2024-02-19 05:33

Feb 19 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. High hopes China's markets would return from the break with a spring in their step have yet to be met, with modest gains for stocks so far. Tourism revenues during the Lunar New Year holiday did surge by 47% on a year earlier as more than 61 million rail trips were taken, though the comparison was flattered by a particularly weak season last year. The country's central bank skipped a chance to cut rates again on Sunday, which will likely limit downward pressure on the yuan, but with deflation looming, analysts see plenty of scope for further policy stimulus. China's blue chip index (.CSI300) , opens new tab added another 0.5% on top of its 6% pre-LNY rally. Yet that is still down 1% this year and 43% from the highs hit in 2021. In contrast, Japan's Nikkei (.N225) , opens new tab is up almost 15% for the year so far and paused just short of the all-time peaks hit back in 1989. Even after its surge the Nikkei is still only capitalised at 683 trillion yen ($4.55 trillion), about the same as Nvidia (NVDA.O) , opens new tab and Apple (AAPL.O) , opens new tab combined, and far below the S&P 500's (.SPX) , opens new tab $42 trillion. The Nikkei's market cap is also not much more than the total cash held by Japanese companies, many of which trade at a discount to book value. Speaking of Nvidia, the AI diva's results this week will be a test of its sky high valuations and a price to earnings ratio of no less than 96. The chipmaker's $570 billion increase in market cap this year accounts for more than a quarter of the S&P 500's gains, so any disappointment would be a black eye for the whole index. Options imply a risk the shares could swing 11%, or $200 billion, in either direction on the results. Then again Nvidia does have a very fat net profit margin of 42% and, as of October, a cash pile of $18 billion, so it can easily weather the vagaries of one result. It is also riding the most powerful force in markets - momentum. Why is it going up? Because people are buying it. Why are people buying it? Because it's going up. For Europe, there is no major data today but flash PMIs will be important later in the week, along with business and consumer sentiment surveys. Analysts are counting on the European Central Bank survey of consumer inflation expectations to resume its downtrend after a slight uptick in November. The ECB's wage data are also of note given how much policymakers have warned about high wage growth, even though it is a well known lagging indicator. There are plenty of ECB speakers out and about, including President Christine Lagarde at a Eurogroup press conference on Friday. Federal Reserve speakers this week include the always influential Fed Vice Chair Philip Jefferson and Governor Christopher Waller. The Fed also releases on Wednesday minutes of its last meeting, though they have rather been overtaken by events given the high readings for consumer and producer prices. There are ugly forecasts around that core PCE inflation could rise 0.5% in January, when markets had looked for only 0.2%. Fed futures now only imply a 36% chance of a rate cut in May, when it was more than fully priced a couple of weeks ago. The market has less than 100 basis points inked in for the year, having taken out two quarter point cuts. Key developments that could influence markets on Monday: - No major European data, while U.S. markets are shut https://www.reuters.com/markets/global-markets-view-europe-2024-02-19/

2024-02-19 05:29

This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine MOSCOW, Feb 19 (Reuters) - Precious metals producer Polymetal International has agreed to sell its Russian assets to a Siberian gold miner for about $3.7 billion, it said on Monday of a deal forced at a knock-down price by repercussions from the conflict in Ukraine. Polymetal's Russian assets were placed under U.S. sanctions in 2023 in response to Moscow sending troops into Ukraine in February 2022 and the company switched its domicile to Kazakhstan from Jersey and listed on the Central Asian nation's Astana International Exchange (AIX) to try to facilitate a sale. The deal involves Polymetal International selling its Russian business to Mangazeya Plus - part of businessman Sergey Yanchukov's Mangazeya Mining - for around $3.69 billion, of which $2.21 billion is the Russian operation's net debt. Polymetal International CEO Vitaly Nesis said achieving a sale was "imperative" and that with the external environment deteriorating over time, there was no point waiting for general conditions around doing business in Russia to improve. "The current situation is ... unsustainable even in the short run," Nesis told investors. "We do not have an option of sitting on our hands and waiting for something to happen." Polymetal's Russian assets represent around 70% of production and more than 50% of core earnings. In 2021, the company's market capitalisation was more than $10 billion. Its share price, down 7.5% on Monday, tanked after Russia launched its "special military operation" in Ukraine in 2022. Moscow also demands a hefty discount on foreign asset sales. "It's a good deal, it's a satisfactory deal, but it's certainly not a great deal," Nesis told Reuters. "It's clear we are not selling the assets for fair value." Tinkoff Investments analysts said the deal valued the assets at an EV/EBITDA multiple of 2.5 times, implying a "significant discount" to Russian peers' current multiples and to the group's historical average multiple of around 8 times. THE BUYER Mangazeya's offer was the only realistic option of the three or four final proposals, Nesis said. "This buyer understood that an extra $100-200 million is not important to us, but the complete elimination of key vulnerabilities in the structure of the new company," he told Reuters. Mangazeya Mining has largely operated in eastern Siberia since forming in 2011. It produced 466,00 ounces of gold last year, its website says, compared with Polymetal's 1.23 million gold equivalent ounces in Russia. Yanchukov said the management team, led by CEO Sergey Cherkashin, would stay on. Urging shareholders to approve the deal, Nesis said nationalisation had been a risk and that Polymetal International's board had no management oversight of the Russian business. The transaction is fully compliant with all sanctions, the company said. Payments will be made in roubles. The deal includes cash of $1.48 billion, of which $1.43 billion is dividends from the Russian business, and an additional $50 million. Polymetal International, which will remain Kazakhstan's second-largest gold producer after the transaction, intends to use $1.15 billion of dividends received to repay intra-group debt. It will spend part of $300 million retained in post-tax proceeds on developing the Ertis POX project in Kazakhstan. Nesis said the company had started looking at possible M&A deals in Kazakhstan and Tajikistan and was planning to eventually return to the London Stock Exchange after building up the company to production of 1 million gold equivalent ounces in three years. "It's senseless to return to London with the size the company now has," he said. With growth the priority, dividends will take a back seat, with a decision on payouts to be taken in May. "Trying to pretend that nothing has happened or that things have gone back to normal... is very naive," he said. "We have to adapt to the new, hard realities." https://www.reuters.com/markets/deals/polymetal-international-agrees-sell-russian-assets-369-bln-2024-02-19/

2024-02-19 05:08

U.S. holiday drains liquidity from oil markets Dollar slightly higher after five straight weekly gains Israeli raids put Gaza Strip hospital out of service U.S. proposes UN Security Council oppose Israel's Rafah assault NEW YORK, Feb 19 (Reuters) - Brent crude oil prices settled slightly higher in an abbreviated session on Monday, as lingering supply concerns from tensions in the Middle East were offset by signs of weakening demand. Oil markets' saw thinner volumes than usual due to the Presidents' Day holiday in the U.S., UBS analyst Giovanni Staunovo noted. Brent futures also settled earlier than usual because of the holiday. Brent futures gained 9 cents to settle at $83.56 a barrel. U.S. West Texas Intermediate (WTI) crude for March delivery , which will not have a settlement today and expires on Tuesday, rose 30 cents to $79.49 a barrel by 1:43 p.m. ET (1843 GMT). The WTI contract for April delivery was down 11 cents to $78.35 a barrel. Both Brent and WTI futures last week gained about 1.5% and 3% respectively, reflecting the increasing risk of the Middle East conflict widening. The conflict in the Middle East continued over the weekend as Israeli raids put the Gaza Strip's second-largest hospital out of service. On Saturday Yemen's Iran-aligned Houthi fighters claimed responsibility for an attack on an India-bound oil tanker. The U.S. has proposed the United Nations Security Council oppose Israel's Rafah assault and back a temporary Gaza ceasefire, according to draft text seen by Reuters. Capping oil's gains were slowing demand forecasts from the International Energy Agency and a bigger than expected increase to U.S. producer prices in January, amplifying inflation concerns and lifting the dollar. The dollar index , which tracks the currency against six peers, has gained for five straight weeks and edged slightly higher on Monday. A stronger greenback makes dollar-denominated oil less attractive to investors holding other currencies, denting demand. "Oil has been quite choppy in recent weeks, partly because of the dollar strength," said Fawad Razaqzada, market analyst at City Index. "The impact of the dollar has been offsetting supportive measures such as the Middle East situation, OPEC's ongoing intervention and hopes economic conditions in China will improve in the coming quarters," Razaqzada said. Demand jitters were magnified on Friday when U.S. Federal Reserve policymakers signalled the need for "patience" over expectations of cuts to interest rates. Markets are also awaiting indications of the direction of demand from China after it returns from a week-long Lunar New Year holiday. https://www.reuters.com/business/energy/oil-down-thin-trade-us-gears-up-presidents-day-2024-02-19/

2024-02-19 05:01

Feb 18 (Reuters) - Goldman Sachs raised its year-end target for the benchmark S&P 500 (.SPX) , opens new tab to 5,200, reflecting roughly a 4% upside from current levels, citing an improved earnings outlook for the index companies. The brokerage had previously projected the index to end 2024 at 5,100, before raising the forecast from 4,700 in December, on cooling inflation and expectations of the U.S. central bank easing rates in the year. Goldman on Friday forecast an 8% profit increase for S&P 500 companies this year, fuelled by an improved U.S. economic outlook and stronger mega-cap profit margins. "We expect strong world GDP growth and a slightly weaker dollar will support EPS, while lower rates and lower oil prices will be a slight drag," said David Kostin, lead strategist at Goldman Sachs. Kostin expects the earnings strength of mega-cap stocks, especially those in the Magnificent 7, boosting aggregate S&P 500 profits in 2024. The growth in artificial intelligence and consumer strength is expected to propel revenue growth alongside margin expansion, Kostin added. He expects the Magnificent 7 stocks to post the strongest earnings growth among S&P 500 sectors. For the rest of the index, operating margins should also improve, but to a "much smaller" degree, as input costs, such as wage growth, continue to moderate alongside robust sales growth and only modest further price disinflation, Kostin said. https://www.reuters.com/markets/us/goldman-sachs-lifts-2024-sp-500-target-5200-upbeat-profit-outlook-2024-02-19/

2024-02-19 04:04

https://www.reuters.com/markets/commodities/australia-gives-nickel-quick-fix-surgery-global-industry-needed-russell-2024-02-19/

2024-02-19 01:42

All 30 economists predicted no change to interest rates on Feb. 21 BENGALURU, Feb 19 (Reuters) - Bank Indonesia will keep its key policy rate unchanged at a Feb. 20-21 meeting over subdued inflation and an improving outlook for the currency, according to a Reuters poll of economists who predicted the first rate cut to come next quarter. Indonesia's inflation rate has stayed within the central bank's 1.5%-3.5% target range since July, suggesting cumulative rate hikes of 250 basis points were working. The rupiah , although down 1.4% against the dollar this year has performed better than many of its peers. With inflation under control, the central bank has room to leave its policy unchanged in the near-term. All 30 economists in the Feb. 12-16 poll expected Bank Indonesia (BI) to hold its benchmark seven-day reverse repurchase rate (IDCBRR=ECI) , opens new tab at 6.00% on Wednesday. Median forecasts showed interest rates staying on hold until at least end-March, followed by a 25 basis-point cut in each quarter to end the year at 5.25%. That was in line with the U.S. Federal Reserve's expectations for 75 bps of cuts to its fed funds rate this year. "We retain our forecast of the first rate cut by BI during the June meeting after the Fed makes its first rate cut announcement in May. We continue to maintain that BI policy decision is mainly influenced by the Fed actions and any delay by the Fed might delay BI rate action," said Kunal Kundu, economist at Societe Generale. "Given their high dependence on foreign holding of government bonds, their monetary policy continues to be guided by the currency movement and bond yields and not necessarily inflation unless it rises too high, too fast." A majority of economists, 17 of 29, expected at least one rate cut next quarter and among them, 14 forecast the key rate at 5.75% and three at 5.50%. The remaining 12 saw it remaining at 6.00%. "Risks are mostly on the external side, namely that the U.S. inflation may remain hotter than expected, which would cause rate cuts to be delayed," said Elbert Timothy Lasiman, economist at Bank Central Asia, who forecast no rate change. Economists saw limited impact of Indonesia's presidential election. Unofficial vote counts showed Prabowo Subianto as the likely winner markets rallying on his promise to follow incumbent Joko Widodo's policies. Official results are due by March 20 at the latest. "As current economic policies will likely continue under a Prabowo government ... the impact on both monetary policy and fiscal policy will be limited," said Jeemin Bang, an associate economist at Moody's Analytics. https://www.reuters.com/markets/rates-bonds/bank-indonesia-hold-rates-until-q2-elections-unlikely-sway-monetary-policy-2024-02-19/