Investment Bank Outlook 05-04-2022

CIBCFX FlowsBoJ Governor Kuroda caused some volatility today. He spoke in parliament and commented about forex, indicated current YEN moves somewhat rapid. Then he reiterated no change in stance that weak YEN is positive for the economy overall. The first statement sent $YEN lower from 122.71 to 122.39. Then it was back up to 122.60. Kuroda also said may not be the last resort but we will offer to buy unlimited amount of 10-year JGBs if rise in long-term interest rates is rapid. Comments from Kuroda continued to roll but this time, market was fatigue and $YEN stalled.The main event today is RBA meeting at 12.30 pm Hong Kong, no change expected in cash rate target but markets believe the RBA to hike rates in June and cash rate at 1.75% by end of 2022. What’s important today will be the messaging if the RBA pushes away from current expectations. AU$, best performing G10 currency this year, didn’t do much, it was at 0.7543 when I took over and ended Asia morning at 0.7538. Strong AU$ resistance at 0.7555/60, I suspect there will be a push higher ahead of RBA, this could invite breakout artists to jump in. 0.7617 will be the next big target.Oil futures firmed up as the US and Europe prepare to impose a fresh wave of sanctions on Russia. However, $CAD faced some buyers. Talk of decent option strikes due in coming week, more than $1.9bn worth of $CAD put strikes at 1.2400 and mixture of 1.2600 strikes around $1.6bn. Economists are expecting a strong January merchandise trade out today. Our economics team said trade surplus will have been bolstered by higher energy prices in February, with an even larger boost from that area coming in March.Bridge closures and protests during the month could have impacted two-way trade, particularly the Ambassador bridge closure and its impact on the auto industry. Advance data from the US suggests that Canadian exports of autos and parts could have seen a greater weakening than imports during the month. That will partly offset the improvement in energy prices within the overall trade surplus, which we estimate will be $3bn in February.Not much to talk about the EUR$, few ticks lower from where New York closed. Chatter of option bids near 1.0950-60 and offers atop 1.0990, could be linked to 1.1000 strikes maturing this week total €4.5bn.CitiEuropean OpenA hawkish shift by the RBA in today’s monetary policy decision (rates left unchanged) sent AUD and Australian bond yields soaring higher as markets repriced rate hike expectations. NZD also rose, following AUD. JPY initially rose early in Asian trading on Governor Kuroda’s comments, although it pared some gains later in the day. DXY and USTs remained flat, while the rest of G10 FX held in a tight range on a quiet day as China, Taiwan and Hong Kong were on holiday. Oil prices continued their march higher following concerns of sanctions yesterday, while equities held onto their gains today. Over in EM, CPIs from KRW, PHP and THB came in above consensus, with all three sitting in the green against the dollar.Looking ahead, we continue to monitor Russia-Ukraine headlines with The Economic and Financial Affairs Council meeting Tuesday at 09:00 BST. We will continue to monitor movements of assets that are showing geopolitical risk premium given further speculation on action from the EU. USD will observe ISM servives data alongside Fedspeak from Brainard and Williams.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-05-04-2022"
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Corn Futures (ZC1!), H1 Potential for Bullish Rise!

Type: Bullish RiseKey Levels:Resistance: 767'0Pivot: 750'2Support: 741'0Preferred Case:With price moving above the Ichimoku cloud along with the recent trendline breakout, we have a bullish bias that price will rise to our 1st resistance in line with the 767'0 in line with he swing high resistance from our pivot of 750'2 in line with the 23.6% Fibonacci retracement and the horizontal pullback support.Alternative Scenario:Alternatively, price may break pivot structure and head for 1st support at 741'0 in line with he 61.8% Fibonacci retracement and the swing low support.Fundamentals:No major news.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/corn-futures-zc1-h1-potential-for-bullish-rise"
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Three healthcare trusts to invest in

The remarkable speed at which scientists were able to discover new vaccines and treatments during the pandemic and roll out mass usage seemed to show that there is no medical affliction which is beyond the scope of ingenuity and innovation. This seemed likely to usher in a new golden era for the healthcare sector, and for biotechnology in particular, that would boost the private companies at the forefront of the medical revolution.

Instead the biotech sector is in its biggest bear market in 30 years. In 12 months, the S&P Biotechnology index has lagged the S&P 500 by 64%, falling nearly 50% back to the level of mid 2015. The broader healthcare sector has fared better, thanks to the resilient share prices of big pharmaceutical firms and healthcare service providers. But smaller, innovative companies focusing on research and development rather than shortterm cash flow have suffered.

Time for the tide to turn

In the year to 28 February, the net asset value of Worldwide Healthcare Trust (LSE: WWH) was down 9%, and that of its sister trust Biotech Growth Trust (LSE: BIOG) was down 35%, each 22% behind their benchmark indices. “Fundamentals did not matter,” says Sven Borho, co-manager of WWH. “Everything was driven by macro trends such as growth into value”. In addition to the poor performance of biotech (22% of WWH’s portfolio, 82% of BIOG’s), exposure to the massive under-performance of Chinese companies (8% in both), also hurt the trusts, he notes.

Still, “the healthcare sector now trades on a 20% discount to the S&P 500, the same as in the financial crisis”, says Borho. “Every single time it has traded at such a discount has been the very best time to be invested, especially in innovation and growth.” Meanwhile, the threat of drug pricing reform and regulatory change in the US has lifted. “We are very confident of recapturing much of the lost performance of WWH and BIOG… We have bounced back from setbacks before.”

Controlling the costs

By far the best performer in the sector is the £1bn BB Healthcare trust (LSE: BBH), which is up by 84%, over the past five years. Manager Paul Major has focused on the rising cost of healthcare – which accounted for 10% of US GDP in 1980 but is now 18% – as a key theme. “The compound annual real growth rate of NHS expenditure is 2.25% but needs to be 3.5%.

Thanks to ageing populations, scientific progress and increasing wealth, healthcare is the secular growth story of our age but it needs to be paid for.” BBH invests in firms that “provide innovative solutions for broken healthcare systems around the world”. For example, healthcare waste in the US is estimated at $750bn per annum.

“The political discussion in the US is about prescription drugs but they only account for 10% of total spending. Hospital care accounts for 31% and physicians and clinics 20%.” This is where efficiency can improve, says Major. “Hospitals are expensive and nobody wants to be there, so newer care models are needed. The first interaction of patients with healthcare needs to be online.”

Other areas of focus are diagnostics, patient monitoring, disease prevention and changing behaviour. “People do not follow medical advice or behave rationally so they need to be nudged. For example, 15% of those with cancer in the US are not receiving treatment. Sensory technology can be used for monitoring the treatment of patients so that their arrival in hospital represents a last resort.”

Other areas of focus are diagnostics, patient monitoring, disease prevention and changing behaviour. “People do not follow medical advice or behave rationally so they need to be nudged. For example, 15% of those with cancer in the US are not receiving treatment. Sensory technology can be used for monitoring the treatment of patients so that their arrival in hospital represents a last resort.”

from Moneyweek RSS Feed https://moneyweek.com/investments/funds/604657/three-healthcare-trusts-to-invest-in
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Buy Bank of Georgia: a cheap play on a robust economy

Investing in any bank’s shares may seem a contrarian proposition at the moment. Investing in a bank in a country that has been invaded by Russia might then seem on the hazardous side of contrarian.

Yet the Russian invasion of Georgia happened in 2008 and that means further military conflict is unlikely. Therein lies the opportunity.

Vladimir Putin’s invasion in 2008 in support of South Ossetia (a Russia-friendly breakaway province) was a brief and one-sided escapade. Sadly it may even have encouraged the Russian tyrant to think that an invasion of Ukraine would be similar.

A solid economy

Following the invasion, Georgia is now less reliant on Russia both as an export market (14% of exports) and as a source of remittance flows from Georgians working abroad who send money back home (now 12%, down from half ten years ago). The rich volcanic Georgian soil means that the country is less exposed to rising wheat prices or a shortage in fertiliser than many. Georgia is also less vulnerable to higher energy costs than in the past, after a decade of investment in hydro power dams. 

These made up 70% of energy production last year. In short, the difficult recent history since the fall of the Soviet Union has been a catalyst for the country to become more resilient.

The economy has been strong, with real GDP growth of 5% per year for the three years preceding the pandemic. Growth is forecast to be 3% in 2022, assuming the conflict in Ukraine is resolved in a few months’ time, according to Galt & Taggart (G&T), Bank of Georgia’s brokerage business (named after the characters in Ayn Rand’s Atlas Shrugged).

Even in the worst-case scenario of a prolonged conflict in Ukraine and sanctions applied to Russia’s oil and gas exports, G&T predict a 1% contraction in the economy.

This may be too pessimistic, since Georgia is a relatively stable destination in the region. I’ve heard stories of flights to Tbilisi from Moscow and St. Petersburg being booked out as skilled Russians flee Putin’s regime.

Managing the risks well

London-listed Bank of Georgia (LSE: BGEO) is one of two leading local banks. It’s cheap and in fine shape (see below), although obviously not risk-free. Around 60% of the bank’s balance sheet (both loans and deposits) is in US dollars or other foreign currencies. This would be an issue if the currency devalues steeply: borrowers who earn in local currency could struggle to service their dollar debts.

Some of this risk is reduced by the 1.3 million Georgians who earn overseas in foreign currencies and send money home. In 2021, remittances were up by 25% year-on-year, and by 36%from 2019.

The central bank, which has been increasing its $4bn in foreign-currency reserves, is aware of the devaluation risk and requires banks to have higher capital weightings for foreign-currency loans. It has also set the maximum term of a foreign-currency mortgage to ten years, as a further incentive to encourage borrowing in lari, the local currency. Thus lower interest costs on foreign-currency mortgages are offset by higher principal repayments.

Sulkhan Gvalia, finance director of the Bank of Georgia, who used to be head of risk management, has just bought £200,000-worth of shares at around £12. I met him when I listed the bank on the London Stock Exchange a decade ago, and he struck me as a shrewd character with a common-sense approach to risk management that larger, supposedly more sophisticated, banks in the US and Europe could have benefited from.

While the share price fell steeply during the financial crisis and Russian invasion, the bank didn’t need a large rescue rights issue or rely on a government bailout. I own the shares and think that there is plenty of upside to compensate for the perceived risks.

from Moneyweek RSS Feed https://moneyweek.com/investments/stocks-and-shares/bank-stocks/604646/buy-bank-of-georgia
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AU200AUD, H4 Potential For Upside

Type: Bullish BounceKey Levels:Resistance: 7684.36 Pivot: 7521.33 Support: 7458.58Preferred Case:Prices are on bullish momentum. We see the potential for bounce from our Pivot at 7521.33 in line with 100% Fibonacci projection towards our 1st resistance at 7684.36 which is an area of Fibonacci confluences.Alternative Scenario:Alternatively, prices may dip towards our 1st support at 7458.58 which is a graphical swing low.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/au200aud-h4-potential-for-upside"
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AUDCHF, H4 | Potential Bullish Rise

Type: Bearish ReversalKey Levels:Resistance: 0.65047Pivot: 0.64634Support: 0.6412Preferred Case:Despite the recent breakout of the triangle to the upside, we have a short term bearish bias that price will drop and retest at out 1st support of 0.6412 in line with the 50% Fibonacci retracement and the ascending trendline from our pivot of 0.64634 in line with the 61.8% Fibonacci retracement and swing high resistance. Our bearish bias is further supported by how price is moving below our Ichimoku cloud.Alternative Scenario:Alternatively, price may break our pivot structure and continue to our 1st resistance at 0.65047 in line with the swing high resistance.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/audchf-h4-or-potential-bullish-rise5"
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Gold Futures (GC!), H1 Potential for Bounce!

Type: Bullish BounceKey Levels:Resistance: 1959.0Pivot: 1921.0Support: 1910.2Preferred Case:Prices have recently broken out of our descending trendline. We see the potential for further bullish continuation from our Pivot at 1921.0 in line graphical overlap and area of Fibonacci confluences towards our 1st resistance at 1959.0 in line with 61.8% Fibonacci Projection . Our bullish bias is further supported by RSI being at levels where bounces previously occurred.Alternative Scenario:If prices were to reverse, they can potentially reach our 1st support at 1910.2 in line with 61.8% Fibonacci projection .Fundamentals:With continuation of Russo-Ukraine invasions and inflation, we might expect a slight bullish turn towards the precious metal.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/gold-futures-gc-h1-potential-for-bounce4"
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Wheat Futures (ZW1!), H1 Bullish Bounce

Type: Bullish BounceKey Levels:Resistance: 1033'0Pivot: 985'2Support: 959'0Preferred Case:Prices have approached our Pivot at 985'2 in line with 78.6% Fibonacci Projection. We see the potential for a bounce from our Pivot at 985'2 towards our 1st resistance at 1033'0 in line with 50% Fibonacci retracement and 61.8% Fibonacci Projection. RSI is at levels where dips previously occurred.Alternative Scenario:Price might continue to drop towards the 1st support level of 959'0 in line with 127.2% Fibonacci extension.Fundamentals:No Major News

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/wheat-futures-zw1-h1-bullish-bounce"
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Nasdaq Futures (NQ1!), H1 Potential for Bearish Dip!

Type: Bearish DipKey Levels:Resistance: 14950Pivot: 14870Support: 14727Preferred Case:We see the potential bearish dip from our Pivot at 14870 in line 23.6% and 61.8% Fibonacci retracement towards our 1st support at 14727 in line with the horizontal swing low support and 61.8% Fibonacci projection. Our bearish bias is further supported by how price is moving below our Ichimoku cloud.Alternative Scenario:Price might move towards the 1st resistance level of 14950 in line with 38.2% Fibonacci retracement and swing high resistance.Fundamentals:Economic risks from inflation and tightening monetary policy causes bearish sentiments around indices.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/nasdaq-futures-nq1-h1-potential-for-bearish-dip"
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Soybeans Future (ZS1!), H1 Bullish Rise

Type: Bullish RiseKey Levels:Resistance: 1623'2Pivot: 1580'0Support: 1546'4Preferred Case:With price expected to bounce off the stochastics indicator, we have a bullish bias that price will rise to our 1st resistance at 1623'2 in line with the 38.2% Fibonacci retracement and pullback resistance from our pivot of 1580'0 in line with the 161.8% Fibonacci extension and swing low support.Alternative Scenario:Alternatively, if price breaks our pivot structure, it may head for 1st support at 1546'4 in line with the swing low support.Fundamentals:No major news.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/soybeans-future-zs1-h1-bullish-rise"
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Dax Futures (FDAX1!), H1 Potential For A Rise!

Type: Bullish RiseKey Levels:Resistance: 14707Pivot: 14355Support: 14202Preferred Case:With price expected to bounce off the RSI support, we have a bullish bias that price will rise to our resistance at 14707 in line with the 61.8% Fibonacci retracement and swing high resistance from our pivot at 14355 in line with the 78.6% Fibonacci retracement and swing low support.Alternative Scenario:Alternatively, price may break pivot structure and head for 1st support at 14202 in line with the swing low support.Fundamentals:With the concerns over the war in Ukraine, European stocks are expected to trade lower.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/dax-futures-fdax1-h1-potential-for-a-rise"
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Corn Futures (ZC1!), H1 Potential for Bearish Dip!

Type: Bearish DipKey Levels:Resistance: 754'6Pivot: 747'0Support: 733'0Preferred Case:We see the potential bearish dip from our Pivot at 747'0 in line 38.2% Fibonacci retracement towards our 1st support at 733'0 in line with the horizontal swing low support. Our bearish bias is further supported by how price is expected to reverse off the Ichimoku cloud resistance.Alternative Scenario:Price might move towards the 1st resistance level of 754'6 in line with 61.8% Fibonacci retracement .Fundamentals:No major news.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/corn-futures-zc1-h1-potential-for-bearish-dip4"
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The FTSE 100 is doing moderately well – can this continue?

The first quarter of 2022 is over.

It's a natural point at which to take stock of what's happened in markets.

It's also a completely arbitrary point, of course. Just because markets have been doing something over the past three months doesn't mean they'll keep doing it.

Yet, arbitrary or not, taking a snapshot of markets can give us an idea of what the overall narrative is at any given time.

And it's very clear from the first quarter of this year that the big stories in investment are now dramatically different to the ones that drove the post-2009 bull market...

The FTSE 100 is doing well – what's gone wrong with the world?

One of the most obvious changes in the investment environment is that the UK's headline stock market index isn't clutching tightly to the wooden spoon for once. That's quite the shift.

During the first quarter of 2022, the FTSE 100, which comprises the 100(-ish) biggest (in terms of market capitalisation) companies listed on the London Stock Exchange, gained 1.8%, notes George Steer in the FT.

You may not be cracking open the champagne on that sort of gain (certainly not with inflation sitting at its present levels). And if you'd been more adventurous, investing in Brazil say, you'd be up a whopping 34.3%, says Morningstar.

But it's rather a lot better than if you'd invested in most other major developed global stock markets – or British ones for that matter. 

The FTSE 250, which comprises the next 250(-ish) companies, lost 10.6%, while the biggest companies on Aim – London's junior market - lost an even more brutal 16%.

As for international comparisons, eurozone stocks (as measured via the Stoxx 600 index) fell by 6.5%, while the S&P 500 dropped 4.9%.

There's a pretty straightforward story to tell here. The FTSE 100 has done reasonably well for two main reasons. One is that it has been the least popular developed market in the world for a long time now, so it was starting from a low base. That shunning was partly due to Brexit. 

Two - which has nothing to do with Brexit – is that it is full of the sorts of stocks that everyone has hated for the duration of the post-2008 bull market. The FTSE 100 has banks (at the heart of the last bubble); miners and oil companies (hated because they're the opposite of both ESG and "digital" assets); and a distinct lack of hot tech stocks.

Oh and it's a dividend-heavy index in a world that had decided that regular payouts to investors showed that a company had run out of imagination. 

So in a world where investors have decided that "value" investing is a dirty word, it's little surprise that the FTSE 100 index was hated.     

Clearly that's changing now. Even before Russia invaded Ukraine, commodity and energy prices were surging. Inflation finally stopped being described as "transitory" in December last year as the Federal Reserve "retired" the word.

Meanwhile, on the other side of the equation, anything speculative (in other words, any asset where profits are a distant prospect) has struggled. "Growth" has lost its popularity. "Virtual" has become less appealing. "Expensive" is no longer a synonym for "high-quality". 

This helps to explain why the US in particular – previously the world's leading stock market by far – has started to struggle. It's far more "growth-y" and "tech-y" than the FTSE 100.

The trend is clear. The rationale is pretty clear too. The big question now is: is it likely to continue?

How to invest for a continuing shift to value from growth

On the "big picture" level, a lot of this boils down to what you think will happen to interest rates, inflation and the economy over the coming year.

If you think that inflation will drop back down and that the world's central banks are going to be clear to cut interest rates, but that we'll scrape by avoiding a recession, then we could probably flip back to the good old days of growth trumping everything and everything being hunky-dory in a slightly glum manner.

If you think that inflation will persist, that central banks are caught between a rock and a very hard place, and that we might end up with the economy being dragged down by soaring living costs even as staff agitate for higher pay to compensate and countries scramble to secure scarce supplies of key resources – well, we can probably expect more of the same.

I'll admit I find scenario number two or some variation thereof the most likely option here. I would prefer a more cheerful outcome (and if wages start rising in a persistent manner, that would make me more optimistic about the economy, if not about earnings prospects).

But overall, it's hard to see how we go back to the previous "secular stagnation" scenario which sounded very gloomy but in practice, entrenched the dominance of the top performers and wasn't much of a problem as far as Wall Street was concerned.

How do you play this? We've looked at lots of ways to play lots of different commodities, from copper to silver and platinum. You could also invest in value-oriented investment trusts or those which are aimed at protecting you from inflation.

The other option is to look at a simple FTSE 100 tracker fund. It won't give you pure exposure to all of the things that will do best out of any shift from growth to value, but it is a cheap option for investing in the overall shift.

On that note, for more on the debate over passive investing and its impact on markets, you really should listen to this week's MoneyWeek podcast, in which Merryn chats to Robin Wigglesworth, FT journalist and author of Trillions, an in-depth history of index investing and its impacts. Have a listen here.

from Moneyweek RSS Feed https://moneyweek.com/investments/stockmarkets/uk-stockmarkets/604664/fsfs
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GBPAUD H4, Potential For Bounce!

Type: Bullish BounceKey Levels:Resistance: 1.77547 Pivot: 1.74474Support: 1.7337Preferred Case:Prices are at a Pivot. We see the potential for a bounce from our Pivot at 1.74474 in line which is an area of Fibonacci confluences towards our 1st resistance at 1.77547 in line with 50% Fibonacci retracement. RSI is portraying bullish momentum.Alternative Scenario:Alternatively, prices may dip towards our 1st support at 1.7337 in line with 127.2% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/gbpaud-h4-potential-for-bounce"
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