Video: November inflation ahead could have slowed, but pressure on energy markets picks up amid deep chill
Equities

Video: November inflation ahead could have slowed, but pressure on energy markets picks up amid deep chill

Jessica Amir
Market Strategist

Summary:  In today's video: Natural gas futures surge, Oil rose 3% $73.17 a barrel, and coal futures lift, as weather forecasts show a deep chill is descending on the northern hemisphere and threatening to erode heating fuel stockpiles. This means investors and traders will likely turn back their attention to oil, gas and coal companies that could benefit from rising demand, with the UK putting coal power stations on notice to start up, should they run out of power. We cover the companies to watch. Plus, amid the cold snap in the US and EU, wheat and beef supply is being questioned.

December 13  2022

Markets await US inflation, the Fed Meeting; but the major indices Nasdaq 100 & S&P 500  rally on hopes inflation has slowed

Ahead of US inflation, reports showed inflation expectations have fallen, as such this optimism flowed to markets; pushing bond yields down and equites up. The S&P500 (US500.I) moved up of its 100-day moving average, rising 1.4% (which is its best gain in two weeks). While the Nasdaq 100 (USNAS100.I) jumped 1.2%, closing at the high of the day, which is a sign there are more buyers than sellers. Still inflationary proof will be in the pudding; with the data to be released later. CPI is expected to have fallen to 7.3% YoY in November as down from 7.7% YoY. We will be watching if core inflation (ex-volatile items such as food and energy) falls from 6.3% YoY to 6.1% YoY as expected. The risk is if inflation doesn’t fall as forecast, then bond yields may likely rise, and pressure equites lower. Consider, over the past six months the S&P 500 has fallen or gained 3% on average, on the day CPI has been released, and fallen on seven of the 11 CPI reporting days this year. Also consider a subdued CPI print could justify the Federal Reserve’s projected half-point move on Wednesday and shed light on whether markets can potentially expect rate cuts in late 2023 as the market projects (which is contrary to Saxo’s belief – we don’t believe rates will be cut next year). 

Focus is on energy companies amid the cold snap in the northern hemisphere, coal plants on standby. Agriculture commodities also a focus

Australia’s ASX200 (ASXSP200.1) is expected to have a positive day of trade on Tuesday, as well as Japan’s market, while other Asia futures are lower. In Australia consumer confidence improved, while business confidence declined. In equites, a focus is on energy commodities, given weather forecasts show a deep chill is descending on the northern hemisphere, and threatening to erode heating fuel stockpiles. Natural gas futures surged, while Oil rose 3% $73.17 a barrel. Energy stocks to watch include Australia’s Woodside, Beach Energy and Santos, Japan’s Japan Petroleum Exploration, Eneos, JGC, Chiyoda and Hong Kong-listed PetroChina, CNOOC and China Oilfield Services. Separately, coal futures are also higher, with Asia set to face a coal winter, and coal plants on high alert in the UK, with snow blanketing parts of the UK. For coal stock to watch, click here. Separately, wheat prices rose 2.8% on expectations supply could wane; so keep an eye on Australia’s wheat producers GrainCorp, and Elders. Elsewhere, Australian beef output is poised to ramp up in the first half of next year, as the heard continues to rebuild. Australia’s Rural Bank agriculture outlook expects increased slaughter rates, and beef production to rise 5% in the first half, (mind you that’s well below average). So keep an eye on Elders, which helps sell and buy livestock, and Australian Agricultural Co – Australia’s largest integrated cattle and beef producer.

EV car makers dominate headlines, revving up competition, despite concerns demand could soften

Tesla shares fell 6.3% Monday, to its lowest level since November 2020, making it the worst performer by market cap. TSLA shares have fallen about 54% this year. TSLA is reportedly suspending output at its Shanghai electric car factory in stages, from the end of the month, until as long as early January, amid production line upgrades, slowing consumer demand and Lunar New Year holidays. Most workers on both the Model Y and Model 3 assembly lines won’t be required in the last week of December. Rivian shares also fell 6.2% on reports its scrapping plans to make electric vans in Europe with Mercedes. Instead Rivian will focus on its own products. While Mercedes-Benz says it will continue to pursue the electrification of its vans and its shares closed almost flat in Europe. VW shares were also lower in Europe, despite it announcing plans to increase market share in North America to 10% by 2030 from 4%. VW wants to produce more electric SUV models in the US; and produce ~90,000 VW’s ID.4 model in 2023 in America.

For a weekly look at what to watch in markets - tune into our Spotlight.

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

 

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.