and other digital assets, the merge marks a big leap forward for both the network and cryptocurrency.
    Technical analysis of the Ethereum price
    Ether tumbled following the finalization of the merge, having rallied into the event. While it’s tempting to attribute the move to something to do with the merge, more than likely, it was more a reflection of narrative and sentiment - that is, a buy-the-rumour-sell-the-fact dynamic.
    A nine percent plunge on the day of the merge and a steep weekly decline has pushed Ether’s price in the direction of its primary downtrend. Crucially, the price has also pushed below technical support at $1400. The next key levels to watch are around the 200-week MA, and below that, support at around $850.
    Ether weekly chart

    Source: IG Technical analysis of BTC/ETH
    The divergence in performance between Bitcoin and Ethereum reversed last week, with the Ether/Bitcoin cross rejecting resistance at its all-time high. Price has reverted to the 20- and 50-week moving averages, as momentum turns to the downside. The next level of support looks to be around 0.064.
    Bitcoin and Ethereum weekly chart

    Source: IG

    Kyle Rodda | Market Analyst, Australia
    21 September 2022
  11. ArvinIG
    Asia-Pacific markets set to rebound after US stocks rise as dollar strength pauses and Japanese inflation data to show rising prices, but unlikely to influence the BOJ and USD/JPY trades at support.

    Source: Bloomberg   Forex Indices Japanese yen Inflation USD/JPY Bank of Japan   Tuesday’s Asia-Pacific outlooks
    Asia-Pacific markets look set to open higher following a bullish New York trading session. The tech-heavy Nasdaq-100 Index (NDX) led stock gains in New York, closing 0.77% higher, and the S&P 500 gained 0.69%. The VIX ‘fear-gauge” index fell 2.01%. The FOMC will likely dictate market direction later this week, with the base-case scenario calling for a 75-basis point hike. Rate traders see a 1-in-5 chance for a larger 100-bps hike.
    The US dollar DXY Index was little changed despite rising short-term Treasury yields. Crude oil prices traded nearly flat as traders weigh the impact of rising global interest rates. Markets expect the Swiss National Bank (SNB) to hike rates into positive territory as inflation and a relatively strong currency bolster the SNB’s stance to tighten policy. A rate hike from the Bank of England is also on tap later this week.
    Japan’s inflation rate is due this morning, with analysts expecting to see the nationwide consumer price index (CPI) for August to hit 2.9%, according to a Bloomberg survey. That would be up from July’s 2.6%. The increased rate, or even a higher-than-expected print, is unlikely to sway policymakers at the Bank of Japan from easy monetary policy, as Governor Kuroda sees price pressures as temporary. Although, Mr Kuroda will likely take a hard stance against JPY shorts.
    The September minutes from the Reserve Bank of Australia’s meeting will cross the wires. Traders are buying AUD versus the New Zealand dollar, pushing AUD/NZD to its highest level since 2016. Rate bets for the October RBA meeting have increased towards favoring a 50-bps hike. Meanwhile, the RBNZ has already front-loaded much of its policy response, and New Zealand’s trade balance faces mounting headwinds.
    Elsewhere, the South African Rand dropped to its lowest level versus the Greenback since early 2020.
    The country’s power utility company implemented a Stage 6 alert on Sunday, mandating six hours of power cuts over a 24-hour period. European natural gas prices fell around 3%. And China’s central bank is expected to keep its 1- and 5-year loan prime rates unchanged today.
    USD/JPY technical outlook
    USD/JPY is trading above the supportive 9-day Exponential Moving Average (EMA) and a trendline from early September. A move higher would challenge resistance at 144.99. An Ascending Triangle pattern implies a bullish bias, but it would require another contact high. The Relative Strength Index (RSI) is flashing a bearish divergence, and MACD is subdued near its midpoint. A break below support could open the door for a pullback into early September levels.
    USD/JPY four-hour chart

    Source: TradingView
    Thomas Westwater | Analyst, DailyFX, New York City
    20 September 2022 This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  12. ArvinIG
    Apart from Nvidia's share price falling 16% last week and experiencing worse-than-expected quarterly results, the US government has stepped in to restrict AI chip sales to China and Russia.

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

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

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

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

    Source: IG
    Source: DailyFX

    Hebe Chen | Market Analyst, Melbourne
    06 September 2022
  14. ArvinIG
    Battery metals have yet to prove themselves, but recent political moves in the United States, with the Inflation Reduction Act, has brought the sector back into sharp focus.

      Lithium Metal United States   IGTV’s Jeremy Naylor caught up with Charles FitzRoy, the CEO of Bradda Head Lithium, a company that plays directly into the push by the US to source its own metals associated with the battery sector.
    Jeremy Naylor | Writer, London
    18 August 2022
  15. ArvinIG
    Global equity markets tumbled last week, sending risk assets and gold prices lower. Central bank event risks fill the docket for the week, offering traders volatility.

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

    Source: DailyFX This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
    Thomas Westwater | Analyst, DailyFX, New York City
    05 September 2022
  16. ArvinIG
    Although China’s policymakers appear to step in provide economic support through tangible measures, the rapidly deteriorating power crisis and extreme weather continues to complicate and challenge the Chinese economy.

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

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

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

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

    Trade of the Week: Short German DAX

    By ArvinIG,


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

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

    Banking on it: Breaking down the Big Four

    By ArvinIG,


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

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

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

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

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

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

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

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

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

    Source: TradingView   Daniel McCarthy | Strategist
    30 August 2022

    This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
  21. ArvinIG

    Best contrarian shares to buy in Q3

    By ArvinIG,


    Analyst article
    Which contrarian stock picks offer the best value?

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

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

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

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

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

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

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

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

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

    Source: IG charts

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

    Persimmon shares down 8% as sales fall

    By ArvinIG,


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

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

    Piper Terrett | Financial writer, London
    19 August 2022
    Take your position on 17,000+ shares with the UK’s No.1 platform.* Learn more about trading or investing in shares with us, or open an account to get started today.
    * Best trading platform as awarded at the ADVFN International Financial Awards 2022

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