Dear Eoin I hope that your move went well. The chart of Carnival (CUK in the USA) is making an interesting breakout. It is a classic example of a company that suffered greatly from Covid and that has a great recovery potential.
David Fuller and Eoin Treacy's Comment of the Day
Category - Global Middle Class
Email of the day on post pandemic recovery candidates
Australia's Economy Powers On, Recouping Pandemic Losses
This article from Bloomberg may be of interest to subscribers. Here is a section:
Australia’s rapid rebound has been underpinned by its ability to limit Covid-19 outbreaks, boosting consumer and business confidence. A massive fiscal-monetary injection strengthened the financial position of households and firms during the lockdown, and consumers are spending and companies hiring.
“Australia is in rare company here -- only five other countries can boast an economy that’s larger now than before the pandemic,” said Kristian Kolding, a partner at Deloitte Access Economics. “Maintaining this trajectory is now the task at hand -- the lockdowns in Victoria are a stark reminder that the pandemic is far from over.”
Deloitte noted that on average, economies in the Organisation for Economic Cooperation and Development are 2.7% smaller than they were before the pandemic. The U.K. is almost 9% smaller, the European Union is 5% smaller and the U.S. has shrunk 1%, it said.
Yet a potential risk to the outlook is the sluggish rollout of a Covid vaccine. This has been magnified by a renewed outbreak of the virus in Melbourne that prompted a lockdown in the nation’s second-largest city, and has now been extended for another week.
Vietnam Stocks Set to Rally Further Despite Virus Resurgence
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Local investors have continued to snap up stocks despite a domestic coronavirus surge, with more than 4,000 local virus cases reported since the end of April - three times more than new cases last year. Last month, the index gained more than 7%, the most in the region.
That compares to a 25% slump in March last year as the global pandemic erupted, and a decline of about 4% in January when another wave hit the country.
Stocks have remained resilient in part due to efforts by the government to contain the outbreak and demand from the Vietnamese making the most of low interest rates. Trading value for Vietnamese stocks climbed to all-time high Monday-- at more than $1 billion, as retail traders poured funds into the market.
On Tuesday, the main bourse halted trading in the afternoon as turnover surged. The VN Index is trading at about 15 times estimated earnings for the next year, compared with more than 16 times on the MSCI Asia Pacific Index.
First named storm of hurricane season comes early because of warming seas
This article from the Hill may be of interest to subscribers. Here is a section:
"The system is considered a subtropical cyclone rather than a tropical cyclone since it is still entangled with an upper-level low as evident in water vapor satellite images, but it does have some tropical characteristics as well," according to the National Hurricane Center.
There have been pre-season named storms in the past six years, but Ana’s addition to the group is distinct for another reason. Storms in May normally form near the eastern Gulf of Mexico, the western Caribbean Sea or the Southeastern coast of the United States, CNN reported. But subtropical storm Ana is distinct because it formed in the Atlantic.
The National Oceanic and Atmospheric Administration (NOAA) recorded a record-breaking 30 named storms in 2020. NOAA reported that 2020 was the fifth consecutive year with an “above-normal” hurricane season. There have been 18 “above-normal” seasons out of the last 26.
“As we correctly predicted, an interrelated set of atmospheric and oceanic conditions linked to the warm AMO were again present this year. These included warmer-than-average Atlantic sea surface temperatures and a stronger west African monsoon, along with much weaker vertical wind shear and wind patterns coming off of Africa that were more favorable for storm development. These conditions, combined with La Nina, helped make this record-breaking, extremely active hurricane season possible,” said Gerry Bell, lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center.
ECB Expected to Keep Its Higher Bond-Buying Pace Through Summer
This article from Bloomberg may be of interest to subscribers. Here is a section:
The pandemic purchases were ramped up in March when the U.S. rebound was fueling a global rise in borrowing costs while the euro zone was in a double-dip recession. The ECB will unveil new economic projections that should confirm a far brighter outlook as vaccinations pick up.
A European Commission report on Friday showed economic confidence in May at the highest level in more than three years as restaurants, hotels and shops across the region start to reopen.
Yet in a sign that the recovery remains fragile, French data on Friday came in much weaker than expected. Consumer spending fell 8.3% in April from the previous month, more than twice as much as forecast, and first-quarter gross domestic product was revised to show a decline. Finland also posted an unexpected contraction.
Bank of England likely to raise rates at some point in 2022
This article from Reuters may be of interest to subscribers. Here is a section:
“In that scenario, the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter,” he added.
The government’s furlough programme, which pays the wages of more than 2 million workers, does not expire until Sept. 30 and Vlieghe said it would take time for the true health of the economy until early in 2022.
If unemployment in the first quarter of 2021 was low and upward pressure on wages stronger then than the BoE expected, “a rise in Bank Rate could be appropriate soon after, along a slightly steeper path than in my central case,” Vlieghe said.
However, if concerns about COVID infection risks persist - possibly as a result of new variants of the disease - higher unemployment could prove persistent and the economy might need more BoE stimulus. (Reporting by David Milliken and Andy Bruce)
China Stocks Jump Most Since July Amid Record Foreign Purchases
This article by Jeanny Yu for Bloomberg may be of interest to subscribers. Here is a section:
Beijing’s efforts to talk down commodity prices and impose more control over financial markets have sent investors into more defensive assets such as consumer stocks with steady cash flows. Liquor giant Kweichow Moutai Co., mainland’s biggest stock, rose 6% after Chinese media outlets reported its parent company aimed to double revenue by 2025.
“Beijing’s crackdown on commodity prices has forced more funds to seek shelter,” said Zhang Gang, a Central China Securities strategist. “Stocks such as Moutai are attractive given its stable earnings outlook and relatively reasonable valuation following this year’s correction.”
Cars Are About to Get a Lot More Expensive
This article from Bloomberg may be of interest to subscribers. Here is a section:
Consider a car manufacturer with $100 billion in sales. A 10% decline in sales volume would push earnings before interest and tax down by 40%, the Boston Consulting Group has estimated. That's an optimistic scenario — and this analysis assumed the company could eliminate all variable costs such as raw materials and labor. In the current situation, that’s not quite possible.
No doubt, carmakers could digest the rising cost of production a bit longer by reducing incentives and discounts they’ve used to lure buyers. But that's already been happening in the world’s largest auto markets, the U.S. and China, and you can’t trim back enticements forever.
Companies have few options to offset creeping manufacturing expenses. With prices already high, consumers aren’t going to be as liberal with their wallets. So far, they have been willing to
accept a 12% premium, or around $5,000 over the sticker price, according to Kelley Blue Book and Cox Automotive. But a U.S. vehicle affordability index has started ticking down, signaling people are beginning to think twice before splashing out. Almost 40% of those who were going to buy cars have now put off their purchases.
Canadian Dollar is pick of commodity currencies
This trading note from Bloomberg may be of interest to subscribers. Here is a section:
The Canadian dollar may fare better than other commodity currencies in the remainder of the year as resurgent growth spurs the nation’s central bank to wean the economy off stimulus.
While already perched near multi-year highs, the loonie still has potential to add to its gains given the surge in commodity prices and an economy that is forecast to grow at the fastest pace in several decades. And with the Bank of Canada having unveiled a scale-back of government debt purchases while accelerating the timetable for a possible interest-rate increase, money markets have lost no time in pricing an aggressive rate trajectory.
Other G-10 commodities, too, have fared well this year. While Norway’s central bank is likely to raise rates sooner than its Canadian counterpart, the differential between 10-year yields in the two nations is a considerable hurdle for the krone to overcome. The Australian and New Zealand dollars, meanwhile, face considerable headwinds to climb from current levels given that they are both overvalued from a fundamental perspective, especially against a backdrop where their central banks are likely to stay accommodative for a long time yet.
The Canadian dollar also stands out in relation to its peer group by its muted volatility, which reduces the overall risk in a portfolio setting. All told, it’s been plain sailing for the loonie so far this year. If the current macroeconomic backdrop prevails, 2021 may well turn out to be annus mirabilis for the currency, not only against its commodities peer group but also the wider G-10 complex.