It’s Sunday once again. Which means it’s time for this week’s market update!
Not the busiest week, but the quiet period won’t last long. Next Friday, earnings season rears its ugly head once again. As always, I’ll report on as many companies as I can. If you have any specific requests, just let me know.
Without further ado, let’s see what’s been going on this week.
Key Events
OPEC and BRIC Groups Push Back Against The West
This week, we’ve seen various reports suggesting that both OPEC and BRICS (Brazil, Russia, India, and China) are wanting to reduce their dependence on the West. Specifically, reducing the use of the US dollar.
For example, various trade agreements between countries such as China, Russia and Saudi Arabia have already come to light over the last few days. These agreements involve ditching the US dollar as their prime trading currency, in favour of the Chinese Yuan.
Moreover, BRICS have even opted to begin work on creating their own, unified currency. This is likely an attempt to, essentially, create a secondary ‘global currency’.
Earlier this week, it was reported that the Chinese Yuan replaced the US dollar as the most traded currency in Russia. The question is; is this a temporary dip in confidence for the dollar? Or is this the start of a currency ‘collapse’?
Regardless, the past week’s announcements will undoubtedly be weighing on the minds of US lawmakers and banks.
NOTE: I want to give the Instagram page, smartfinancepage, some credit here. I’m only aware of much of the above because of his stories this week.
UK House Prices Rise for Third Consecutive Month
On Thursday, Halifax released their monthly report on average UK house prices.
The report suggests home prices rose by 0.8% in March (i.e., month-over-month), bringing the average house price to £287,880. In fact, this is the third consecutive month where house prices have risen.
However, this increase has slowed drastically since the start of 2023. In January, house prices rose by 2.1%, while in February they rose by 1.6%.
With high inflation, a cost-of-living crisis and high interest rates, I personally won’t be surprised if we see home valuations begin to decline for a 6-12 month period. Then again, neither the housing or stock market have made sense over the last 12 months, so anything could happen.
Stock Market News
World Wrestling Entertainment (WWE) – Company Merge Announced
Earlier this week, WWE announced it has agreed to merge with the Ultimate Fighting Championship (UFC).
The merge has valued the combined companies at an eye-watering $21.4bn, creating a sports entertainment supergiant.
The new company will be listed under ticker symbol “TKO”, but an official name has yet to be announced. WWE’s ex-CEO, Vince McMahon, will retain his current executive chairman role.
Virgin Orbit Files for Bankruptcy
Last week, I reported on the collapse of Virgin Orbit.
Well, on Tuesday, after failing to obtain last-minute funding, the company has filed for bankruptcy protection.
This marks the end of another Branson-funded venture, of which there are many. Almost too many to count at this point!
Tesla (TSLA) – New Mega-factory Announced
This weekend, Tesla announced it will be building a second mega-factory, where it builds its megapack product.
It’ll be built in China, near Giga Shanghai, and will have the same capacity as the company’s megapack factory in Lathrop, California. Production will also be the same, producing up to 10,000 megapacks per year.
As is the classic Tesla MO, the factory is expected to be operational by Q2 2024, merely twelve months away.
This announcement will double megapack production, which currently has around a two year wait time for delivery. Thus, the demand is definitely there and waiting. At about $2m per megapack, fully ramped production would bring in another ~$20bn per year in revenue.
Shell (SHEL) – Quarterly Update for Q1 2023
This week, Shell gave us a little insight into their Q1 earnings, which will be released on 4th May 2023. In short, the company gave us two key insights.
Firstly, Shell has sold higher volumes of liquified natural gas (LNG) in Q1 compared to Q4 2022. Secondly, the company hinted at a net loss for the quarter. While this sounds shocking, considering the profit they have been achieving, it’s not something investors will be concerned about. Essentially, the company will be taking advantage of an accounting practice, where it ‘front runs’ its expected future windfall tax, by including it in current quarters instead.
In all likelihood, Shell will have no shortage of cash generation, and will continue to pay attractive dividends. To make things even better for the company, oil prices have recently spiked past $80 per barrel once again. This will boost Q2 numbers, which were previously expected to come in lower as supply chains stabilise. OPEC had other ideas!
Next Week
US CPI (Inflation) Data for March 2023
On Wednesday, we’ll get inflation data for March.
Somewhat shockingly, the consensus estimate is that year-over-year, inflation will rise by 5.2%, compared to 6.0% in February. Month-over-month, it’s expected that CPI will come in at 0.3%, or 3.6% annualised.
Core CPI is expected to come in at 5.6% year-over-year, slightly above February’s 5.5%. This will also be the first time in recent years that core inflation edges higher than headline inflation.
This will no doubt be an interesting report, and act as a huge stock market catalyst.
Company Earnings
Here’s a list of the company earnings I’ll be covering next week (subject to change):
- JPMorgan Chase (JPM) – 14th April
Let me know your thoughts on this week’s events, in the comments below!
