Financial News & Insights for Investors & Traders; Virgin Money & Disney surge, Coal stocks lift, Markets brace for more Fed speak
Summary: Eight Minute Daily Dose of Financial Insights for Investors and Traders; covering what to watch today, what could move markets ahead. Plus, the latest from these six companies; Tesla, Disney, Virgin Money, SQM, and Whitehaven Coal.
What you need to know about markets now
The major US indices closed in the red on Monday
Investors are concerned China may tighten Covid restrictions with one region near Beijing (Shijiazhuang) suspending schools, locking down universities and asking residents to stay at home for five days, after cases spiked back to April levels. While investors are also weighing up Fed speakers commentary with Mary Daly saying the Fed will need to be mindful of the lags of rate hikes, while on the other hand she said too much tightening could be “unnecessarily painful” for the economy. However, investors are nervously hanging on the edge of their seats for more Fed speeches on Tuesday and FOMC minutes released on Wednesday, which could provide more hints on how high US rates may go and could likely cause volatility and may stoke fear selling into markets, like we saw last week. As such, the Nasdaq 100 fell 1.1%, while the S&P 500 losing 0.4%. As for big moves in US markets; the biggest loser by market value was Tesla (TSLA) shedding 6.8% after recalling vehicles and anxiety about production and sales falling amid China lockdown. On the upside, Disney (DIS) rose 6.3% after the former CEO who spent more than four decades at Disney was re-hired at CEO.
The Australian share market opens 0.6% up on Tuesday. Lithium, fertilizers, coal and banking stocks shine
Lithium company Pilbara Minerals (PLS) trades 4% higher and Allkem (AKE) also up about 3% with sentiment in the lithium sector buoyed after lithium giant SQM shares rose almost 10% in NY on announcing a US$3.08 dividend per share following their optimistic update last week. SQM also operates in fertizliers as well, so ASX fertilizers companies are seeing a sentiment uptick with Incitec Pivot (IPL) are trading higher. Coal companies such as Whitehaven (WHC) and New Hope (NHC) also are trading sharply higher with large block trades coming through with traders expecting higher prices for coal in January. Also in commodities, it’s worth watching copper company Oz Minerals (OZL) as options trading volume increased dramatically after BHP increased their takeover offer for company. Yesterday OZL options volume was almost 7 times the 20-day average, with 5,000 calls and zero puts, meaning the market expects a higher price for OZL. In banking Virgin Money (VUK), trades up 13% today after the London listed stock rose 15%. Virgin reported stronger than expected profits for the year to Sept. 30 and upgraded its outlook on Monday, saying it expects its net interest margin to expand in the medium term. Virgin Money’s Slyce, a buy-now-pay-later product that launched earlier this year, had a waitlist of about 40,000. So optimism is in the air the business could be turning around.
In AsiaHong Kong’s Hang Seng and China’s CSI300 are likely to have a negative day of trade, with according to the futures with investor worried more lockdown downs will rattle markets
In commodities Oil is a focus
Oil is again in focus after the WSJ reported OPEC+ is considering rising output by 500,000 barrels ahead of the EU's Russian oil embargo. Later Saudi Arabia denied the allegations and oil price recouped some of its losses. At once stage, brent briefly flipped into contango , after dropping more than 6.1% to below $85 for the first time since September and WTI touched $75/barrel. Demand concerns are picking up again with Covid cases rising in China and stronger US dollar also weighting.
In FX markets
The focus is on the commodity currency, the Aussie dollar, which has slumped back to 66.05 US on concerns that China will announce more lockdowns which may see demand for the AUD slide. We are also watching the AUDNZD – given the NBNZ is expected to hike rates by 0.75% tomorrow and the RBA can’t hike as much- this theoretically supports downside for the currency pair.
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.