Weekly Commodities Update Weekly Commodities Update Weekly Commodities Update

Market Insights Today: Netflix shares surged, floods impacted commodity production – October 19, 2022

Equities 3 minutes to read
APAC Strategy Team

Summary:  Better-than-expected corporate results boosted US stocks for the second day. Afterhours Netflix shares rose 14% on reporting better than expected results. Oil prices fell 3% with the US said to release more strategic petroleum reserves on supply concerns. Gold advanced. Floods hampered commodity production numbers in Australia. RBA notes loan arrears and insolvencies are rising. Mercedes-Benz launched new EV models that rival Tesla’s Model Y. Rio Tinto sees lithium tightness.


What’s happening in markets?

The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) indices rally for the second day 

US stocks extended their gains in choppy trading, with the S&P500 gaining 1.1% and now up 3.8% in two days after continuing to rebound from nearly oversold levels, before closing at 3,719.98 points (its highest level in 8-days) on better-than-expected corporate results. All 11 sectors of the S&P500 gained, with Industrial, Materials, Utilities, and Financials leading. Defense giant, Lockheed Martin (LMT:xnys) shares gained the most since 2020, up 8.7% after its earnings per share topped estimates. Goldman Sachs (GS:xnys) rose over 2%, with stronger trading results helping the investment bank beat quarterly earnings and revenue expectations. Goldman’s results continued a strong stretch of bank earnings, including beats from Bank of America (BAC:xnys) and Bank of New York Mellon (BK:xnys) on Monday, with the financial sector outperforming on Tuesday. Meanwhile, Afterhours, Netflix (NFLX:xnas) shares rose 14% after reporting better than expected results, adding 2.4 million customers in the 3Q, beating expectations. The rally was also supported by the Bank of England calming nerves saying, the funds whose vulnerabilities also fueled the rout in UK markets have now raised tens of billions of pounds in capital, and as such are on a more sustainable footing.

U.S. treasury (TLT:xnas, IEF:xnas, SHY:xnas) ended Tuesday little changed

Treasuries finished a choppy session with yields largely staying near the levels from the day before. The 2-year yield was 1bp richer at 4.43% and the 10-year yield was unchanged at 4%. U.S. economic data were mixed with stronger industrial production in September but a below-expectation read in the NAHB Housing Market Index. Contrary to a Financial Times report suggesting the Bank of England would delay its quantitative tightening program, the U.K. central bank announced later in the day that it will start bond sales on Nov 1 but not including long-dated bonds initially.

Australia’s ASX200 (ASXSP200.1) rises 0.3%, with lithium stocks charging, while energy companies retreat after the oil price fell 3%.

The Australian share market trades 0.3% higher on Wednesday (1.5 hours into the seesion) with lithium stocks like Pilbara Minerals, (PLS), Allkem (AKE) up over 3% (for more on lithium see below). Meanwhile, the energy sector is capping broad market gains, with selling in oil stocks taking the energy sector down 1.6% after the oil price fell 3.1% to $82.82, with the US said to release emergency crude on supply concerns. Meanwhile losses in oil stocks are somewhat limited with OPEC+ members defending their supply cuts, saying they are justified by the growing risk of a global recession. Woodside (WDS) trades 1.7% down. Beach Energy (BPT) is down the most in the sector, 4.6%, after reporting production dropped amid flooding. The best performing stock on the ASX this year, Whitehaven (WHC) trades 2.2% lower today after announcing production fell 37% last quarter, with total equity sales down 32% compared the June quarter. Whitehaven Coal’s CEO said he sees demand for high quality coal continuing to outstrip global supply, which will likely continue to support coal prices. The coal price has fallen 3% this month, and is now down 15% from its all-time high. Meanwhile, gold stocks are also in focus after Gold prices steadied after the US dollar continued to fall. However St Barbara (SBM) shares are 6.2% lower after the miner cut its gold output forecast for the year, which disappointed analysts.

Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg)

Hong Kong stocks rallied, with Hang Seng rising 1.8%, following the move higher in U.S. equity index futures on reports that the Bank of England was delaying its quantitative tightening due to start at the end of October. The Bank of England denied the story later. HSBC (00005:xhkg) and Standard Chartered (02888:xhkg) gained more than 2.5%. BYD (01211:xhkg) surged 6.4% after the leading EV maker said its Q3 profit was set to rise as much as 365% Y/Y, lifting most other EV makers 3%-5% higher in share prices as well. Healthcare names surged again, with Ali Health (00241:xhkg) up 9.4%, Hansoh Pharmaceutical (03692:xhkg) up 5.9%, CSPC Pharmaceutical (01093:xhkg) up 4.5%, Sino Biopharmaceutical (01177:xhkg) up 4% and some biotech stocks soared more than 10%. Chinese airlines stocks gained from 2% to 3% after some Chinese airlines, including China Eastern Airlines and China Southern Airlines, announced the resumption of some more international flights. CSI300 ended a choppy session losing 0.2%.

USDJPY climbed to 149.37, the highest level since 1990, and oil price fell to USD83.70

The Yen weekend to 149.37 with the 150 figure in sight. EURUSD, at 0.9850, and GBPUSD, at 1.1330 were little changed from Monday. NZDUSD was the notable outperformer among the G10 currencies, rising to 0.5690 while USDCAD underperformed as oil prices slumped, WTI crude fell 2% to USD83.70 on the report that the Biden administration has approved to release of more strategic petroleum reserves.

What to consider?

Stronger-than-expected industrial production but a softer NAHB Housing Index

U.S. September industrial production came in at +0.4% M/M, (vs consensus: 0.1%, Aug: -0.1% revised) and capacity utilization increased 0.2pp to 80.3%. NAHB Housing Market Index fell to 38, below 43 expected and 46 in August.

RBA sounds alarm that rate hikes could soon pause with loan arrears and insolvencies rising

The Aussie dollar rose for the 3rd day after the after the USD continued to lose strength when the UK re winded some tax cuts. However, the outlook for the Australian dollar against the US remains restricted, with the RBA noting loan arrears and insolvencies have picked up in Australia. Yesterday's RBA Meeting Minutes highlighted the RBA has little room to rise rates, without compromising the health of the economy. The RBA was only able to raise rates by 0.25% this month, as business insolvencies had picked up, plus a low level of loan arrears were seen, while housing loan commitments declined -  ‘demonstrating the effect of high interest rates on housing’.

Lithium sector news; Mercedes-Benz launches new EV that rivals Tesla’s Model Y. Rio Tinto sees lithium tightness

Mercedes-Benz (MBR) broadened its electric vehicle range on the eve of the Paris car show; unveiling a new sporty vehicle that’s US$4,300 cheaper than Tesla’s Model Y, with Mercedes selling the EQE SUV later this year for US$68,000. The new sporty EV Merc also has a 590 kilometres range, means it travels 76 kilometres more than Tesla’s Y Model. Mercedes also plans to offer EV versions of all of its vehicles by the end of this year. And aims to only sell EVs by 2030, particularly in markets phasing out fuel engines. Also in Lithium news yesterday, Rio Tinto (RIO) said the lithium market is experiencing tightness, while demand continues to strengthen from government policies, and EV producers rolling out new models. Lithium carbonate prices remained elevated in the quarter after Power rationing in China’s Sichuan province (a key lithium supply hub) also led to production cuts. Also, Australia’s biggest pure play lithium company Pilbara Minerals (PLS) sold spodumene concentrate at a new record high price, equating to $7,830 a ton.

For our look ahead at markets this week - Listen/watch our Saxo Spotlight.

For a global look at markets – tune into our Podcast.

 


 

 



Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.