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Now for some insights…
Stocks to Watch
Exxon Mobil (XOM) – As tensions in the Middle East rise, Exxon Mobil is sure to benefit be by any conflict in the Middle East that would drive up prices.
Advanced Micro Devices (AMD) – This company’s stock has been on the rise lately as they gain market share from their chief competitor, Intel (INTC). Their strong second-quarter earnings report released last month caused their stock price to jump, and they show no signs of slowing down.
Nvidia (NVDA) – This company provides the chips that power many of the high-end graphics in today’s video games and movies. Their stock has been on a tear lately, and with several big-budget films set to be released in the coming weeks, they could see even more gains.
Medical Properties Trust (MPW) offers a super-high dividend yield plus a solid, profitable track record. This stock is a great income play for investors who are looking for some stability in their portfolio.
Airbnb (ABNB)- Airbnb reported earnings that topped expectations, as the company said it is seeing a "V-shaped" recovery in travel demand. The company's revenue for the quarter came in at $2.52 billion, which was higher than the $2.25 billion that analysts were expecting.
Comcast (CMCSA) Strong 4th quarter results driven by growth in high-speed Internet and business services, as well as a decline in subscriber losses for its video business, suggest that it is still a well-run company with a solid future.
Trends and Events
In 2022 Google searches for both food and energy prices hit their five-year high.
Network analysis of news articles that mention geopolitics, supply chain, food, and energy prices show:
General supply chain issues, rising food prices, and geopolitics are the most embedded topics within the network.
Green supply chain management is outside of the network signaling that firms are not connecting these technologies at a mainstream level. But as ESG programs become more analytically driven and it’s likely that they will become more integrated over the next two to five years.
Geopolitics is most connected to energy followed by manufacturing supply chains.
The chart below ranks each cluster’s connectivity across the network above.
European Energy
Leaders of the European Union member states agreed on a 'roadmap' of measures to protect European consumers from the effects of soaring energy prices. The summit agreement sets out a plan for continued work on the topic of energy prices, with the goal of submitting concrete decisions to energy ministers and the European Commission. Among these decisions are a proposed "temporary dynamic price corridor on natural gas transactions" that would limit price spikes, and a price cap on gas used to generate electricity. Essentially, this means that the EU is taking steps to protect consumers from being overcharged for energy, by working to create stability in the markets. This is good news for European citizens, who have been struggling with rising energy costs in recent years.
What Caused the Price Spikes?
One of the main causes of soaring energy prices in Europe has been the Russia-Ukraine gas dispute. In 2009, Russia halted all gas supplies to Ukraine after a pricing disagreement between the two countries. This led to shortages across Europe, as much of the region's gas comes from Russia via pipelines through Ukraine. In response to this crisis, the EU worked with Russia and Ukraine to develop a new pricing system for gas supplies, which came into effect in 2011.
However, this system has not been working as intended, and there have been several instances of Russia cutting off gas supplies to Ukraine since then. As a result, prices have become increasingly volatile, and consumers have borne the brunt of these price spikes.
What Are The Proposed Solutions?
The "temporary dynamic price corridor on natural gas transactions" would essentially create a ceiling and floor for prices, so that they cannot spike too high or fall too low. This would help to stabilize the market and protect consumers from sharp increases in prices. The other proposed solution is a price cap on gas used to generate electricity. This would also help to keep prices stable and predictable, making it easier for households and businesses to budget for their energy costs.
Global Inflation & Interest Rates
China is set to report trade data on Monday and inflation data on Wednesday, with weakening factory prices and tame consumer prices, another sign of weakness in momentum. Chile will release a series of economic data on Monday, including trade and copper exports, followed by October inflation data on Tuesday, which are expected to show a second consecutive year-on-year decline from the 14.1% cycle high in August.
Bank of England hikes rates by 75 basis points and warns of 'longest recession’
Households across the UK are facing even more financial pain after the Bank of England hiked interest rates to 3%. Today's decision by the Monetary Policy Committee to raise interest rates was widely trailed and is explained by the Bank as a response to ongoing high levels of inflation, particularly in the price of energy and food. In September prices had risen by 10.1% compared to a year ago, well above the 2% level that the Bank of England is required to target in its policy-making.
German Chancellor Olaf Scholz made his first visit to China
Chancellor Olaf Scholz made his first visit to China as German leader last week, a diplomatically delicate journey as Germany and the European Union work on their strategy for an increasingly assertive and authoritarian Beijing. “Current Sino-German relations can be characterized as ‘politically cold and economically hot,'” said Ding Chun, director of the Center for European Studies at China’s Fudan University, a phrase often used to describe relations between Beijing and Japan.
Last year, China was Germany’s biggest trading partner for the sixth year in a row, with the value of trade up over 15% from 2020, according to official statistics.
Together, Chinese imports from, and exports to, Germany had been valued at €245 billion ($242 billion) in 2021.
China made up 40% of Volkswagen’s worldwide deliveries in the primary three-quarters of these 12 months, and it’s additionally the top marketplace for different automakers akin to Mercedes.
Copper, Iron Ore rally on hopes for China COVID reopening
According to Reuters, three-month copper on the London Metal Exchange recently traded +4.4% to $7,895/metric ton after reaching $7,918/ton, its highest since September 13. Iron ore futures also are surging, with January iron ore on China's Dalian Commodity Exchange ending daytime trade +4.9% to 662.50 yuan/metric ton, and December iron ore on the Singapore Exchange +5.5% at $86.20/ton. Also, copper stocks in LME warehouse fell by 5,375 metric tons to 88.6K tons, the lowest in more than seven months.
How We Got Here
Gold prices are up 2% as a key recession gauge hit a 40-year high
The gold market no longer fears the Federal Reserve’s aggressive interest rates as a critical recession marker has reached its highest level in four decades, according to some market analysts. December gold futures last traded at $1,665.70 an ounce, up more than 2% on the day. The gold market is also being helped by the renewed bargain hunt as the price has managed to hold critical support above last month’s low of around $1,621 an ounce. However, analysts have said that an increase in investor sentiment could fuel renewed demand for gold.