Investment Bank Outlook 30-07-2021

Natixis Equities: upbeat sentiment in Europe, spurred by the start of a rebound by Chinese indices. The Stoxx 600 was up 0.4% at Thursday’s close. Energy and financials were out in front, while defensives (health, utilities, telecoms) were down slightly. The FTSE MIB (+1%) and FTSE (+0.8%) outperformed in Europe. In the US, the typically goldilocks macro news flow (good but not too good) is supporting equities: the S&P500 was up 0.4% Thursday evening, still near its all-time highs. The VIX closed at 17.7. On the US earnings front, halfway through the results published in the S&P500 universe, the percentage of positive surprises is very high at 87% for EPS (average surprise of 18%) and 83% for sales. FX: the US dollar fell yesterday against most G10 currencies after the FOMC Statement. As a result, the DXY dollar index declined by 0.45%, pulling back below 92.00. The EUR/USD appreciated by 0.39% to 1.1888, benefiting from a weak dollar and the release of upbeat German unemployment figures. On the other hand, concerns over the Delta variant saw the Swiss franc strengthen against the euro, while the single currency weakened for the fourth consecutive session against sterling. Commodity currencies ‑ Norwegian krone, New Zealand, Australian and Canadian dollars ‑ appreciated against the greenback (rising by 0.70% on average) on the back of the rise in the price of Brent. Turning to emerging currencies, they all appreciated against the greenback in Asia, Latin America and the EMEA.Commodities: in a bid to cool down prices, China auctioned off 170,000 tonnes of base metals. Initial reports suggest that a bigger discount was applied than at the last auction which took place earlier in the month. Looking at aluminium, prices rose to a three-week high due to supply issues. Rio Tinto cut production at a site in Canada due to a strike; meanwhile Henan Shenhu announced that it would be missing its annual aluminium production target due to electricity rationing.Credit AgricoleAsia overnight: In Asian hours risk sentiment was unstable with US stock futures trading lower at the time of writing. This is partly in reaction to the most recent US earnings releases disappointing. In the bigger scheme of things, however, market impact was limited and so much is well reflected in G10 FX trading in narrow ranges. If anything, the NOK has been among the underperformers. However, from the current levels downside should prove limited with well supported central bank rate expectations expected to put a floor below the currency.

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Market Update – July 30

Improved demand for risk boosted Wall Street overnight and weighed on Treasuries amid myriad crosscurrents. The markets are busy repositioning in the last week of July, that the Fed is safely out of the way with little likelihood for a tapering announcement until at least November. The miss on Q2 GDP was overlooked as inventories were the major culprit, while the surge in the price indicators to near 4 decade highs added to the pressure bonds.

The focus turned back to earnings, data, the Delta variant, and the infrastructure deal out of Washington.

Good earnings news in general supported stocks with the USA30 and USA500 leading the way with gains of 0.4%, while the USA100 rose 0.1% as concerns over guidance from heavyweights, including Facebook and Paypal ( beat earnings estimates, but guided lower,), limited enthusiasm. Amazon’s online sales growth slows as lockdowns ease. Amazon’s core online store business dissapoint, since it grew 15%, the slowest rate since 2019, despite it bringing forward its flagship Prime Day sales event to June. In Europe,  GER30 and UK100 futures are also down -0.7% and -0.6% respectively.

In FX markets: EUR and GBP corrected against a stronger USD, leaving EURUSD at 1.1877 and Cable at 1.3980. USDJPY lifted to 109.60, although the Yen was steady to higher versus most other currencies. The USOIL is at $73.38 per barrel. Gold was little changed at $1,831.

USOIL’s rally to 2-week highs over $73.20 on tight US supplies and helped the CAD today as well. The market ignored the small uptick in Canada May average weekly earnings. USOIL stabilized at 72.60 today while PP set at 72.45 and Resistance us at 73.00 and 73.30,

Today: The calendar is busy and focuses on Q2 GDP numbers for the Eurozone and Germany, which is expected to show a strong rebound from the contraction in the first quarter, while preliminary HICP readings could come in higher than anticipated, after strong German number yesterday. US CPI is also on tap, and it should decline -0.8% in June following the -2.0% May drop. Spending is forecast rising 0.9% after the unchanged reading in May. Weakness should result from a -5.5% decline in “current transfer receipts” after an -11.7% May plunge, as this measure tracks the pull-back in stimulus spending. This will more than offset the 0.5% rise in compensation. The savings rate should fall to 10.8% from 12.4% in May and a 27.6% peak in March.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Old-fashioned thrills from a Porsche 911

The new Porsche 911 GT3 Touring reaches 62mph from rest in around three and a half seconds and goes on to a top speed of near 200mph. But the numbers don’t matter, says Ollie Marriage in Top Gear. “If they do matter, go and buy electric. You’re looking at the Touring for the wrong reason. This is a car for the feels.” And how does it feel? Truly “awesome”. It’s unusual for a car to be this special without “drawing attention to itself”, but the Porsche is understated. “The engine chunters and rattles slightly at idle, the clutch has a springy action, you need some throttle to pull away” – there’s no anti-stall technology – but the result is “a car as cars used to be”. Despite the “hardcore” performance, it’s also one you can “drive daily without concern”. This is “a ten out of ten car”.

You wouldn’t have thought that the last 911 GT3 left much room for improvement, but “somehow Porsche has made the new one feel like a noticeable step forward”, says Matt Robinson on Car Throttle. While other supercar makers put out models with ever-fancier technology and “ludicrous” levels of power and speed, Porsche relies instead on “decades of honing the same effective recipe”.

The GT3 is the “antithesis of the turbocharged, pointlessly powerful supercar elite” with “old-school sensibilities” that make for a “fabulous” drive. After a few plays on a track, the GT3 will quickly become “your best friend” and you’ll have years of fun exploring its potential. If you have supercar money to spend, this is the one to buy.

Marriage, Robinson and Steve Sutcliffe in Evo all agree that the manual is the model to go for. It makes the already brilliant car “even more engaging to drive”, says Sutcliffe – the shift quality is “peachy” – and the car a lot more civilised on the road than you might have thought. “Even on soaking wet bumpy Welsh B-roads”, the car has an “entirely unexpected knack of being able to cope with whatever comes your way”, making you “appear to be an even more highly skilled wheelman than you already are”. In short, the manual GT3 “is one of those cars that makes your heart beat faster every time you climb aboard”, whether on the road or the track. It is exceptionally good value too, with no obvious rivals for the price. Demand, though, will considerably outstrip supply. “Nice work – if you can get it.”

Price: £127,820. Engine: 3,996cc, flat six, six-speed manual, rear-wheel-drive. 0-62mph: 3.9 seconds. Top speed: 199mph. Power: 503bhp at 8,400rpm. Torque: 346lb ft at 6,100rpm.

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Four simply stunning English wines

2018 Danbury Ridge, Chardonnay, Essex, England

£32, cambridgewine.com; £32.50, tivoliwines.co.uk, grapebritannia.co.uk, luckinswinestore.co.uk, padstowwinecompany.co.uk; £32.99, lokiwine.co.uk; £33, oldbridgewine.co.uk; £33.10, hedonism.co.uk; £35.50, jnwine.com

I have been waiting a while to taste the amazingly talented Liam Idzikowski’s new creations since he left Lyme Bay to work with Michael and Heather Bunker and their exceptionally well-situated, young vineyard in Danbury in Essex. Its wines are everything I hoped they would be and more, and you ought to do everything you can to find a bottle or two. Only 10,132 bottles were produced of my featured wine and the other three in this piece (MoneyWeek has many more readers than the bottles made at Danbury Ridge).

The reason for my excitement about these wines is their sheer impact and luxuriousness on the nose and palate. These are wines that do not, in any way, shape or form, seem like they come from a cool climate. My featured chardonnay is terrifically smooth, mildly exotic, juicily oaky, incredibly long, amazingly ripe and fabulously ostentatious. Its big brother, 2018 Chardonnay Octagon Block (£52), is even more structured and concentrated and, even though the oak is ridiculously expressive, it is a sensationally balanced wine. The 2018 Pinot Noir (£34) is equally posh and plush, with Volnay-like appeal and its texture is unlike any English pinot noir to date. The 2018 Pinot Noir Octagon Block (£55) adds even more spice, drama, head-turning fruit density and prodigious length. These are true signposts – pointing the way for us all to a stunning future for English wine.

Matthew Jukes is a winner of the International Wine & Spirit Competition’s Communicator of the Year (matthewjukes.com).

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Eight of the best properties for sale for around £1m

Bryn Madyn Hall, Bagillt Holywell, Flintshire

Bryn Madyn Hall, Bagillt Holywell, Flintshire. A Georgian house with views over the Dee Estuary. It has a dining kitchen with hand-built English oak cabinets and a double sitting room with French doors leading onto the garden. 7 beds, 3 baths, dressing room, 2 receps, stables, 1.18 acres. £1m Strutt & Parker 01244-456823.

The Grove, Gillingham, Suffolk.

The Grove, Gislingham, Suffolk. An early 1800s house with an adjoining former coach house surrounded by gardens with a large vegetable patch, a polytunnel and a pond. The house has open fireplaces and French doors leading onto a conservatory. 4 beds, 3 baths, 2 receps, kitchen, stables, 4 acres. £1.195m Jackson-Stops 01284-700535.

Lleifior, Llandegfan, Porthaethwy, Lon Ganol. An 1890s house built in a mixture of Tudor, Arts & Crafts and Scottish Baronial styles with views over the Menai Strait. It has reception rooms with leaded casement windows and open fireplaces, and a large kitchen with an Aga. 4 beds, 3 baths, 3 receps, study, 3 attic rooms, barn, summer house, 1.45 acres. 2 paddocks available separately. £1.1m Strutt & Parker 01743-284200.

The Red Cottage, Whitburn, Sunderland, Tyne & Wear.

The Red Cottage, Whitburn, Sunderland, Tyne & Wear. A Grade II-listed house built in 1842 for a brickworks owner to display a range of ornate design features. The house is a short walk from the seafront and is set in walled gardens that include a kitchen garden, a greenhouse and a grape house. It has beamed ceilings and a sun room with French doors opening onto a patio. 5 beds, 2 baths, 3 receps, dining kitchen, outbuildings, 0.45 acres. £999,999 Sanderson Young 0191-223 3500.

Deerhill, Aveton Gifford, Kingsbridge, Devon.

Deerhill, Aveton Gifford, Kingsbridge, Devon. A period barn conversion in a woodland setting on the edge of a village. It has vaulted beamed ceilings, a living room with French doors opening onto the garden and a heated swimming pool. 5 beds, 4 baths, 2 receps, 4 acres. £1m Marchand Petit 01548-831163.

Wheeleys Road, Edgbaston, Birmingham.

Wheeleys Road, Edgbaston, Birmingham. A renovated, Grade II-listed 1820s villa in a quiet street in the popular suburb of Edgbaston. The house retains its sash windows, wood floors and period fireplaces, and has a Minton tiled floor, a double drawing room with French doors leading onto the garden and a fitted kitchen with an Aga and doors onto a terrace. 4 beds, 2 baths, 3 receps, cellar, garage. £1.2m Knight Frank 0121-233 6400.

Tall Trees, Kites Hardwick, Rugby, Warwickshire.

Tall Trees, Kites Hardwick, Rugby, Warwickshire. This 18th-century village house was originally two thatched cottages, which have been converted into a single property. It has a large, handmade kitchen with a vaulted ceiling, exposed trusses, an Aga and bifold doors leading onto a terrace. The reception rooms have exposed timbers and open fireplaces. 5 beds, 2 baths, 2 receps, sun room, garage with studio, workshop, gym, stables, gardens, 0.96 acres. £1m+ Pritchard & Co 01608-801030.

Wapping High Street, London E1W.

Wapping High Street, London E1W. A two-bedroom apartment in an award-winning, Grade II-listed warehouse conversion close to Wapping overground station. It retains its iron hoists and exposed brickwork, and has curved, sash-style windows with shutters and wooden floors. It comes with a secure parking space and a share of the freehold. 2 beds, 2 baths, open-plan living area, shared courtyard gardens. £1m Savills 020-7456 6800.

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Where to find the best British seafood

Welsh delights

The Gower Peninsula in Wales has a long history of good food “thanks to fertile farmland, mild winters and miles of coast”, says Liz Boulter in The Guardian. Now, this “fist of land west of Swansea” has seen a “mini explosion of new foodie ventures combining traditional produce with prime 21st-century flavours” that are seasonal, organic and have a low carbon footprint. 

One such is Môr (mor-mumbles.co.uk), a high-end yet informal bistro with a menu shaped by local fishermen and farmers, supplying local lobsters, as well as scallops from Lundy Island in the Bristol Channel. A fishmonger alerts the owners when he’s “going bassing” off a beach on the Gower.

Across Carmarthen Bay, Pembrokeshire is not to be outdone, says Kerry Walker in The Daily Telegraph. Here, “a stiff wind rakes the Atlantic at Freshwater West, where dunes make a joyous leap down to a vast scoop of butterscotch sand”. The wild surf blows away the cobwebs and makes you glad to be alive on a summer’s day. “And never more so than when you are about to get your chops around a Café Môr lobster roll slathered in Welsh seaweed butter – each bite delivering a delirious burst of the sea.” The self-professed “world’s first solar-powered seaweed kitchen” (beachfood.co.uk), on the beach, is “just one example of how Pembrokeshire is embracing its culinary roots with new-found gusto”.

The Norfolk Blue

“The Romans loved Dorset… They turned out with wine and olive oil, built grand villas and swanned around in their togas,” says Stanley Stewart in Condé Nast Traveller. “I feel they would have been proud of the way, two millennia on, it is rediscovering a passion for good food and good living.” Robin Wylde (robinwylde.com), a restaurant that opened in an old Lyme Regis pottery workshop last year, is a case in point. The emphasis is on ingredients fished, foraged or farmed locally, served with West Country wines and ciders. Further round the coast is the “ramshackle” Crab House Café (crabhousecafe.co.uk) at Wyke Regis, “where the oysters come straight from the sea to your table”.

Over in Norfolk, the village of Brancaster is synonymous with shellfish, particularly the mussels that thrive in the salt marshes along the coast, says Richard James Taylor in National Geographic Traveller. Families have been farming the mussels here for generations, “working with time and tide to nurture a prized variety known as the Norfolk Blue”. The White Horse in Brancaster Staithe (whitehorsebrancaster.co.uk) uses them in its take on the classic moules marinière. 

Cley next the Sea used to be one of the most important ports on the North Sea coast. Nowadays, however, it is best known for its 18th-century windmill and “much-loved kippers, smoked gently over oak… at the Cley Smokehouse”. Cromer, “a classic English seaside resort renowned for its dressed crab and grand pier”, is also worth a visit.

The best oysters

“With expanses of beautiful water meeting with lush greenery of the nearby hills and Munros,” Scotland’s lochside restaurants are some of the best places to enjoy the freshest seafood, says Sean Murphy for the Daily Record. The Loch Fyne Oyster Bar (lochfyne.com) in Cairndow, Argyll and Bute, is the place to go for “the best oysters around, and that’s before you take in the surrounding scenery”. “Stunning” Loch Fyne, with its long sea loch combining salt and freshwater, creates “uniquely flavoured oysters that will live long in the memory”. 

Further north, The Seafood Shack (seafoodshack.co.uk), in Ullapool, “is an unassuming catering trailer with bench seating and views over Loch Broom”, say Andy Lynes, Emily Sargent and Harriet Addison in The Times. It is “one of the best places to sample Scottish seafood”. The menu changes daily with the catch, but if you’re lucky, it will feature fried hand-dived scallops with herb butter. The Harbour Café (theharbourcafe.co.uk), in the Scottish seaside village of Elie, is another great seafood spot. There are “amazing views over the rugged coastline” to enjoy while tucking into langoustines served with aioli and buttered new potatoes.

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Daily Market Outlook, July 30, 2021

Daily Market Outlook, July 30, 2021 Overnight Headlines Biden Details New Vaccination Initiatives As Covid-19 Cases Surge Schumer Claims He Has Votes For Moving $3.5T Social Package House Passes Sprawling Spending Bill Ahead Of Fall Shutdown Fight ECB Focusing On Medical Data When Declaring End To Emergency UK Chancellor Optimistic As Pace Of Economic Recovery Picks Up China Keeping An ‘Open Mind’ On G-7 Talks Aimed At Trade Abuses Japan's Factory Output Rises, Job Availability At Near One-Year High Japan Seeks To Expand Tokyo Emergency Amid Record Virus Wave Asian Equity Markets Down, Set For Worst Month Since Mar 2020 Amazon Dumps 7.5% After Hours On Soft Third Quarter GuidanceThe Day Ahead Eurozone Q2 GDP is expected to see the first rise in three quarters as lockdown restrictions impeded output in the previous two quarters. Just released GDP data for France showed a rise in output of 0.9% in Q2. The individual outturns for Germany, Italy and Spain are also all expected to be positive. The forecast rise of 1.5% for the Eurozone might be considered a rather tepid upturn, but that is partly due to the gradual and uneven lowering of restrictions. Moreover, preliminary indications for Q3 point to a further acceleration. The July Eurozone CPI is expected to show annual inflation unchanged from June at 1.9%, while the ‘core’ rate is forecast to slip to 0.5% from 0.9%. That headline number would leave inflation only marginally below the European Central Bank’s new symmetrical 2% target but the much lower ‘core’ rate points to the risk that it may fall sharply. Overall, the data is likely to reinforce expectations that ECB monetary policy is likely to remain accommodative. The data from today’s US consumer spending report for June will have been included in yesterday’s GDP outturn. So today’s reading should provide few surprises. However, it will show the monthly trajectory and so how much momentum spending had moving into Q3. Unsurprisingly, it appears that spending is switching from goods to services as restrictions are eased. The report also contains the Fed’s preferred inflation measure, which is expected to show the annual rate rise above 4% in June, although the Fed continues to describe most of the rise as transitory. . Also in the US, the employment cost index is expected to show a gain of 0.9% in Q2, the same as in Q1. The final reading for July consumer sentiment will be watched in particular for what it says about inflation expectations. The first estimate showed a big rise in 1-year expectations and a smaller increase in 5- to 10- year expectations. Today’s speech from the Fed’s Bullard will provide one of the first comments by Fed policymakers following Wednesday’s US monetary policy update. Bullard does not have a vote on policy this year but will in 2022. His previous comments suggest he favours a relatively early date for tapering asset purchases.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) EUR/USD: 1.1850 (1.5BLN), 1.1865-75 , 1.1900 (1.3BLN), 1.1910-20 (700M) USD/CHF: 0.9225 (250M). EUR/NOK: 10.35 (520M). AUD/USD: 0.7340 (205M) EUR/GBP: 0.8470-80 (810M). GBP/USD: 1.3800 (381M), 1.3900-05 (425M), 1.4000 (270M) USD/CAD: 1.2400 (785M), 1.2450 (735M), 1.2500 (835M), 1.2545 (431M) USD/JPY: 109.00 (537M), 109.25-35 (500M), 110.25 (315M), 110.40 (280M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.1950 Bullish above EUR/USD eased back from 1.1895 EBS early high but still buoyant Downside limited to 1.1878, upside seen capped ahead of 1.1900 for now Option expiries today working again to contain EUR/USD moves 1.1840-50 below E1.7 bln, 1.1865-85 E1.6 bln, 1.1900-25 total E2 bln Stronger EZ data o/n. contrasts with US GDP miss EUR/JPY not a factor, steady between 130.03-31, EUR/GBP quiet, 0.8516-19 EUR/USD's post Fed recovery matches 6 July 1.1895 peak Friday Close above 23.6% of 1.2266-1.1752 fall at 1.1873 opens 38.2% 1.1943 However, huge 5-billion options between 1.1850-1.1920 expire 10-am NY Related delta hedging could certainly have some influence - add resistance EUR/USD implied volatility finds mild support after post Fed setback 1-month risk reversals show a tiny topside vol premium emerging Options focus volatility premium on Jackson hole and Sept FedGBPUSD Bias: Bearish below 1.40 Bullish above. Cable falls to 1.3935 as risk appetite decline weighs on risk-sensitive GBP 1.3935 is the lowest level since Thursday's five-week high of 1.3982 Risk appetite decline influenced by Amazon's Q2 revenue miss 1.3935 is a pip shy of 23.6% Fibo of 1.3768 (Tuesday's low) to 1.3982 Tuesday's low was plumbed before big fix-related buying of GBP New COVID cases in Britain rose for second day in row ThursdayUSDJPY Bias: Bullish above 109 Bearish below Market risk off in Asia on Amazon news, after US GDP miss USD/JPY heavy, to 109.37 EBS before bounce to 109.60 before steadying Support ahead of 109.29 base of daily Ichi cloud, 100-DMA 109.60 above Break below Ichi cloud base could see 109.00 test, 109.07 low July 19 Tokyo better bid from low into Tokyo fix, Gotobi and month-end demand Offers look to be in place from @109.60 Option expiries today 109.00 $537 mln, 109.25-35 $501 mln, supportive US yields sag some in Asia, help cap upside, Treasury 10s @1.252% Asia risk off on Amazon news, Nikkei -1.5% @27,353 Some JPY crosses buoyant, GBP/JPY 152.62-91 Others steady, EUR/JPY 130.03-21 EBS, AUD/JPY 80.80-81.03AUDUSD Bias: Bearish below .76 Bullish above AUD/USD -0.2% as Asia risk mood remains fragile on China regulatory concerns Shanghai Composite -1%, Hang Seng-2.3% as investor sentiment remains fragile Nasdaq e-mini -1.3% after Amazon earnings, likely to dent mood further Dalian iron ore drops 7.5% Fri on China demand concerns, will undermine AUD Upside constrained by Sydney lockdowns which cloud economic recovery outlook RBA meets Tuesday, widely expected to reverse taper decision Resistance 0.7415-20, 0.7445-50, support 0.7375-80, 0.7355-60, 0.7320-25

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Dollar Edges Higher; Weekly Losses Likely on Dovish Fed

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Dividends are back – here's where to find them

Dividends are back. In the second quarter of this year, total UK dividend payouts jumped by a pleasing 51% to £25.7bn, thanks mostly to companies that cancelled dividends in March last year restarting them. Link Group (which publishes a regular UK Dividend Monitor) now forecasts that dividends should grow by around 24.4% this year, for a full-year total of £71.2bn. That is significantly less than in 2019 (just over £100bn) but nonetheless represents a good recovery with more to come as the UK economy continues to normalise. 

You can now get a yield of 3.7% on the FTSE 100 – which with interest rates at 0.1% and inflation rising doesn’t look bad at all. If you can cope with the risk of holding individual stocks there’s a lot more than that on offer: how about 6.5% on Vodafone? Those looking for a more diversified and international stream of income might consider Alliance Trust, a UK-listed trust that gives low-cost access to genuinely active management through the concentrated portfolios of ten excellent equity managers, most of whom UK investors would not have access to independently. The dividend yield is not super-high at the moment (1.4%) but it has risen every year for the last 54 years and Investec points out that the board is in the process of “reviewing the level and funding of the dividend to assess if a more attractive and sustainable level of distributions may be provided”. I suspect that it can.

On the subject of attractive and sustainable dividends, in this week's magazine we look at the Japanese market. There was a time when this was the last place you’d go for income. No longer. Today the market yields 1.7% and there are even Japanese income funds (eg, the Jupiter Japan Income Fund and the Baillie Gifford Japan Income Growth Fund). 

We often write about Japan in MoneyWeek (Olympics or no Olympics). The market has been one of the cheapest in the developed world for years and – even after a 25% rise in the last year – it still is. Whenever we point this out, some of you email to say that cheap is nice, but if something is cheap and stays cheap what use is it to an investor looking to make actual returns. What’s the catalyst? Our reply has been to note several things that might spark a shift in sentiment (and hence prices), but also to add that ordinary investors don’t really need one. Professional investors are pushed for time – they are judged every quarter. That’s why so many of them insist that their fund is run with a “value plus catalyst” strategy. But if you aren’t judged every quarter you should have no sense of urgency. A “value plus patience” strategy will do you. 

That said, a sense of what might get things moving is nice. With that in mind, listen to this week’s podcast with Joe Bauernfreund, manager of the AVI Japan Opportunity Trust. He holds a fairly concentrated portfolio of smaller stocks in Japan, many of which trade at prices not much higher than the value of the cash on their balance sheets. The trust initially aimed to be its own catalyst – engaging with companies to help them unlock that value for shareholders. But now private-equity managers have noticed the opportunities on offer in Japan, and money is flooding in. We don’t always feel happy about private equity buying too many public companies (it is bad for shareholder democracy). But it should at least spark some share-price movement.

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Dollar Up but Ends Week Near One-Month Low Over U.S Data, Fed Decision

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Robinhood is going public – should you invest?

Online stockbroking app Robinhood is going public, but it may already be bracing itself for a lacklustre start. 

Robinhood is due to trade later today under the symbol “HOOD” on the Nasdaq exchange, marking the seventh biggest public listing (also known as an initial public offering, or IPO) to take place on a US exchange in 2021. It is looking to raise $2.1bn.

On Wednesday the company sold 55 million shares at $38 each. That is at the low end of the range of $38-$42 it was targeting, and gives it a market valuation of around $33bn 

It is clear from the price Robinhood opted for that investors are probably not scrambling to buy into the company. But, as Bloomberg puts it: “a lower price in the IPO could allow more room for the “first-day pop” craved by investors when the stock begins trading Thursday.”

Robinhood’s co-founders, Vlad Tenev (who is also the firm’s chief executive and creative officer) and Baiju Bhatt will between them hold most of the voter power and rights in the company. 

But what is Robinhood?

Robinhood was set up in 2013 and is a middle man, a broker-dealer which allows private investors to buy and sell shares. But it is a unique middle-man: it is backed by the US Securities and Exchange Commission and by FINRA, which is part of the Securities Investor Protection Corporation. 

It revolutionised the brokerage industry and gave birth to mobile share trading, making it much more convenient, particularly for amateur investors, to purchase derivatives, something which was difficult until a few years ago. 

It also pioneered the zero-fee business model. Normally, broker-dealers earn money by setting a commission in the form of direct fees to customers. This often deterred investors from buying stocks, but Robinhood’s business model – known as “payment for order flow” (PFOF) – allowed Robinhood to make money by charging market makers in return for directing customers’ trades to their trading desks. This paved the way for other brokerages to embrace the business model and slash fees. 

The zero-feel model has helped several day-traders enter the market and is at the heart of the retail market frenzy that started last year as amateur investors – many using their government stimulus cheques – flocked to the app to make money during heights of market volatility, punting on “meme” stocks such as GameStop.

But the company was criticised during the meme stock frenzy earlier in January this year, when several retail investors came together on forums such as “wallstreetbets” on the social media platform Reddit. 

The flurry in trading in those meme stocks triggered higher deposit limits at its clearing house. This led to a ten times higher deposit requirement for the broker’s equities trading. 

Robinhood had to get emergency funding and put curbs on a number of volatile stocks.

Robinhood was then forced to raise billions of dollars from its backers to prevent liquidity problems. 

Another sore spot relating to that episode was the fact Robinhood blocked the purchases of stocks such as AMC, Gamestop and others just after the Reddit-sparked rallies. It told its clients they would still be able to close out positions in many of these volatile stocks but could not buy any additional stocks. Robinhood’s critics said this amounted to market manipulation. 

But despite the negative publicity, Robinhood remains a strong growth stock, and has raised $5.6bn via 23 separate funding rounds since it was founded, according to Crunchbase. 

For retail investors, Robinhood’s IPO may be particularly attractive as it is making  just over a third of its shares available to buy directly through the app. This is rare for IPOs, which normally put aside reserve shares for institutional buyers. 

So should you invest?

Forbes doesn’t recommend it, and says: “With its rapid growth slowing down, investors should be concerned about talk of a regulatory crackdown on major components of its revenue.” 

The SEC is also exploring the trade in meme cryptocurrency dogecoin, which has risen by almost 6000% in the last year without any fundamental reason or value. Depending on the outcome, it could hurt Robinhood because of its reliance on cryptocurrency revenue as dogecoin alone accounts for 6% of Robinhood’s revenue, reports CNBC. 

Robinhood is also prone to further regulations on its PFOF revenue model. While it accounted for 81% of Robinhood’s revenue in the past quarter, SEC Chairman Gary Gensler is scrutinising the model due to potential conflict it poses to brokers. 

It also still faces 50 class action legal cases from the GameStop saga, 15 cases from application outages in March of last year as well as cases stemming from its PFOF model. 

So if your risk appetite is big, then by all means invest in Robinhood. But as The Motley Fool puts it, while it remains uncertain how badly these lawsuits could harm Robinhood, “they do add another layer of risk to anyone thinking of investing in the company”.

from Moneyweek RSS Feed https://moneyweek.com/investments/stockmarkets/us-stockmarkets/603651/robinhood-is-going-public-should-you-invest
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Pfizer: Pharmaceutical Sector Is Still a Target for Investors

Revenue of American pharmaceutical company Pfizer Inc.  in Q2 2021 jumped 92% on the year to $19 billion, exceeding analyst expectations. Earnings per share in the three-month period jumped 58% to $0.98 on a net profit of $5.6 billion. The drugmaker also raised its full-year guidance and now expects revenue generated by its coronavirus vaccine to increase to $33.5 billion in 2021 from $26 billion.

Pfizer said Wednesday it had sold $7.8 billion worth of Covid-19 vaccines in Q2. Income forecasts were raised as the delta variant spreads rapidly and scientists debate whether people will need a booster shot.

Other Pfizer business units also experienced strong sales growth. Revenue from its oncology unit rose 19% year-on-year to $3.1 billion. The company’s hospital unit generated $2.2 billion in revenue, up 21% from a year earlier. Internal medicine units grew 5% from last year to $2.4 billion.

Pfizer said earlier this month that it was seeing signs of reduced immunity in recipients of its Covid vaccine with German drugmaker BioNTech, and planned to ask the Food and Drug Administration to authorize a booster dose. It also said it was developing a booster shot to target the delta variant.

Pfizer said it could potentially file an emergency use authorization for booster doses with the FDA as early as August, and it expects to start clinical studies testing the delta variant vaccine in the same month. It expects full approval for its two-dose vaccine by January 2022.

Pfizer was up 0.71% to $42.40 a share in premarket trading after the update. The company’s stock has gained more than 14% since its inception.

#Pfizer, D1

Technically,  bulls dominance has been seen since the break of the symmetrical triangle to the current resistance level at 43.02. A further move will test the upper trendline of the ascending tunnel which coincides with the next resistance level 44.57. The continued movement due to strong investor interest in pharmaceuticals allowed the company’s share price to reach a peak price of 46.46 recorded in December 2018. On the downside, it places 41.08 resistance as support in case of profit taking.

Meanwhile, here is the outlook for other similar companies:

• Merck & Company, Inc. will also report earnings today, Wednesday 29 July, before the market opens. According to Zacks Investment Research, based on 3 analyst forecasts, the consensus EPS forecast for the quarter is $1.3. The reported EPS for the same quarter last year was $1.37.
• AbbVie Inc. is scheduled to report earnings on July 30 before the market open. According to Zacks Investment Research, based on 5 analyst forecasts, the consensus EPS forecast for the quarter is $3.12. The reported EPS for the same quarter last year was $2.34.
• Astrazeneca PLC will report earnings on July 29 before the market open. According to Zacks Investment Research, based on 4 analyst forecasts, the consensus EPS forecast for the quarter is $0.45. The reported EPS for the same quarter last year was $0.48.
• Gilead Sciences, Inc. will report earnings on July 29 after market close. According to Zacks Investment Research, based on 9 analyst forecasts, the consensus EPS forecast for the quarter is $1.76. The reported EPS for the same quarter last year was $1.11.

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Joe Bauernfreund: why Japan is an active investor's dream market

Merryn talks to Joe Bauernfreund of the AVI Japan Opportunity Trust about the opportunities for investors in Japan, a hugely under-researched market with plenty of value.

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/603647/joe-bauernfreund-on-japan
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Chinese yuan bears return after regulatory crackdown on private sector: Reuters poll

from Forex News https://www.investing.com/news/stock-market-news/chinese-yuan-bears-return-after-regulatory-crackdown-on-private-sector-reuters-poll-2572333
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