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
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).
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.
A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.
Steen Jakobsen,
Chief Investment Officer
As globalisation turns to fragmentation, China seems set on playing a role in the global economy, while simultaneously working towards proofing its own economic situation from external shocks and crises.
Redmond Wong,
Market Strategist
The recent bank runs and ensuing challenges are reminicent of something we've seen before. Will it end like the S&L crises of 1986 and 1995?
Chris Dembik,
Head of Macroeconomic Research
Equity markets need to recalibrate to another - fragmented - global world. What's your view on equities in this market - are they going up or down?
Peter Garnry,
Head of Equity Strategy
With every development comes new opportunites, some of which could be in India. Have you considered the country as a part of your diversification strategy?
Charu Chanana,
Market Strategist
A collar is an option strategy that allows some protection while maintaining some upside potential. What investment would you like to use a collar strategy for?
Hans Oudshoorn,
Trainer Academy
There are arguments to be made for many commodities to have upside. Which are you paying the most attention to this quarter?
Ole S. Hansen,
Head of Commodity Strategy
In a very challenging macro environment, which currencies do you think will come out on top?
John J. Hardy,
Head of FX Strategy