Here's the latest market news, hand curated by our research team.
Brent crude rallies closing a $83.65 a barrel
The Big Story 💥
U.S. crude rose 1.5% to $80.52 a barrel on Monday, closing above $80 for the first time since late in 2014 and bringing its climb since the end of last October to 125%. Oil is now on track to outpace copper this year by the largest amount since 2002.
The S&P 500 energy sector has been the broad index’s best-performing group this year, advancing about 50%. Rebounds in shares of companies such as Pioneer, Occidental and Diamondback Energy have led the way, while industry giants Exxon Mobil and Chevron have trailed many stocks in the sector, but have still surged.
Bank of America is not the only broker to suggest that Brent could command a $100 price tag by the winter's end if demand continues to shoot up considering the supply constraints seen around the developed world. This sort of price increase will add further pressure on the fed's plan to raise interest rates.
The U.S. is considering releasing oil from the Strategic Petroleum Reserve, but of course we go back to climate change problems that come with consumption trends. Oil prices remain in focus as analysts say the recent swings show the risks of phasing out fossil-fuel production too quickly.
Steps such as releasing US reserves could help briefly balance energy markets, but some investors still think the long-term push by investors for producers to curtail supply and emissions will help buoy prices.
Overnight Action ☕
In the US, markets opened in the green only to fade into the red zones around 1pm Eastern Time ultimately closing to lows for the session. The Dow Jones Industrial, Nasdaq and Russell 2000 fell relative to the S&P 500 after each had traded higher in market openings.
The dig in the afternoon was not based on any specific news, and Chinese stocks cannot be blamed considering the current upswing we have been witnessing in Chinese equity sentiment. Nine of 11 sectors ended in negative territory but there is no clear winner between value and growth stocks.
The trading day was a flimsy byproduct of bond markets being closed for Columbus day. Banks also saw a slowdown in trading with earnings coming out this week, fading on worries that the rally is overdone. In fact, the upcoming earnings season could be a rocky one looking at what happened with ASOS tumbling 13% in Europe after it's weak outlook.
WTI crude futures briefly topped $82 amid the well-known supply constraints (read our latest blog on energy) and the S&P 500's best performing sector (energy) coughed up almost 2% in gains while natural gas futures fell 4.1%.
Merck was in the news for confirming its submission of an emergency FDA application for its oral pill, Emerson confirmed the $11B merger with Aspen we spoke about in yesterday's newsletter and Aptiv the auto supplier lowered its 2021 revenue forecast by $1 billion amid the chip shortage.
In Washington, it has been calm in the past few days with the debt ceiling de-risked for now but Democrats are still working to reconcile the Sanders and Manchin wings and aiming for a $2T compromise--stay tuned. At the IMF, the executive board opted to retain Georgieva as the managing director despite allegations of data manipulation, which the committee says were unsubstantiated claims.
Top 5 Moves 🆕📰
1. Alibaba sees a 24% pop surpassing its 50DMA
After Meituan's lower than expected fine added to a growing list of positive factors top Chinese stocks made their way back up the curve. Analysts favor Alibaba’s climb beyond its 50-day moving average after the stock jumped from a record low in Hong Kong. The $469 billion e-commerce giant has no sell ratings, with 36 out of 38 analysts giving it a buy. Analysts forecast shares to increase 45% over the next year versus a 28% and 18% gain for Tencent and Meituan, respectively.
2. EU members kicks off largest ever green bond sale The EU is looking to conquer the green bond market offering the biggest ever deal yet starting today. The Bloc issued its first green bond to raise 12 billion euros providing investors with a highly liquid bond. That may allow the bloc to shave some basis points off its borrowing costs, since debt with an environmental label typically commands a “greenium” and outperforms conventional peers. The funds will be used for projects such as clean energy and transport.
3. Banks rally slows ahead of tomorrow's earnings Bank stocks have reversed lower as investors get ready for the earnings season that start tomorrow. Near-term fundamental trends are mixed for the industry with loan growth and spread-based forecasted indicators hopefully looking bright while underwriting revenues should not surprise. However, reserve releases and trading figures should slow after this past year's surge. If we believe that bonds face a near-term downside then banks could see a healthy run up from climbing yields, but there may easily be hiccups as Q3 figures are reported.
4. Merck pleads case to FDA with emergency pill
The Merck-Ridgeback pill, if authorized, would be the first oral antiviral for Covid-19. A course of treatment is 40 pills, eight daily for five days, started within five days of showing symptoms. Merck plans to manufacture 10 million courses of treatment by the end of the year and has already begun production. The Kenilworth, N.J.-based drugmaker has a $1.2 billion deal with the U.S. to provide 1.7 million courses of treatment, should regulators clear it for use.
5. SoFi jumps 15% as Morgan Stanley raises PO to $25 Morgan Stanley's Betsy Graseck sees considerable upside, setting a price target of $25. She says the company has a unique story, "a challenger consumer finance company that is leading with lending," specifically refinancing high- rate student loans to lower-cost loans. The analyst expects financial services revenue growth for Sofi of 150% over the next two years as it doubles the customer base and expands its product set. This is a very bullish thesis for an online lending business which we have said in the past tends to fall post IPO.
Crypto Outlet 🐳
Bitcoin is down to $56,726 after reaching a high of $57,300. Ethereum: $3,489
Bakkt said it had partnered with Google to allow its users to purchase goods and services using Bitcoin (BTC) and other cryptocurrencies through the Google Pay wallet and payment system.
For the first time in chess history, grandmaster Magnus Carlsen has been awarded a nonfungible token (NFT) trophy for winning an international chess tournament, Meltwater Champions Chess Tour (MCCT). The tournament minted a number of NFT trophies and collectibles to indefinitely preserve the game’s most defining moments.
2B4CH, a Swiss non-profit think tank assisting the state in exploring cryptocurrencies like Bitcoin (BTC) and blockchain technology, is launching an initiative that could make Bitcoin one of the country’s reserve assets.
Coal prices in China surge with thermal coal futures skyrocketing
In Shanxi China, 60 out of the 682 coal mines have shut due to heavy rains and authorities have said later on Friday that they would consider allowing higher power prices. This region is known for having produced 30% of China's supply of fuel this year. Thermal coal futures have surged to an intraday record today and the government has allowed market action to drive prices i.e. prices could rise as much as 20% for electricity prices.
US dollar performs with bullish bets hitting a two-year high.
USD/JPY trades at 33-month high, the yen's weakest level since April 2019.
Global tax rate reshaping the corporate tax landscape moves forward.
Crude tops $81 a barrel--Dec.-Red.-Dec spread tops $8.
Energy sector outperformance illustrates a new cyclical trade emerging…
This article will help you catch up on the energy outperformance, and where the sector is headed. Topics covered include; ESG, the ‘’energy transition’’, other affected sectors, and current events.
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