Market comment 2023

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For months, Sweden's government has sought to play down a property crisis that has throttled confidence in the Nordic state, repeating a simple message: While some companies are in trouble, the country is not. Now Heimstaden Bostad, a $30 billion property investor with swathes of homes from Stockholm to Berlin, is grappling with a multibillion dollar funding crunch, which has rebounded on one of its owners - the country's biggest pension fund. That undoubtedly raises the stakes for Sweden, the European nation hardest hit by a global property rout triggered by the steep rise in interest rates last year that abruptly ended a decade of virtually free money. 

Sweden is one of Europe's wealthiest states and the biggest Nordic economy, but it has an Achilles Heel - a property market where banks have lent more than 4 trillion Swedish crowns ($360 billion) to homeowners. Weighed down by these home loans, Swedes are twice as heavily indebted as Germans or Italians. Earlier this year, the International Monetary Fund flagged Sweden's historically high household borrowing coupled with debt-driven commercial property firms and their dependence on local banks as a financial stability risk. The property crisis accelerated this month when pension fund Alecta, which owns a 38% stake in Heimstaden Bostad, said Sweden's biggest residential landlord needed cash and it may contribute.

Sweden braces as property storm clouds darken | Reuters

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Another estimate by Ehrlich assumes there would be a much smaller immediate spillover effect. He estimated $440 million worth of income would be lost nationally if all the UAW members strike for two weeks. If the strike lasts eight weeks, he estimates a $9.1 billion hit to incomes nationwide. Here are the ways the US economy could get hurt by the strike:

Beyond the automakers: How the UAW strike may hit the US economy

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The cost of batteries fell by nearly 10 per cent in August, taking them past a key milestone that is seen by energy analysts as a “tipping point” to supercharge the transition to electric vehicles. The price of lithium-ion battery cells, which power everything from smartphones to the International Space Station, fell below $100/ kilowatthour (kWh) last month – a 33 per cent drop from March 2022 and an 8.7 per cent month-on-month drop. Energy analytics firm Benchmark Mineral Intelligence, who compiled the figures, noted that battery pack prices need to reach $100/kWh for electric vehicles to reach price parity with fossil fuel-burning vehicles..

Electric cars approach ‘tipping point’ as lithium battery prices plummet | The Independent

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Hope for motorists as bank says oil could fall 20pc within months Drivers could see their fuel bills fall within months after a Wall Street bank predicted the price of Brent crude will slump by more than 20pc toward $70 next year. The global oil benchmark slumped more than 3pc as markets opened in London after analysts at Citi predicted its price will fall from its present level of around $92 a barrel. Oil is up 0.4pc since then.  Governments and central banks around the world had feared the prospect of oil prices heading toward $100 a barrel, which would risk fuelling inflation. 

Prices had rallied by more than a quarter since mid-June when Russia and Saudi Arabia began unilateral cuts to global supplies. However, analysts at Citi said Brent crude will collapse to a low of $70 a barrel next year as the global market swings back to a surplus. The bank’s global head of commodities research Ed Morse said prices would average $73 in the second quarter of next year. He said: “Demand looks constrained as the pandemic recovery factors continue to ease off and peak transport fuel demand looms, while supply is growing in non Opec+ suppliers.” He added that cuts to supplies “have driven oil higher in a prolonged bull run” but that the fourth quarter of this year “is set to move lower with further 2024 downside”.

Tesla suffers first fall in deliveries in more than a year

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Big tech outperformance of smallcaps at record high

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As the stock market goes along for a choppy ride, chartists are keeping close watch on an important level for the S&P 500, the subject of our call of the day. “The 4,200 mark is crucial,” says Michael Kramer, Mott Capital Management   founder. “Not only is it where the 200-day moving average [DMA] resides, but dropping below 4,200 also means the S&P 500 no longer boasts a 20% gain from the October 2022 lows.” The S&P 500 SPX closed at 4,229.45 on Tuesday, a 1.37% drop.

TRADINGVIEW/MOTT CAPITAL
“It’s worth considering how many investors might grow anxious if the 200-day moving average is breached and the index is no longer in a bull market,” Kramer told clients in a note.

The 200-DMA is considered a key indicator used by many chartists to determine long-term trends. After Tuesday’s selloff, the S&P 500 is still 21% above its October intraday low. “4200 is a big technical level and a very big psychological level, and if that breaks, I would think things get worse. Obviously, if you get weak job data on Friday and rates collapse, stocks will snap back. So suddenly, Friday’s job report just became a whole lot more important,” said Kramer. A stock market commentator who goes by Heisenberg (@Mr_Derivatives) has been discussing in recent weeks a pivotal moment facing the S&P 500. He’s optimistic, expecting a visit to 4,200 sooner than later, perhaps an “overshoot” to 4,185 to 4,190, and a “decently strong rally” from there out. 

Stock-market rout puts all eyes on 4,200 level for S&P 500

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An ADP report released Wednesday showed that private payroll data from September came in lower than expected, indicating that labor market growth may be slowing. Job growth came in at just 89,000 for the month, down from an upwardly revised180,000 in August sharply lower than the 160,000 forecasted by economists polled by Dow Jones.

Stock futures rebound after light jobs data sends yields lower: Live updates

• The slowdown might come just in time to save the stock market, but it needs confirmation Friday from the jobs data.
  

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Its monopoly has been due to the exploitation of photolithography to an extreme level. Each EUV lithography system made by ASML costs around USD 200 million and is made of thousands of components acquired from nearly 5000 different suppliers. The machines, which are the size of a double-decker bus and weigh around 180 tonnes, are also made up of seven different modules, built around ASML’s manufacturing sites spread across more than 60 locations on three continents.

 Is ASML the Most Important Tech Company in the World?

Tom Lee, head of research at Fundstrat, is well-known as a stock-market bull. And here’s one chart that he just can’t get his around. It’s of 10-year yields around the world. The yield in the U.S. BX:TMUBMUSD10Y is higher than even Greece’s BX:TMBMKGR-10Y, which admittedly has made strides in reducing its debt burden but still has a worse credit rating than the U.S. Lee appended further “wut” tags to the bonds of Spain BX:TMBMKES-10Y, Germany BX:TMBMKDE-10Y and Japan BX:TMBMKJP-10Y.

Inflation is higher in Germany, Spain and Greece than in the U.S., and Japan isn’t far behind. Lee adds that the U.S. also doesn’t have a currency that is riskier to justify the yield difference. “Maybe this is another example of how there’s been a lot of momentum pushing yields higher, but it may be divorced from fundamentals,” he said in a video message. Lee did add that it doesn’t necessarily mean that things will change next week. There are of course other reasons why U.S. yields are higher. In Japan’s case, the central bank there is still buying debt, while the Federal Reserve is shrinking its balance sheet. Germany has a much smaller debt burden relative to the size of its economy than the U.S.

The chart that has one strategist convinced bond market is divorced from fundamentals

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For the second time in just over two months, Country Garden has warned investors that it could default on its $190 billion debt in a reminder that China’s real estate crisis is far from over. The company said it had not made a repayment of 470 million Hong Kong dollars ($60 million) due to overseas bondholders by Tuesday. The troubled developer, formerly China’s largest, is battling a liquidity crisis and has dodged multiple defaults in the past month. But persistent weakness in the property market and a difficult refinancing environment have hobbled its ability to raise enough cash to service its billions of dollars of debt. It said sales of apartments fell by 81% in September, compared with the same month last year. Country Garden “expects that it will not be able to meet all of its offshore payment obligations when due or within the relevant grace periods,” it said in a Tuesday filing to the Hong Kong Stock Exchange.

China’s Country Garden warns of default again as property sales plunge

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Novo said the trial would be halted almost a year early based on a recommendation from the independent data monitoring board overseeing the study. Independent monitors can recommend stopping a trial early if there is clear evidence that a drug was going to succeed or fail based on interim analyses.
Novo's U.S. listed shares rose 2.5% in extended trading. The Danish drugmaker said the trial was testing whether the widely used diabetes drug, which contains the active ingredient semaglutide, could delay progression of chronic kidney disease and lower the risk of death from kidney and heart problems. emaglutide is also the active ingredient in Novo Nordisk's powerful weight-loss drug Wegovy. 

Barclays analyst Emily Field said in a note that the company's decision affirmed the view that GLP-1 receptor agonists like Ozempic have "therapeutic benefits far beyond their original intended purpose." Since the start of the year, Novo has been riding a wave of demand for its highly effective semaglutide-based diabetes and weight-loss drugs that transformed the drugmaker into a $315 billion powerhouse. The company briefly unseated luxury goods brand LVMH (LVMH.PA) as Europe's most valuable listed company in September, and has seen its shares rise by around 17% since it announced in August that a large study had shown Wegovy had clear cardiovascular benefits. Novo's success has also created an economic boom for Denmark, according to Danish economists, analysts, and executives at the Novo Nordisk Foundation.

Novo Nordisk stops Ozempic kidney trial after early signs of success

It will replace hundreds of millions of jobs. It will revolutionise the way we work. And it will turn every major industry upside down. There has been a lot of hype over the past few months about the way that artificial intelligence will transform the economy. And yet there is another innovation with the potential for far greater impact: weight-loss drugs. From flying, to snacking, to healthcare and insurance, the new generation of pills and injections to reduce Type 2 diabetes and obesity may well turn out to be the genuinely transformative innovation of this decade, and in ways the markets have only just started to reckon with.

Novo’s share price has quadrupled over the past five years, and last month it overtook the French luxury goods giant LVMH to become Europe’s largest firm. With a market cap of more than $400bn (£327bn), its value is already greater than Denmark’s GDP, and the drug’s success has already lifted the country’s annual growth rate. The UK has a successful life sciences sector, but we could certainly do with a mega-hit like that. And yet the impact of weight-loss drugs could extend far wider than one company. In the UK, a quarter of the population are classified as obese, while another 37pc are overweight. In the US, more than 40pc of the population is classified as obese, and 11pc as “severely obese” (defined as more than seven stone overweight).

Weight-loss drugs will transform our economy as well as our waistlines