Happy hump day folks! Markets are heating up more than ever right now with a slew of macroeconomic and geopolitical shifts hitting the playing field yesterday and today. Stealing headlines have been the ‘closing of the tap’ of Russia’s Nord Stream 1 pipeline…this provides a large minority of energy needs to the EU and acts as Germany’s main energy supply. Panning to monetary news, the Bank of England has now joined Japan in purchasing their own government’s long-dated bonds, a strategy that doesn’t really seem to work but alas, here they are as well now suspending their own house of cards.
Markets in Review
On all this material news, indexes aren’t trading too far down in the premarket, just about 1, 22 and 60 bps for the Dow, S&P and Nasdaq respectively. However, European markets are seeing way more red currently, with the Euro Stoxx 50 index losing 8 percent over the last few trading days alone. Despite the market not wanting to lose this key 3600-point psychological level as tracked by the S&P 500, it has been a constant battle between buyers and sellers and this has maintained a heightened level of volatility; as such, the $VIX has started to make its way into the mid-30s, clocking in at 33.31 at time of writing.
S&P 500 Index, 1D
Panning to European energy, now could be the time for the beginning of another leg of the oil super-cycle; price action could be similar to what happened early on in the pandemic following negative oil prices when producers experienced triple-digit runs over 2021. Now more than ever could a run in European oil stocks take place as US energy’s earnings growth outpaced Europe’s by roughly 30% over the last twelve-month period. With the shutting off of Nord Stream 1, now is the time for non-Russian oil companies to make up the difference and catch up to their US peers’ valuations. Read an in-depth report on the earnings growth of European energy producers here.
Trade of the Day - Short: Apple (AAPL-NASDAQ) | Timeline: 2 days
Apple Inc. (AAPL), the company we all know and love, designs, manufactures and markets personal technology worldwide. Still, it looks like they were a little too far over their toes when considering production numbers for their new iPhone 14 as they are now dropping plans to increase production of its new iPhones this year after a much-anticipated surge in demand failed to materialize. (Full Story) Turning to the chart, AAPL has had quite the indecisive year so far. The stock experienced a death cross midway through the year but is now attempting a golden cross as we enter the last quarter of 2023. That said, with negative company news and the MACD signalling bearish momentum as it crosses below its equilibrium, AAPL is likely to continue trading through its downward price channel over the next couple of days.
Zooming out...
Nord Stream Sabotaged
The Nordstream pipelines are a pair of undersea natural gas pipes that bring gas from Russia into Germany, who then disperses it to other European nations. While these pipes have been extremely contested as the war in Ukraine continues, nothing has been done to physically disrupt their use, on Tuesday that all changed. While Nord Stream 1 had been shut off for the past month, and Nord Stream 2 was non-operational this move still could prove to be the match that sparks the tinderbox in such a treacherous time. Calls of sabotage were quickly uttered by members of many European governments, which are heavily supported by Swedish seismology readings. These readings picked up a blast that registered as a 2.3 on the Richter Scale in the near vicinity of the pipeline. Many have ruled out the possibility of natural events as the leaks appeared in both pipelines nearly simultaneously. The depth of the damaged pipeline is only 70m, or roughly 220 ft, meaning that any commercial diving team could be within reach, although, with the heavy security presence in the area state actors are suspected.
The Disruption Viewed From Danish F-16s
This disruption comes on the same day as the new Baltic Pipe opening. The Baltic Pipe is a new gas pipeline sponsored by Poland, Denmark, and Norway, which brings gas from the North Sea to Poland, through Denmark. The goal of the project is to create a new gas corridor within Europe with further hopes of reducing dependence on Russia in the process. Culpability aside, the attack on the pipelines will be detrimental to Europe’s success throughout the coming winter, as now they are backed into a corner. On the bright side, this act removed the powerful chain that Putin held over the continent and might be the catalyst for Europe to separate from Russia economically. On the other hand, it could lead to widespread energy shortages throughout the continent for the foreseeable future.
Making headlines...
Labour shortage, pandemic savings to soften the blow of a short-lived recession
A tight labour market and elevated savings during the pandemic will cushion the impact of a recession on Canadians, says a new report from Deloitte. (Full Story)
Investors Make Long-Term Bet on Renewables as Gas Crisis Deepens
Some bond investors are playing the long game as a deepening standoff with Russia threatens Europe’s energy supply, betting that gas shortages will speed up a transition to renewable energy. (Full Story)
Biogen stock explodes higher after potential 'mega blockbuster' Alzheimer's drug study
Biogen stock is booming as Wall Street speculates about a potential profit boom after a promising study detailed the company's new Alzheimer's drug in partnership with Japan’s Eisai. (Full Story)
Enbridge sells minority stake in seven pipelines to Indigenous communities
Enbridge Inc. has signed a deal to sell a minority stake in seven pipelines in the Athabasca region of northern Alberta to a group of 23 First Nation and Métis communities for $1.12 billion. (Full Story)
Turkish State Banks Set to Exit Russia’s Mir on US Warning
Turkish state banks are planning to exit a Russian payment system, a dramatic example of how US secondary sanctions are forcing countries to distance themselves from Moscow. (Full Story)
Chart of the Day - Measuring the Dollar…
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- Madeleine Albright
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