Commodity Prices – RR Reading http://rrreading.com/ Tue, 27 Sep 2022 16:36:40 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://rrreading.com/wp-content/uploads/2021/03/rrrreading-icon-70x70.png Commodity Prices – RR Reading http://rrreading.com/ 32 32 Lumber prices fall to new 2022 low as mortgage rates approach 7% https://rrreading.com/lumber-prices-fall-to-new-2022-low-as-mortgage-rates-approach-7/ Tue, 27 Sep 2022 16:22:37 +0000 https://rrreading.com/lumber-prices-fall-to-new-2022-low-as-mortgage-rates-approach-7/
  • Lumber fell 20% in a four-day period ending Monday, hitting a 2022 low.
  • The essential construction asset was rattled by soaring mortgage rates and a slowing housing market.
  • The average 30-year fixed mortgage rate has come closer to 7%, according to Mortgage News Daily.

Soaring mortgage rates and a slowing housing market continue to weigh on timber prices, with the essential construction product hitting a new low in 2022 on Monday.

Lumber futures hit a low of $413 per thousand board feet on Monday, down 64% year-to-date and down 76% from its record reached in May 2021. Product fell 20% in a four-day period. losing streak, which ended on Monday. On Tuesday, lumber prices rebounded 8% to $442 per thousand board feet.

The continued decline in lumber prices is primarily attributable to a slowdown in the housing market, which has been hit hard by the Federal Reserve’s rapid and aggressive interest rate hikes.

Just a week after the Fed raised interest rates an additional 75 basis points at its FOMC meeting, the average 30-year fixed mortgage rate has moved closer to 7%. According to the Mortgage News Daily Rate Index, the popular 30-year fixed rate hit 6.87%, a far cry from just a year ago, when the average rate was just over 3%.

Soaring mortgage rates over the past year have resulted in a continued decline in sales of existing and new homes, as well as a decline in the median selling price of homes.

According to the S&P CoreLogic Case-Shiller Index, home price growth slowed by a record amount in July, representing a four-month deceleration. The Case-Shiller index jumped 15.8% in July, down more than two percentage points from June’s reading of 18%.

“Although U.S. home prices remain well above their levels of a year ago, the July report reflects a sharp deceleration,” said Craig Lazzara, chief executive of S&P DJI.

With house prices still higher than they were a year ago, the sharp slowdown in July suggests that the housing market will be even more painful, which could put additional pressure on lumber prices.

Homebuilders like Lennar and KB Home are already moving away from residential land deals due to the deteriorating housing market outlook. In their last quarter, Lennar said they canceled contracts to purchase 10,000 lots, while KB Homes dropped 8,800 lots.

“The timber market continues to be in a general state of unease as buyers anticipate lower overall demand in the future. Many yards are trying to reduce their inventories to minimum levels and really have no fear of a price increase,” said Steve, director of risk management at Sherwood Lumber. Loebner told Insider last week.

While lumber prices could see a significant rebound from their steep one-year decline, it will likely take a significant rebound in homebuilding activity due to lower mortgage rates. But until that happens, it’s not hard to see lumber prices trading in the pre-pandemic $200-$600 range.

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Weakening rupiah makes importing crude oil and other raw materials expensive https://rrreading.com/weakening-rupiah-makes-importing-crude-oil-and-other-raw-materials-expensive/ Sun, 25 Sep 2022 11:55:16 +0000 https://rrreading.com/weakening-rupiah-makes-importing-crude-oil-and-other-raw-materials-expensive/

On Friday, the value of the rupee depreciated 30 paise to close at a new all-time low of 81.09 against the US dollar, while it fell 83 paise on Thursday, which was its biggest loss ever. one day in about seven months. Following this, the value of the Rupee closed at 80.79.

Experts and economists say the global value of currencies depreciated as the war in Ukraine drove up commodity prices, which also led to big rate hikes by the US Fed.

The pressure on the domestic currency, mainly due to repeated hikes in interest rates by the US Fed, should continue with the increase in the trade deficit and the gradual withdrawal of funds from institutional investors.

Read also : Indian rupee ‘has held up very well’ against US dollar amid global currency swings: Nirmala Sitharaman

The Reserve Bank, which is due to announce its bi-weekly monetary policy later this week, is expected to raise the repo rate or short-term lending rates by 50 basis points in a bid to rein in inflationary pressure.

For a country that depends 85% on imports to meet its oil needs and 50% for its gas needs, a weakening of the rupee affects the domestic price of fuel.

Read also : Markets week ahead: Can RBI policy give bears a break? 50 bps rate hike on cards

India’s trade deficit more than doubled to $27.98 billion in August due to increased crude oil imports. Imports of “petroleum, crude and derived products” amounted to $17.7 billion in August this year, an annual increase of 87.44%.

Read also : RBI expected to raise repo rates for fourth time to stifle inflation on September 30: experts

India’s forex pool continued its southerly journey, with overall reserves declining by $5.219 billion to $545.652 billion for the week ended September 16. Reserves, which fell as the central bank deploys the kitty to defend the rupee amid pressure from global developments, had fallen by $2.23 billion to $550.87 billion the previous week.

In a report, the SBI said global commodity prices remained volatile after falling in June from all-time highs. Prices rose slightly in late July-early August, before moderating towards the end of the month, mainly on concerns about slowing demand.

Crude oil prices are trading well below $100 a barrel with heightened volatility on expectations of an impending slowdown in global demand, he said.

“A depreciation of the INR will partly offset the benefits of lower commodity prices on inflation,” said Aditi Nayar, Chief Economist, ICRA.

The executive director of the Solvent Extractors Association of India, BV Mehta, said the cost of imported edible oils would rise. The country imports about 13 million tons of edible oils every year. “Ultimately, this will trickle down to consumers. However, the only bright side is India’s oilseed sector exports…Rupee depreciation will boost export realization and support exports “, did he declare.

Vegetable oil imports amounted to USD 1.89 billion in August 2022, up 41.55% from the same month last year.

According to the SBI report, no central bank can prevent the currency from depreciating currently and the RBI can allow the rupee to depreciate for a limited period. The RBI’s foreign currency holdings have shrunk by $75 billion since the war in Ukraine to protect the rupee, he said, adding that this has led to a reduction in import cover of nine months, which is at the bottom of the scale.

“It is also true that once the currency stabilizes at a lower level, currency appreciation accelerates at a dramatic pace, this is a distinct possibility given India’s strong fundamentals. “, says the report.

Moreover, much of the rupiah’s weakness is due to a strong dollar and not our domestic economic fundamentals, he said.

Madan Sabnavis, Chief Economist, Bank of Baroda was of the view that the RBI’s Monetary Policy Committee (MPC) will have a unique issue to discuss when it meets next week for monetary policy.

The recent downward movement of the rupiah following the Fed announcement has made the rupiah one of the most unsatisfactory currencies based on the response to the strengthening dollar in the global market, he said. .

“This coin will also be actively discussed in the deliberations, because when deciding on interest rates, the monetary part of the story cannot be left out,” he said.

Dilip Parmar, Research Analyst, HDFC Securities, said the Indian rupee marked the biggest weekly decline after April 2021 amid a stronger dollar index and risky mood.

“There seems to be no turning back for the dollar as it hit a new two-decade high and in turn pushed the rupiah to an all-time high,” Parmar added.

The 38th meeting of the Monetary Policy Committee, constituted under the Reserve Bank of India Act, will be held from September 28-30.

The rupee fell 30 paise to close at a new all-time low of 81.09 against the US dollar on Friday, weighed down by a strong US currency overseas and risky sentiment among investors.

In the interbank foreign exchange market, the local currency broke through the 81 mark for the first time and fell to 81.23 against the US currency. It finally closed at 81.09.

(With PTI entries)

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]]> The impact of rising interest rates on commodities https://rrreading.com/the-impact-of-rising-interest-rates-on-commodities/ Fri, 23 Sep 2022 16:01:14 +0000 https://rrreading.com/the-impact-of-rising-interest-rates-on-commodities/

The Federal Reserve has been raising interest rates for several months. The same is true for many other countries around the world. The reasoning is that higher interest rates will curb inflation. Inflation usually occurs when too many dollars are chasing goods and services, there is a shortage of supply, or both.

The backdrop to the inflation story is that in 2020, when the world virtually went dormant from a supply creation perspective, savings grew at a faster rate than at any time. another moment in history. Add to that labor shortages as workers stayed home and the backlog of supplies (lack of new supplies being made) drove up the prices of products, especially those that needed to be delivered across the oceans. It was a near perfect storm for more available dollars chasing less goods.

Initially, the banking system and the administration viewed the situation as transitional and temporary, assuming a rapid rebound from the pandemic. Unfortunately, this view was probably too passive, as it took much longer for the offer to bounce back. Labor was scarce and continued Covid lockdowns prolonged the lack of availability of overseas goods and services. Rising wages and salaries with dollars being pent up in search of goods and services has put upward pressure on prices, with an annualized rate of inflation not seen since the early 1980s.

The Federal Reserve’s reaction has been slow in coming and is now aggressive, raising interest rates on borrowed money to slow the economy. The Federal Reserve is now walking a tightrope of raising rates too fast (which could send the economy into a recession) or not acting fast enough (allowing inflation to climb at a historically rapid rate) .

The implications are many, but the two most glaring are: 1) it will cost more to borrow money, and 2) rising interest rates in the United States imply that the US dollar will continue to rise, making goods (especially agricultural products) more expensive for importing countries. For American farmers, this means a sharper awareness and pencil when making marketing decisions.

Suggestions are to watch base, carry and price. With the harvest this fall, many will store. Storage is an alternative that saves you time to make marketing decisions later. Storage is expected to provide a better base and higher deferred price. Still, due to tight supply in some regions, the base might be stronger than usual. The current futures market offers little to no carry (reward for storage) until July. It might suggest you rethink your storage decisions. If the basis is better than usual and there is no carry, and you want to retain ownership, consider selling spot and buying futures. This is a very simple example that does not encompass all potential variables. Have an in-depth conversation with your advisor and weigh the merits of specific strategies.

For most farmers, the challenges of inflation and a rising dollar are variables they haven’t had to consider for decades. Yet these challenges are not new. Before you start harvesting full steam ahead, take a few minutes to think about the impact higher interest rates and inflation could have on your farm. Have meaningful conversations with those who can give you advice to help you navigate these waters. As the old saying goes, “pre-planning prevents poor performance”.

If you have any questions about this view, please don’t hesitate to contact Bryan Doherty of Total Farm Marketing: 800-334-9779.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial situation. Past performance is not necessarily indicative of future results.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the grain belt, Bryan Doherty is deeply passionate about his customers, their success and their successful long-term relationships. As Senior Market Advisor and Vice President of Brokerage Solutions, Doherty lives and breathes agricultural marketing. He has a deep understanding of tools and markets, listens and communicates with intention and clarity to ensure clients are comfortable with decisions.

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AfDB cuts India’s growth forecast amid gloomy Asia https://rrreading.com/afdb-cuts-indias-growth-forecast-amid-gloomy-asia/ Wed, 21 Sep 2022 21:20:35 +0000 https://rrreading.com/afdb-cuts-indias-growth-forecast-amid-gloomy-asia/

BENGALURU/NEW DELHI: The Asian Development Bank on Wednesday lowered its growth forecast for India for 2022-23 to 7% from 7.2% estimated in July, given higher than expected inflation and a monetary tightening. He also lowered India’s growth estimate for 2023-2024 to 7.2% from 7.8%.

He said high oil and commodity prices and high inflation will likely require continued tightening of monetary policy to ensure inflation expectations do not take root, “which would likely hamper economic growth in the short term. term”.

The Manila-based multilateral funding agency forecasts India’s inflation of 6.7% for FY23 and 5.8% for next year. He pointed out that demand pressures resulting from stronger economic activity are alleviated by alleviating supply bottlenecks.

“GDP growth is revised down from the ADO 2022 forecast to 7.0% for FY2022 and 7.2% for FY2023 as pricing pressures are expected to impact negative on domestic consumption, and sluggish global demand and high oil prices are likely to be a drag on net exports,” ADB said in the 2022 Asia Development Outlook Update.

He said inflation proved more persistent than expected and led to a sharp tightening of monetary policy. “Inflation projections are revised upwards over the forecast horizon. Due to the less than favorable global environment, the current account deficit forecast for both fiscal years is also raised,” he added.

Retail price inflation in India has hit a record high of 7%, remaining above the Reserve Bank of India’s 6% upper tolerance limit for eight consecutive months now, mainly due to rising food prices and pressures from rising world oil and commodity prices.

“These developments indicate that while rising global oil and commodity prices and supply constraints following the Russian invasion of Ukraine fueled inflation, domestic factors, such as heat waves and heavy rains, have a major impact on inflation,” he said.

The report highlights that slowing global growth and high oil prices will hurt India’s export prospects in 2022-23. He added that imports are expected to grow faster due to rising domestic demand and remittances could fall as global income weakens, despite the depreciation of the rupee.

“Weaker-than-expected global demand over the next two years will also have a negative impact on exports and growth, despite the structural reforms undertaken by the government,” he said.

The Reserve Bank of India’s rate-setting panel raised the repo rate by 50 basis points for the third consecutive time in August, bringing the key rate back to pre-pandemic levels of 5.4%.

“Given that economic activity remains below pre-pandemic trend levels and that inflation is largely driven by supply-side factors, the hike was primarily aimed at anchoring inflation expectations and reducing inflation expectations. capital outflows following US monetary tightening,” the outlook report said.

He estimated that India’s current account deficit would widen to 3.8% of GDP in 2022-23 from 1.2% of GDP last year and narrow to 2.1% in 2023-24.

The report notes that private consumption will be affected by higher inflation which will erode consumers’ purchasing power, even if consumer confidence continues to improve. He also said persistent core inflation will negatively impact spending over the next two years if wages do not adjust. “Subsidized fertilizer and gas, the free food program and excise duty cuts will help offset some of the effects of high inflation on consumers, but the packaged food tax will likely be a burden on consumers. consumers already facing rising inflation,” the report said.

India’s economy grew 13.5% year-on-year in the first quarter of FY2022, reflecting strong services growth that mirrors the pent-up demand released for contact-intensive service sectors as the country returns back to normal after COVID-19.

The multilateral agency also lowered its growth forecast for South Asia to 6.5% for 2022 from 7.0% previously estimated and to 6.5% from 7.4% for 2023, as headwinds from global economy continue to reduce demand and cause supply disruptions. “The outlook reflects the growth pattern in India, which accounts for 80% of the sub-regional economy,” the report said.

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Fastmarkets introduces Fastmarkets NewGen – an expanded suite of essential products for a new generation of energy markets https://rrreading.com/fastmarkets-introduces-fastmarkets-newgen-an-expanded-suite-of-essential-products-for-a-new-generation-of-energy-markets/ Tue, 20 Sep 2022 07:00:00 +0000 https://rrreading.com/fastmarkets-introduces-fastmarkets-newgen-an-expanded-suite-of-essential-products-for-a-new-generation-of-energy-markets/

LONDON, September 20, 2022 /PRNewswire/ — Fastmarkets, the industry’s leading cross-commodity pricing agency, announces the launch of Fastmarkets NewGen, an expanded set of products that provides transparency and clarity for a new generation of energy markets. Fastmarkets NewGen helps market participants and investors better understand the current dynamics and crystallize their vision for these markets over the next decade and beyond.

The critical drive towards sustainability has spawned a new generation of renewable energy and given greater attention to low-carbon raw materials and supply chains. Battery materials and biofuel feedstocks are the critical resources that will enable renewable energy sources to power vehicles and energy storage systems. Low-carbon feedstock grades that leverage recycled materials and clean energy sources are key to reducing the carbon intensity of supply chains.

Fastmarkets NewGen offers a comprehensive portfolio of price data, news, analysis and forecasts, meeting the critical needs of participants and investors in these markets. Fastmarkets NewGen gives context and meaning to current momentum and provides long-term forecasts to navigate the accelerated transition to a new generation of energy markets.

This transition can be seen through the lens of battery makers and automakers who are already under pressure from lithium supply shortfalls. For example, Fastmarkets’ long-term lithium forecast shows that Europe will account for 25% of global lithium demand in 2032 but will only produce 4% of global supply. This regional disconnect affects the policies of European governments, the electrification strategies and revenue streams of automakers, as well as consumer behavior.

“We are seeing a global shift to deal with the impact of climate change and the emergence of a new generation of energy markets that have very different supply chains and price dynamics,” said declared Raju Daswani, CEO of Fastmarkets. “Battery materials and biofuel feedstocks will be as heavily traded and consumed in the future as oil and gas is today. Fastmarkets NewGen will provide market players and investors with the best data and insights to make the right investment and trading decisions and will play an important role in supporting the transition to a more sustainable planet.”

The world is changing at a surprising scale and pace – the global energy market is at the center of this change. Fastmarkets NewGen provides essential transparency and clarity for a new generation of low-carbon energy markets and supply chains to help build a more sustainable world.

ABOUT QUICK MARKETS: Fastmarkets is the industry’s leading pricing information agency (PRA) for global commodities, providing price data, news, analysis and events for the metals and mining, forest products markets , energy and agriculture. Fastmarkets data is essential for clients seeking to understand and forecast dynamic and often opaque markets, enabling trading and risk management. Fastmarkets is a global company with a 130 year history built on trust and deep market knowledge. Its team of over 450 people is spread across global locations, including London, helsinki, Boston, New York, Shanghai, beijing, Singapore, Brussels and Sao Paulo. Fastmarkets is part of Euromoney Institutional Investor PLC (LSE:ERM), a company listed on the London Stock Exchange. Euromoney is a leading international business-to-business information group focused primarily on global commodity markets, banking and asset management.

SOURCE Quick Markets

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Vanguard FTSE Europe ETF: Time to start looking beyond the gloom (NYSEARCA:VGK) https://rrreading.com/vanguard-ftse-europe-etf-time-to-start-looking-beyond-the-gloom-nysearcavgk/ Sun, 18 Sep 2022 06:29:00 +0000 https://rrreading.com/vanguard-ftse-europe-etf-time-to-start-looking-beyond-the-gloom-nysearcavgk/

Imaginima

There has been a tendency to lump together the whole of the European continent and predict worst-case scenarios in the aftermath of the war in Ukraine, rising fuel prices and the fall of the euro following the review of the monetary policy of the ECB. With so much negativity in the price, the Vanguard FTSE Europe ETF (NYSEARCA:VGK) is now available for less than $51, after suffering a nearly 27% year-over-year decline, as seen in the chart below.

Chart
VGK data by YCharts

However, Europe is made up of many countries and regions that have been impacted differently by supply chains and high commodity prices, and this thesis attempts to look beyond the gloom to identify opportunities, while highlighting the risks.

I begin by providing an overview of country exposure.

Diversification at national level

As shown in the table below, in addition to the UK, France and Germany, VGK owns shares of companies located in many other countries such as Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain and Sweden. Interestingly, 15.2% of its assets are dedicated to Switzerland, which includes pharmaceutical companies and financial institutions.

look for

Country level diversification (Avant-garde)

This diversified country-level exposure is in itself diversification and includes a range of value opportunities that fly under the radar as many holdings are currently trading at low prices. This contrasts with the United States, where opportunities are limited as valuations remain above historical averages despite recent stock market declines.

Additionally, despite the majority of countries suffering globally, VGK in blue underperforms both the S&P 500 (in orange) and the Vanguard FTSE All-World ex-US ETF (VEU) in purple . So, from a valuation perspective alone, Europe is far from being a super bubble.

composition

Performance Comparison (Looking for Alpha)

This undervaluation is not normal because despite an unprecedented energy crisis which risks causing a rationing of natural gas for its industries, Europe has some of the most competitive multinationals in the world which can relocate their production to other countries where they operate.

Additionally, VGK seeks to track the performance of the FTSE Developed Europe All Cap Index. However, it is developed markets, and not underdeveloped or developing countries, whose economies must be rescued at the first signs of deterioration in the balance of payments or acute currency devaluations. To this end, many European states have developed the resilience of their economic models, in particular through elaborate social protection systems financed by taxpayers’ money.

Thus, there may be a cap on the energy price spike with higher taxation for oil companies to finance widening national trade deficits. For this question, the Vanguard ETF only has 5.76% exposure to energy companies. In addition, the sharp rise in interest rates by the ECB (European Central Bank) or the Bank of England may lead to economic slowdowns, but this does not mean that there will be a crisis of apocalyptic dimensions, which would suddenly blow up VGK’s holdings. existence.

Participations – Strengths and Weaknesses

As investors will notice, the top ten holdings out of a total of 1,369 are not from Germany or Italy, whose economies have a higher mix of industrialists who are expected to be hit hardest by the rising cost of electricity. ‘energy. Normally, when you think of Germany, you automatically associate the country with car manufacturers.

hold

Assets (Avant-garde)

Well, VGK does not include any of these major German automakers in its top twenty holdings but, on the other hand, owns shares of SAP SE (SAP) as shown above. After some short-term headwinds from its exposure to Russia, this German enterprise software and cloud game should see more sales as its US competitors’ products become more expensive in Europe and other parts of the world. world due to a strong dollar. Along the same lines, VGK includes other companies that stand to benefit from windfall gains in FX, even if a falling Euro or British Pound is bad for inflation.

The ETF also includes the giant Allianz (OTCPK:ALIZF), as well as other insurance companies, such as Zurich Insurance (OTCQX:ZURVY) which are considered to be the beneficiaries of the policy of raising interest rates of the ECB. The reason for this is that in addition to investing, insurance companies also hold policyholders’ money in banks and when interest rates rise, the value of their assets also rises. In fact, the fund devotes around 15% of its assets to financials, including banks like HSBC plc (OTCPK: HBCYF).

Additionally, a sector seen as defensive in tough times is healthcare, which makes up around 15% of VGK’s assets, including big names like Swiss-based Roche AG (OTCQX: RHHBY) and Novartis (NVS). As evidenced by the one-month stock market performance of these two companies, the healthcare sector held up well.

By contrast, the consumer discretionary sector represented here by luxury brand LVMH Moët Hennessy (LVMH) has suffered 9% over the past month, despite revenues up 13% in the second quarter of 2022 year-on-year. . base. There was, however, a slight decline on a sequential basis, instilling doubts in the minds of investors as to whether there might be further difficulties in the second half of the year.

Remaining cautious, industrial operations which constitute 15% of VGK’s total assets are likely to suffer the most, as in addition to suffering from rising energy and material costs, they are likely to face prospects of uncertain demand. This uncertainty appears to have been priced into the 40% decline in Siemens (OTCPK:SIEGY) since the start of 2022.

Discuss prospects

Yet Europe’s largest manufacturing company has yet to capitulate and recently commissioned one of the largest green hydrogen production plants in Germany. In a way, this shows Europe’s commitment to green technologies while the United States is stuck with its oil companies. So Europe is better prepared for global warming while across the Atlantic Ocean many are choosing to keep their heads buried in the sand. This implies that there is a risk that the US federal government will not have enough money to bail out flooded areas or places ravaged by major fires or hurricanes.

However, the future remains uncertain, not only on the old continent but almost everywhere in the world, including in the United States where confidence has now given way to doubt since the Fed must now apply the most drastic after a rise in the CPI. (consumer price index).

Under these circumstances, Europe deserves a fresh look, and peering into the price action, VGK hit a low of $49.97 on the first day of September, coinciding with the Russian cut and the no – resumption of natural gas supplies to Germany. It is currently trading at $50.25 and tested the $50.50 level on July 14. Therefore, $50.25-50.50 appears to be a resistance level.

Also, when the ECB raised rates by 75 basis points, VGK then rose about $2 to $53.51, showing that investors appreciate the fact that the ECB is willing to do what it takes to fight inflation. Additionally, many companies that have cash are fighting back with commodity hedging like Volkswagen (OTCPK:VWAGY) which gained €400m this way.

Therefore, if one sticks to the rhetoric of diversification, not all holding companies are likely to experience the same level of headwinds, namely those based in France. This country is in a unique situation because it was not as dependent on Russian oil as Germany due to the increased number of nuclear power plants and engineers are working very hard to repair older ones before winter. It is therefore much less vulnerable to the war in Ukraine.

Conclude with the justification of the dividend

Therefore, all is not bleak and there are many “pockets of opportunity”. For those who have been long in cash and want to diversify into an income-generating ETF, VGK pays one of the highest yields (at 4.38%) as shown in the chart below.

to note

Dividend grades (www.seekingalpha.com)

Now, one of the reasons yields are so high is VGK’s loss of value. Additionally, the chart above shows that quarterly dividend payouts are not uniform. The reason for this is that, unlike some US counterparts, European companies do not intend to become dividend aristocrats. Instead, when the business is not doing well, they cut the dividend and when conditions improve, they increase the returns. This is why a high dividend does not mean that their business is underwater and they are desperately trying to create a value trap. So the higher dividend payout in July shows that the underlying fund is doing well.

As an alternative to VGK and for those (like me) whose brokers give them access to funds listed in Europe, there is the Lyxor CAC 40 (DR) UCITS ETF for French stocks, the Xtrackers XDAX INCOME ETF for Germany and the Lyxor Core UK EQ ALL CAP DR ETF which provides access to many of the holdings I mentioned above. They also pay good dividends. However, the Vanguard ETF remains cheaper with an expense ratio of just 0.08% and you get all stocks in one basket.

Finally, the Ukraine conflict and high commodity prices all have the hallmarks of a “predictable recession” where investors, as well as the common people, already know in advance many of the pains to come. Therefore, while there may be a further drop in VGK in the event of a “winter recession” in Germany or further difficulties in the UK as the value of the pound declines, I do not foresee a stock market crash of the proportions apocalyptic as is the case during a normal recession.

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Dow drops 300 points as traders fret over FedEx warning, Wall Street heads for big weekly loss https://rrreading.com/dow-drops-300-points-as-traders-fret-over-fedex-warning-wall-street-heads-for-big-weekly-loss/ Fri, 16 Sep 2022 15:57:00 +0000 https://rrreading.com/dow-drops-300-points-as-traders-fret-over-fedex-warning-wall-street-heads-for-big-weekly-loss/

Stocks fell on Friday as Wall Street headed for a big losing week, and traders absorbed a nasty earnings warning from FedEx about the global economy.

The Dow Jones Industrial Average lost 306 points, or 1%. The S&P 500 and the Nasdaq Composite fell 1.2% and 1.6% respectively.

FedEx shares plunged 24% after the shipping company withdrew its full-year guidance and said it would implement cost-cutting initiatives to deal with weak shipping volumes. shipping as the global economy “deteriorated significantly”.

Transportation stocks are generally seen as a leading indicator of the stock market as well as the economy, and FedEx pointed to weakness in Asia as a key reason for its negative outlook. Shares of shipping rivals UPS and XPO Logistics fell 4% and 7%, respectively, and shares of Amazon fell 3%.

FedEx’s announcement comes shortly after a hotter-than-expected inflation report from the United States on Tuesday raised concerns that the Federal Reserve could be forced to trigger a recession to cool prices. This data triggered a drop of more than 1,200 points for the Dow Jones.

“There’s a lot of nervousness about how the global economy may affect the US economy now, as the US economy faces its own set of very serious issues. I think that dynamic is what people woke up,” Callie Cox said. , US investment analyst at eToro.

The three major averages were poised to record their fourth losing week in five as a rally back looks more and more like a bear market bounce. The Dow Jones Industrial Average is down 4.7% this week, while the S&P 500 is down 3.8%. The Nasdaq Composite is down 6.2%, heading for its worst weekly loss since June.

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The threat of a US railroad strike begins to rattle commodity markets https://rrreading.com/the-threat-of-a-us-railroad-strike-begins-to-rattle-commodity-markets/ Wed, 14 Sep 2022 21:13:12 +0000 https://rrreading.com/the-threat-of-a-us-railroad-strike-begins-to-rattle-commodity-markets/

(Bloomberg) – A potentially catastrophic strike by railroad workers across the United States is beginning to scare energy and commodity markets, driving up prices for everything from natural gas to corn being loaded onto barges for delivery.

Bloomberg’s Most Read

Natural gas futures jumped 10% on Wednesday, in part on fears that a prolonged strike could curb deliveries of coal – which generates around 22% of electricity in the United States – and force the electricity producers to become more dependent on an already limited gas supply. The premium for barge-loaded corn to be delivered to the Gulf Coast jumped nearly 5% on speculation that more would move by ship if railcars stopped.

It could get worse. A U.S. railroad strike, the first in more than 30 years, would deal a major blow to commodity markets, further disrupting supplies already ravaged over the past two years by crop losses, production cuts and, more recently, the war in Ukraine. . Goods represent half of all rail freight traffic.

“It’s just one-off risk that is slowly building up in the market,” Eli Rubin, senior energy analyst at EBW AnalyticsGroup, said in an interview.

According to Anton Posner, CEO of Mercury Group, a logistics service provider, a lack of rail transport would further strain the grain barge system, which has already had an “extremely busy” season due to increased exports. in the middle of the war in Ukraine.

“There just aren’t enough barges out there,” Posner said in an interview. “There is too little at the moment to even cope with the current volume, even without a railway strike.”

A shutdown of rail service also threatens to drive up gasoline prices, according to American Fuel & Petrochemical Manufacturers, a trade association. Although the group said some sensitive regional markets could end up with insufficient fuel, individual refiners did not report similar concerns.

Phillips 66, one of the largest U.S. fuel makers, is “monitoring the situation and has contingency plans in place to mitigate the potential impact” at its sites, a spokesperson said by email in answer to questions.

Almost all finished gasoline in the United States is blended with ethanol, which relies heavily on rail transportation. Ethanol in Chicago was little changed a day after prices jumped 5.6% in the biggest gain since December. The price of so-called RINS credits, which refiners must buy to comply with the US renewable fuels mandate when they don’t blend enough biofuel into gasoline, has hit its highest level in nearly a month , reaching a record high.

Meanwhile, a slump in diesel prices may have been partly influenced by the dismantling of fuel hedges by major railroads ahead of an expected decline in their actual consumption, analysts at wholesale fuel distributor TACenergy wrote in a report. note to customers.

Duke Energy Corp., which has utilities in the Carolinas, Florida, Ohio, Kentucky and Indiana, has enough coal stored to handle “limited disruption” and also has contingency plans for limit the impact of a rail strike, according to John Verderame, the company’s vice president of fuels and systems optimization. Its facilities could burn more natural gas or fuel oil and could also transport coal using trucks instead of trains – although it would take around 450 trucks to transport as much coal as a single train.

“A prolonged outage would have reliability implications,” Verderame said in an interview Wednesday.

While the likelihood of a work stoppage is potentially high, the risk of a prolonged strike of more than two days is very low, with Congress needing to act to avoid further impacts, said Morgan Stanley analysts, including Pamela Kaufman, in a note to clients.

Talks between freight rail companies and unions continued on Wednesday under the leadership of Labor Secretary Marty Walsh as the deadline to avert a strike approaches. About 125,000 workers could leave their jobs if a deal is not reached by Friday’s deadline, with talks between the rail companies and unions showing no signs of progress.

“Secretary Walsh continues to lead discussions at the Department of Labor between the railroads and the unions,” a department spokesperson said. “The parties are negotiating in good faith and are committed to staying at the table today.”

(Updates with Duke’s comment in 11th and 12th paragraphs)

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP

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Global inflation pushes millions of Africans back into poverty https://rrreading.com/global-inflation-pushes-millions-of-africans-back-into-poverty/ Tue, 13 Sep 2022 07:09:26 +0000 https://rrreading.com/global-inflation-pushes-millions-of-africans-back-into-poverty/

Jadson Mankwala has been hit so hard by rising prices that he has been reduced to collecting twigs to make firewood, no longer able to afford the small plastic bags of charcoal to sell in the Malawian city of Blantyre.

“I’m having trouble buying energy to cook at home, so I picked up some wood,” says the 39-year-old unemployed man, a few thin branches under his arm.

The conflict in Ukraine, combined with currency depreciations triggered by rising US rates and years of economic mismanagement in the country, has left inflation in Malawi at 25%. The rising cost of staples such as maize, which accounts for nearly half of Malawi’s inflation basket, means there is little money for other items, even sacks of charcoal which are only worth 30 US cents.

While Russia’s invasion of Ukraine has caused the prices of basic necessities such as food, fuel and fertilizer to soar around the world, the human cost has been particularly high in larger African economies. vulnerable like Malawi. “You really talk about things [coming] one-headed,” the country’s president, Lazarus Chakwera, told the Financial Times.

The result, according to the International Energy Agency, is that by the end of this year, up to 30 million Africans may no longer be able to afford liquefied petroleum gas (LPG) for cook the food they eat. Such a development would mark an economic regression which, according to the World Bank, could push the total number of Africans living in extreme poverty from 424 million before the pandemic in 2019 to 463 million this year.

“There is a lot of hard-to-measure poverty, but we know it is pervasive,” said Jacques Nel, head of macro Africa at Oxford Economics Africa.

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Many African economies have been hit particularly hard by the global price hike, as food accounts for a relatively larger share of national inflation baskets compared to developed economies, Nel added.

Food, for example, accounts for about half of Nigeria’s basket. “If a household already spends more than 50% of its income on food [and prices increase even further]which are not spent on other goods, and which have a ripple effect on savings,” Nel said.

The situation in Malawi has been replicated in some of the largest economies on the continent.

In Nigeria, which has seen the real rate of the naira plummet by 25% against the dollar since the start of the year, it costs twice as much to fill a 5 kg bottle of LPG as it does year. This has forced many people to resort to cheaper but more polluting energy sources such as kerosene or charcoal. Food inflation is 22%, prompting consumers to reduce their consumption of meat and fish.

Years of underinvestment in infrastructure, oil subsidies and widespread theft of crude oil have meant that Africa’s largest oil producer has failed to benefit from rising crude prices. With foreign currency in short supply, many companies raised their prices to reflect rising import costs.

Ladi Delano, co-founder of Moove, a Nigerian vehicle finance company, called the situation a “perfect storm”. “The cost of living crisis has made it harder for people to save,” Delano said, adding that they’ve removed the down payment requirement to encourage buyers.

Similar woes plague Ethiopia, described by a senior economics official in Addis Ababa as facing a “cocktail of challenges” including inflationary pressures and a crippling shortage of foreign currency, exacerbated by the Tigray war. This is in addition to a shortage of imported products such as medicines and infant formula.

Prices increased by 32% and the value of the birr fell to around 82 against 1 dollar in the informal market, against 60 at the beginning of June.

Rahel Atnafu, a 46-year-old single mother, cleans apartments and beauty salons in Addis Ababa. She earns 5,000 Birr ($95) a month and spends 1,500 Birr ($28) on rent. Her employers “usually give me ready meals or injera“, she says. “Still, I am struggling to survive.” The price of onions alone has doubled in the last two months. “How do poor people like me manage and survive the high cost of living ?”

With governments lacking the capacity to provide appropriate levels of support across sub-Saharan Africa, the onus increasingly falls on central banks to provide stability.

Monetary policymakers are “throwing everything they have at the problem,” said Virág Fórizs, Africa economist at Capital Economics.

With prices up 31% in Ghana and a falling currency, Accra has in recent months raised rates at the most aggressive pace in 20 years. Nigeria’s central bank has raised rates by 250 basis points since May.

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But with the dollar continuing to appreciate as markets price in further rate hikes by the US Federal Reserve and food prices remain high, economists doubt inflation will reverse any time soon.

“Outside of South Africa, like Ghana and Nigeria for example, I don’t think we’ve seen the peak of inflation rates yet,” Fóriz said. ” In both [the Ghanaian and Nigerian] inflation baskets, food is very important – and we don’t see food inflation going down anytime soon.

Malawi, landlocked and dependent on imports, symbolized the structural weakness of many African economies entering this crisis. In 2021, the country imported twice as much as it exported, with a $3 billion bill dominated by fuel and fertilizers. While Malawi’s President Chakwera believes the country can ‘overcome’ the pain with cash transfers and low-interest loans to smallholder farmers, the country is dependent on outside help, including approval of a $750 million loan from the IMF.

With the cost of food making up a large portion of people’s expenses, many remain in dire straits. “These are the most [people] find each other,” Mankwala said.

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These six stocks are hot picks in festival season. here’s why https://rrreading.com/these-six-stocks-are-hot-picks-in-festival-season-heres-why/ Sun, 11 Sep 2022 12:46:40 +0000 https://rrreading.com/these-six-stocks-are-hot-picks-in-festival-season-heres-why/

Earlier this week in its report, Axis Securities said: Festivals are times that bring a state of excitement to life, creating mental space and good vibes between us all and making the global environment conducive to generating demand, especially for consumer products. in the economy.”

“After witnessing two muted years that were impacted due to intermittent Covid-19 disruptions, the party spirit has finally returned to pre-Covid levels. This year the excitement seems to have revived and economic activities are regaining momentum, thanks to the large-scale vaccination campaign undertaken by the Government of India (which reached the remarkable milestone of 213 Cr on 4 Sep 22),” the report adds.

Multiple catalysts are triggering renewed excitement in the air, according to Axis Securities. These are:

1. The remarkable resilience of the Indian economy in FY23 to date, with a slight uptick visible in most high-frequency indicators.

2. The remarkable resilience of the Indian economy in FY23 to date, with a slight uptick visible in most high-frequency indicators.

3. Improvements in urban demand along with rural demand are also poised to improve as normal monsoon revives confidence in demand recovery in rural India.

4. Fully functioning contact-intensive service sectors such as travel and tourism, hotels, schools and colleges post COVID 3.0. Furthermore, all public transport systems like Air, Rail and Bus are now fully operational, supporting a rapid and resilient recovery of economic activities.

5. Remittances (major contributors to rural incomes) are expected to return to pre-Covid levels with the recovery in service sectors.

6. Easing supply chain conditions and cooling commodity prices, providing a break from high inflation. Against this backdrop, market discourse has shifted from worrying about inflation to slowing inflation expectations over the next one or two quarters.

Based on the above themes, the Axis Securities note said: “We recommend the following stocks which are well positioned to benefit from strong festival demand: Maruti; Bajaj Finance; SBI Cards; Trent, Relaxo; V -mart”.

These six stocks are considered long-term wealth creators. Axis Securities’ time horizon for these stocks is 6 to 9 months.

These six stocks are Axis Securities’ top picks during festival season:

Maruti-Suzuki

On the BSE, Maruti Suzuki shares ended at 8,945.70 each per 158.05 or 1.80% Friday. The market capitalization of the company is approximately 2 70,231.76 crores.

In one year, the shares rose by at least 31.5%. Stocks were around 6,801 each on September 9 last year. Its sales climbed 50.52% year-on-year to reach 25,286.3 crores. Operating income amounts to 26,499.8 crores, up 49% YoY for the quarter under review, but down 0.8% QoQ.

For the June 2022 quarter, the company recorded net income of 1012.8 crore up 129.76% from 441 crores in the corresponding quarter of last year.

Axis Securities gave a buy rating with a target price of 9,801 each on stock.

Bajaj Finance

On Friday, NBFC shares closed at 7,183.55 each less 74.45 or 1.03% on BSE. The market capitalization of the company is approximately 4 34,913.12 crore.

Bajaj Finance shares have had a volatile year and its performance was slightly lower by just over 3% compared to the level of September 9 last year. However, stocks have rallied strongly over the past three months, with gains of almost 22%.

Bajaj Finance had a strong quarter in June 2022 (Q1FY23) with net profit up 159% to reach 2,596 crores compared to 1,002 crores in the same quarter last year. Net interest income (NII) increased by 48% to reach 6,638 crore in the quarter under review 4,489 crores in Q1FY22. During Q1FY23, new loans booked jumped 60% to 7.42 million from 4.63 million in Q1FY22.

Axis Securities has set itself a target price of 8,250 each on stock.

SBI cards and payment services

On BSE, SBI Card shares closed at 943.60 each down 1.69% on Friday. The market capitalization of NBFC is approximately 89,011.67 crores.

Although the title has plunged nearly 15% in one year. However, in the last three months of this year, stocks rallied strongly and rose more than 22%.

During Q1FY23, SBI Card reported 105.80% growth in net profit to 626.91 crore compared to 304.61 crores in the same quarter last year. Operating revenue amounted to 3,100 crore in Q1FY23 up 31% yoy and 9% yoy. Interest income reached 1,387 crores in the first quarter of this budget increase of 20% YoY and 10% YoY.

Axis Securities has given a target price of 1,050 each.

Thirty

On BSE, Trent shares closed at 1,379.35 each 1.98% lower. The market capitalization of the company is approximately 49,034.16 crores.

In one year, shares have soared nearly 35%.

In the first quarter of FY23, the company recorded consolidated net income of 114.93 crore against a loss of 138.29 crores in the same period last year. Operating income amounted to 1,803.15 crore – up sharply from 491.99 crore in Q1FY22.

Axis Securities has given a target price of 1,530 each on stock.

Relaxo shoes

On the BSE, shares of Relaxo Footwears closed at 1,012.90 each up slightly on Friday. The market capitalization of the company is approximately 25,213.72 crore.

Over the past three months, stocks have gained nearly 3%.

During Q1FY23, the company recorded a net profit of 38.67 crore against 30.96 crore in Q1FY22. Operating income amounted to 667.15 crores more than 497.13 crores observed in Q1FY22.

Axis Securities has given a target price of 1,120 each on stock.

V-Mart

On BSE, V-Mart shares closed at 2904.30 each per 8.35 or 0.29% on Friday. The market capitalization of the company is approximately 5,741.33 crores.

In Q1FY23, the company recorded a net profit of 20.45 crore against a loss of 28.71 crore in Q1FY22. Operating revenue amounted to 587.88 crores in Q1FY23 versus 177.41 crores in the first quarter of FY22.

Axis Securities has given a target price of 3,350 each on stock.

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