Investingblog (2024)

13/12/2022

European stocks largely flat ahead of crucial U.S. CPI Release
European stock markets traded largely unchanged Tuesday in tight ranges ahead of the release of crucial U.S. inflation data later in the session which could set the tone for the rest of the year.

At 03:50 ET (08:50 GMT), the DAX index in Germany traded 0.1% higher, the FTSE 100 in the U.K. climbed 0.1%, while CAC 40 in France traded down 0.1%.

Global stock markets are largely in a holding pattern ahead of the U.S. consumer price index for November, which is expected to show a moderation in the annual pace, to 7.3% from 7.7% the prior month, while the core inflation remains steady at 0.3% month-on-month.

Investors generally remain very wary about the risks of further increases in borrowing costs hurting economies, and signs of inflation remaining at elevated levels could prevent the Federal Reserve from beginning to slow its aggressive rate rises when it concludes its latest policy-setting meeting on Wednesday.

Back in Europe, the U.K. claimant count increased by 30,500 in November, while the October unemployment rate rose to 3.7%, from 3.6% the prior month, as the country’s labor market began to feel the repercussions of the slowdown in consumer spending.

Additionally, U.K. wages rose faster in October than at any time on record, rising 6.1% on the year, providing more justification for the Bank of England to increase interest rates again when it meets on Thursday.

The final reading of the headline annual German CPI figure came in at 10.0% for November, down from 10.4% the prior month.

Investors will also focus on the German ZEW economic sentiment survey, which is expected to show a slight improvement in confidence in the Eurozone's biggest economy, ahead of Thursday's meeting of the European Central Bank.

In corporate news, InterContinental Hotels Group (LON:IHG) stock rose 0.2% after the owner of the Holiday Inn chain announced Michael Glover, the finance chief of its Americas division and group head of commercial finance, will be promoted to the role of chief financial officer.

Chemring (LON:CHG) stock fell 0.8% despite the U.K. defense firm reporting a rise in profits while maintaining its guidance for the current year, saying Russia’s invasion of Ukraine is having a “profound impact” on defense spending and priorities.

Crude oil prices have extended the previous session’s gains on continued concerns about tightening supply as the Keystone pipeline between the U.S. and Canada remained closed.

Keystone has remained shut since a massive leak in the U.S. state of Kansas was reported on Dec. 7, preventing around 620,000 barrels-per-day of Canadian crude from entering the United States, the largest consumer in the world.

The pipeline closure is likely to be reflected in the latest U.S. crude inventories, with the latest numbers from the industry body American Petroleum Institute due later Tuesday ahead of the official data from the Energy Information Administration on Wednesday.

Comments from China’s ambassador to the U.S. late Monday that his country will continue to relax its strict COVID-19 measures have also helped the tone.

By 03:55 ET, U.S. crude futures traded 1.3% higher at $74.14 a barrel, while the Brent contract rose 1.6% to $79.20. Both benchmarks settled up more than 2% in the previous session.

Additionally, gold futures rose 0.2% to $1,796.55/oz, while EUR/USD traded 0.1% higher at 1.0541.

09/12/2022

Asian stocks rebound ahead of U.S. PPI, Hong Kong outperforms
Most Asian stock markets rebounded from recent losses on Friday ahead of key U.S. inflation data, although fears of a global recession and rising interest rates put most regional bourses on course for weekly losses.
Hong Kong’s Hang Seng index was the best performer for the day, rising 1.7% amid growing bets that the city’s government will follow Beijing in scaling back anti-COVID measures.
The Hang Seng also vastly outperformed its Asian peers for a second consecutive week, rallying nearly 6%.
China’s blue-chip Shanghai Shenzhen CSI 300 index rose 0.2%, and was also set to end the week 2.6% higher, while the Shanghai Composite added 1.4% this week as China scaled back several COVID-related movement curbs and testing mandates.
The move ramped up hopes over a broader reopening in the world’s second-largest economy, as it faces increasing public unrest and worsening economic conditions.
But recent economic readings show that the country has a long road to recovery. Chinese inflation shrank further in November, as overall business activity contracted.
Other Asian bourses rose. Japan’s Nikkei 225 index added 1.2%, while the Taiwan Weighted index and South Korea’s KOSPI rose 1% and 0.5%, respectively.
Focus now turns to upcoming U.S. inflation data, which is expected to shed more light on the potential path of monetary policy.
The U.S. producer price index due later on Friday is expected to show that manufacturing inflation eased further in November. The reading is also likely to herald a similar trend in the consumer price index, which is due next week.
But markets are wary of any signs of inflation remaining sticky, which could invite more hawkish moves by the Federal Reserve. While the central bank is expected to hike rates by a relatively smaller 50 basis points next week, it has warned that rate hikes could continue for longer than expected in the face of stubborn inflation.
Such a scenario is negative for Asian stocks, which were battered by rising interest rates this year.
Technology-heavy bourses in Asia were the worst performers this week, as the sector was battered by warnings of a potential U.S. recession in 2023. The KOSPI and Taiwan Weighted indexes shed nearly 2% each this week.
Indian stocks were flat on Friday, with the Nifty 50 and BSE Sensex 30 indexes set for muted weekly performances as the Reserve Bank hiked interest rates and flagged more measures to combat high inflation.

25/11/2022

Germany's Q3 GDP growth revised higher
Germany's economy grew by a shade more than initially thought in the third quarter, according to revised data published Friday.

Federal Statistics Office Destatis said gross domestic product expanded by 0.4%, rather than the 0.3% reported in its first reading. That left GDP up 1.2% from a year earlier, rather than the 1.1% in the first reading.

That is still a sharp slowdown from 1.7% in the second quarter, when the economy still had momentum from its post-pandemic reopening. Analysts still expect Europe's largest economy to slide into recession next year, as the lagged effect of this year's energy price shock hits businesses and consumers alike.

Growth was essentially driven by the release of pent-up demand for travel in the first Covid-free summer since 2019. Private consumption rose 1.0% from the second quarter. Additionally, the easing of supply chain bottlenecks allowed investment in equipment to rise 2.7%. By contrast, construction was a drag on output, and a 2.0% rise in exports was outweighed by a bigger rise in imports, chiefly due to the surge in oil and gas prices.

Separately, market research firm GfK said German consumer confidence posted a second straight improvement for December, but the rise in its consumer climate index was smaller than expected and it remains close to an all-time low at 40.2. While consumers' expectations for the economy remained bleak, assessments of individual circumstances improved, helped by signs that this year's round of collective wage agreements will be relatively generous. A benchmark wage deal in the engineering industry in southwest Germany last week agreed an 8.5% pay raise over two years, along with a one-off payment of €3,000 (€1=$1.0414).

GfK said that the sharp decline in confidence appears to be bottoming out as the German government's measures to cap energy prices through the coming winter take shape. Berlin agreed draft legislation on a 'gas price brake' earlier this week that will limit further increases in retail prices, although it will only take effect retroactively as the country emerges from winter.

"Consumers are obviously assuming that the agreed measures to cap energy prices can contribute to reducing inflation, even if this is only a modest contribution," GfK analyst Rolf Buerkl said.

25/11/2022

Analysis-Out of fashion: Gucci faces daunting task to replace top designer
PARIS (Reuters) - The abrupt departure from Gucci of Alessandro Michele, the flamboyant designer who was a favourite of Harry Styles and Lady Gaga, increases pressure on owner Kering (EPA:PRTP) as it faces slowing revenue growth at the Italian fashion house.

News of the creative director's exit after seven years comes as Kering is seeking to reinvigorate the label, which accounted for two thirds of the parent company's profits last year, and ahead of the lucrative holiday shopping season.

Tensions had been high between the designer and company management, sources told Reuters.

Announcing his departure on Wednesday, Michele referred to "different perspectives each one of us may have."

Kering chairman and CEO François-Henri Pinault lauded the designer's tenure as "an outstanding moment" in Gucci's history. He did not name a successor.

Without an obvious replacement, analysts said Michele's exit created a vacuum the label needs to fill fast.

"This raises a few question marks in our view on the ex*****on and evolution of the brand in the coming months, leaving further uncertainty around the timing of the acceleration of the brand's momentum," JP Morgan analyst Chiara Battistini said in a research note on Thursday.

Michele's departure is "more than just the exit of one of the most iconic designers of the last decade," said analysts at Jefferies, who pointed to a likely "deeper rethink" of the label at Kering.

"The next step is necessarily more complicated now," they added.

Shares in Kering, worth more than 66 billion euros, have lagged rivals in recent years. They have lost a quarter of their value this year.

Graphic: Gucci shares fall out of fashion - https://fingfx.thomsonreuters.com/gfx/mkt/zdpxdokqopx/gucci.PNG

FURRY LOAFERS

Michele, who turned 50 on Friday, reinvigorated the brand with his eccentric, gender-fluid styles popular with younger shoppers.

Early hits were fur-lined loafers, embellished with the label's signature horse bit, that fetched over $1,000 and the Dionysus handbag, with a chain strap and double tiger heads, starting at around $900 for mini sizes.

After his promotion from designing accessories in 2015, he helped fuel profits, which grew four-fold by 2019 as revenue soared to nearly 10 billion euros from under 4 billion.

In recent years, growth has slowed while rivals like Dior and Louis Vuitton, owned by rival luxury group LVMH, have shot ahead.

Third-quarter sales at LVMH's fashion and leather goods division rose 22% while Gucci grew by 9%, less than the market had expected, and which some analysts attributed to fading appetite for the designer's styles.

They have questioned the mid-term target for annual sales of 15 billion euros, set in June.

The brand has also suffered from COVID-19 lockdowns in China where it has an extensive store network and higher exposure compared with other heavyweights.

China generates around 35% of Gucci's annual sales, according to Barclays (LON:BARC) estimates, compared to 27% for LVMH's fashion and leather goods division and 26% for Hermes.

MOVE QUICKLY

Time is not on the iconic label's side.

While making such a radical change is positive, "it could take around a year to see the results of any aesthetic shift", said UBS, citing design and production lead times.

Industry observers say there is a large pool of potential creative directors, ranging from big-name designers to relative unknowns who could be tapped from the inside like Michele was.

A new director could give the brand an entirely new direction with a "tabula rasa" approach, as Demna Gvasalia did at Balenciaga, or build on a previous designer's direction like Anthony Vaccarello, who followed Hedi Slimane at Saint Laurent, said Serge Carreira, head of emerging brands at the French fashion federation FHCM.

"You could also stick with the status quo for a spell and take a break for a year or so," he said. The existing team could keep designing collections, just as the men's team at Louis Vuitton has, following the death of designer Virgil Abloh last year.

But given the strength of Michele's aesthetic and brand identity, a change in positioning could mean more of a "revolution than an evolution", said JP Morgan's Battistini.

"This, in our view, could mean a period of relative disruption, both operationally and financially, that could further put the re-rating story of Kering on hold for now," said Battistini.

($1 = 60.3500 roubles)

22/11/2022

Russia cuts flows on last gas pipeline to Europe

By Geoffrey Smith

European gas prices rose again on Tuesday after Russian gas monopoly Gazprom (MCX:GAZP) said it will cut transit supplies through Ukraine from next week.

Gazprom said the measure was a response to Ukraine failing to transport gas shipments to Moldova, by most measures the poorest country in Europe.

The pipeline that passes through Moldova and Romania en route to Bulgaria is the only one still carrying meaningful volumes of gas to European Union countries, since Gazprom suspended shipments through the Nord Stream 1 pipeline and through its trunk pipeline to Slovakia earlier this year. While it doesn't yet represent a full shut-off of all shipments, it is consistent with widespread expectations in Brussels and other European capitals that Russia - which was the EU's biggest supplier before it invaded Ukraine in February - will not supply any natural gas to the bloc this winter.

Gazprom and Ukraine have a long history of disputes over transit shipments, after years of illegal siphoning by Ukrainian companies in the 1990s that was initially tolerated by Moscow as a price for keeping influence in its neighbor. From 2005, however, when the country first voted to move significantly toward the EU, Russia has taken a stricter approach.

In all, Gazprom said, over 52 million cubic meters of gas destined for Moldova are currently trapped in Ukraine, over a full day's supplies to Moldova.

Moldovan President Maia Sandu told delegates at a conference in Paris on Monday that her country, which is in the early stages of a process to join the EU, faces "an acute energy crisis" that could "jeopardize our social peace and security."

Benchmark prices for northwest Europe were little changed by Gazprom's announcement, which will hardly change Europe's overall gas balance in the near term. By 07:55 ET (12:55 GMT), the front-month Dutch TTF contract was up 1.2% at €117.5 a megawatt-hour.

22/11/2022

Best Buy, Abercrombie, Urban Outfitters rise premarket; Dollar Tree, Zoom fall
By Peter Nurse

Investing.com -- Stocks in focus in premarket trade on Tuesday, November 22nd. Please refresh for updates.

Best Buy (NYSE:BBY) stock soared 7.3% after the retailer forecast a smaller-than-expected drop in annual sales ahead of the holiday season, as steep discounts help soften the blow to electronics demand.

Dollar Tree (NASDAQ:DLTR) stock fell 2.4% after the discount store operator said it expects full-year profit to be in the lower half of its range, even as it raised its annual sales forecast.
Zoom (NASDAQ:ZM) stock slumped 9.1% after the video-conferencing platform lowered its annual revenue forecast, expecting a hit from declining online business.

Abercrombie & Fitch (NYSE:ANF) stock rose 15% after the clothing retailer forecast fourth-quarter sales above expectations, saying it was "cautiously optimistic" ahead of the holiday season.
Urban Outfitters (NASDAQ:URBN) stock rose 2.4% after the clothing retailer beat expectations for its revenue in the third quarter, while CEO Richard Hayne said he was "encouraged" by current quarter sales ahead of the Black Friday weekend.

Dell Technologies (NYSE:DELL) stock fell 1.1% after the computer manufacturer provided a cautious outlook for current quarter sales, even after posting a 68% rise in quarterly operating profit on strong demand for servers and network equipment cushioned weak PC sales.

Walgreens Boots (NASDAQ:WBA) stock rose 1.7% after Cowen upgraded the pharmacy store chain to 'outperform' from 'market perform', saying it can rally more than 30% as it grows its health care business.

Carvana (NYSE:CVNA) stock fell 1.1% after Cowen downgraded its stance on the used car retailer to 'market perform' from 'outperform', citing a "lengthened" path to profitability.

Agilent (NYSE:A) stock rose 4% after the consumer electronic company beat quarterly earnings expectations, helped by growth in its core business.

21/11/2022

China's COVID woes keep European stocks under pressure
(Reuters) - European shares slipped on Monday, with economically sensitive sectors like mining and industrials leading the losses on worries about the impact of surging COVID-19 cases in China.

The pan-European STOXX 600 slipped 0.1% after the index marked its fifth straight weekly gain on Friday.

Asian stocks closed sharply lower on Monday as investors fretted about the economic fallout from fresh COVID-19 restrictions in China, with Beijing's most populous district urging residents to stay at home as COVID-19 cases rose.

"The worsening situation is coming at a time of fears of flu outbreaks, which is putting fresh pressure on commodity stocks, with mining companies feeling more pain in trading today," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Mining, travel & leisure, and industrial goods and services fell between 0.5% and 1.1%, leading losses among European sectors.

Defensive sectors such as healthcare and utilities, which are typically preferred during times of economic uncertainty, rose and helped limit broader market losses.

The benchmark STOXX 600 has recovered nearly 13% since hitting this year's trough in September on better-than-expected earnings reports and hopes that the U.S. Federal Reserve will shift to smaller rate hikes.

While comments from European Central Bank officials were mixed last week, ECB chief economist Philip Lane told Market News on Monday that the central bank will raise rates again in December but the case for another 75 basis point move has diminished.

"Although the pace and size of hikes are expected to slow, the prospect that higher rates will linger for longer than hoped is adding to recession worries," added Streeter.

Data released earlier showed German producer prices fell unexpectedly on the month in October, primarily due to a dip in prices for electricity and distributed natural gas.

Julius Baer edged higher 0.5% as the bank said it was on track to reach its 2022 profitability targets despite "challenging market" conditions taking a big bite out of its assets under management.

HelloFresh rose 0.7% after Goldman Sachs (NYSE:GS) started coverage on the German meal-kit maker with "buy" rating, citing proven profitability and cash generation potential.

In UK, Virgin Money (LON:VM) surged 11.6% after the lender reported a jump in full-year profit and investor payouts.

Vallourec tumbled 9.0% even as the French steel pipemaker reported a 55% jump in quarterly core profit.

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