Get started

Europe

XNGUSD ready to reverse recent downtrend LONGOn the daily chart here XNGUSD had a head and shoulders or double top last summer and fall and has now trended down to support. I see this as a prime place to take a long position. The decline of the overvalued USD contributes to this idea as does the persistent demand in Europe for compressed / liquid NG and the ongoing war there that could eventually grind into WWIII. ETFs such as BOIL , UNG and UNL may be a good way to make this trade if not in the forex market.
FXOPEN:XNGUSDLong
by AwesomeAvani
Quality is back in focus, amidst the banking turmoilHistory never repeats itself, but it often does rhyme. The recent collapse of Silicon Valley Bank (SVB) and Signature Bank in the US and the forced takeover of Credit Suisse by rival UBS have triggered concerns of contagion across the global financial system. The current stress in the banking sector is reminiscent of the 2008 financial crisis. However, unlike the 2008 financial crisis, uncertainty is not centred on the quality of assets on bank balance sheets but instead on the potential for deposit flight. Tough ride for Banks ahead US regional banks have witnessed significant deposit outflows which, combined with unrealised losses on their security holdings, have seen banks consuming their liquid assets as a very fast pace. In turn, sentiment towards European banks has deteriorated. This is evident in the widening of debt risk premia, making it more expensive for banks to fund their operations. It’s important to note that banks were already tightening lending standards prior to recent events. So, lending conditions are likely to tighten further as deposits shrink at small and regional US banks and regulators respond to the new risk environment. The turn of events in the banking sector have led to higher uncertainty which is likely to be reflected in higher volatility in credit markets. So far, the impact on other sectors has been fairly contained, but a further deterioration of bank credit quality could drag other industries lower as well. We are still in the early innings, so the range of repercussions remains wide. Traditional defensive sectors offer more protection in prior weakening credit cycles On analysing the impact of a further rise (by 200Bps) in credit spreads on US and European debt (highlighted by the dark blue bars) we found that not all equity sectors will be impacted equally on the downside. In fact, traditional defensive sectors like utilities, consumer staples and healthcare could offer some protection in comparison to cyclical sectors such as banks, energy and real estate. Since March 8, 2023, the steepest price corrections have been centred around the banking and commodity related sectors such as energy and materials, while technology, healthcare, consumer staples and utilities have managed to escape the rout illustrated by the grey bars. The historical sector performance (in the light blue bars) during Eurozone debt crisis (the second half of 2011), confirm a similar pattern whereby the traditional defensive sectors tend to shield investors when spreads widen. Europe earnings hold forth despite the banking turmoil Interestingly despite the recent banking turmoil, the global earnings revision ratio continued to show resilience in March. Europe stood out as the only region with more upgrades than downgrades. Earnings remain the key driver of equity market performance. Europe has clearly gotten off to a strong start and it will be interesting to see if European earnings expectations can hold up as credit conditions deteriorate. Within Europe we analysed the sectors that were most exposed to the banking stress. By observing the beta of the sectors in the EuroStoxx 600 Index relative to regional banking spreads, we found that real estate, financials, industrials, materials, and energy were most exposed on the downside to the high banking stress. On the contrary, consumer staples, information technology, utilities and healthcare showed more resilience. When the going gets tough, quality gets going Investors should focus on companies with strong balance sheets which we often tend to find within the quality factor. Quality stocks, characterised by a higher earnings yield compared to its dividend yield alongside higher return on equity (ROE) and return on assets (ROA), would offer a higher margin of safety in periods of higher volatility. Conclusion While central banks in US, Europe and UK continued their hawkish stance at their most recent policy-setting meetings, the evolving banking crisis could alter the path for monetary policy ahead. Chair Powell conceded that tightening financial conditions could have the same impact as another quarter point rate hike or more from the Fed. Given the rising concerns on the risk of banking industry contagion, shrinking corporate profits and central bank policy ahead we continue to believe that positioning your equity exposure towards the quality factor would be prudent.
FRED:BAMLH0A3HYC
by aneekaguptaWTE
Brace for volatility as inflation meets recession2023 has been ushered in with a rebound in pockets of equity underperformance from 2022. Markets are coming to terms with the fact that stickier inflation and more resilient economic data globally are likely to keep central banks busy this year. Owing to which the spectre of interest rates staying higher for longer appears to be the dominant theme for the first half of 2023. Global money market curves are re-pricing higher to reflect the tighter monetary scenario. For the Federal Reserve (Fed), markets have priced in a 5.5% terminal rate, somewhat higher than was suggested by the median dot plot back in December. While in Europe, 160Bps of additional rate hikes are being priced for the European Central Bank (ECB) with terminal rate forecasts approaching 4%. The speculative frenzy witnessed since the start of 2023, indicates that equity markets are discounting the fact that the global economy has not faced such an aggressive pace of tightening in more than a decade and the ramifications, although lagged, will eventually be felt across risk assets. Preference for international vs US equities Exchange-traded fund (ETF) flows since the start of 2023 resonate investors’ preferences to diversify their portfolios with a higher allocation to international markets versus the US. Since the start of 2023, international equity market ETFs have received the lion’s share of inflows, amounting to US$20.6bn in sharp contrast to US equity ETFs that suffered US$9.3bn in outflows. Looking back over the past decade, US companies outpaced international stocks owing to two main drivers of equity price appreciation: earnings and valuation. Earnings remain the key driver for equity markets over the long term. If we try to think about what lies ahead, we can see that earnings revision estimates are displaying a marked turnaround for China, Japan, and Emerging Markets (EM), whilst the US and Europe are poised to see further earnings contractions. China’s recovery remains the important swing factor that could enable its economy, alongside EM and Japan, to outperform global equities in 2023. At 8% of sales, Europe has the second highest exposure after Asia-Pacific (ex-Japan) to China. Yet it’s important to bear in mind that European companies earn twice the amount of revenue from the US than from China. So, a soft landing in the US will be vital for Europe to continue its cyclical rally. US valuations remain high vs international developed and EM equities US equity market valuations from a price-to-earnings (P/E) ratio remain high globally, whilst Japan continues to trade at a steep 29% discount to its 15-year average. Amidst the recent rally, European valuations at a 13.7x P/E ratio remain at a 14% discount to its 15-year average. That being said, three months ago European equity valuations were trading at a 35% discount to its 15-year average. After travelling half the distance to their long-term average, European valuations might have to contend with the headwinds of tighter monetary policy. Evident from the chart above, international markets ex-US continue to boast of favourable valuations allowing for a higher margin of safety, which is why we expect investor positioning to tilt in favour of international markets ex-US over the course of 2023. The battle between Energy and Technology stocks The Energy sector is coming off a strong year, as tight supplies and rising demand drove energy prices higher in 2022. While these dynamics have failed to play out so far in 2023, owing to the speculative frenzy in riskier parts of the market, we expect earnings results for energy companies, and their stock performance across the spectrum (including oil, gas, refining and services), to maintain momentum in 2023. Whilst investment in oil and gas production has been rising, it will still take multiple years for global supply to meet demand, which continues to support the narrative of higher energy prices. Refining capacity continues to look tight this year, given the reduced capacity and long lead time required to bring new capacity online. We expect this to support another strong year for the profitability of refining operators. At the same time, energy service companies should also benefit as spending on exploration and production continues to gather steam. The biggest risk to the sector remains if demand for energy falters in the face of a severe recession. However, as we expect most economies to face a modest recession, this risk is less likely for the Energy sector. Meanwhile, higher interest rates were the key driver of the underperformance of the Technology sector last year. We continue to see weakness in the Technology sector amidst rising risks of peak globalisation, weaker earnings, and the potential for more regulation. Despite the recent layoff announcements by technology firms, they still appear inflated, with employee growth in recent years 20% too high relative to real sales growth. The COVID-19 pandemic had accelerated the demand in software and technology spending with the rise of remote work and social distancing. However, companies today are more likely to cut their technology spending to offset the higher costs of energy, travel, wages, and other factors. The key risk, in our view, remains that valuations have come down, and if rates do begin to peak, selective technology companies could benefit from the growth generated by their cost-cutting initiatives. Value vs Growth in 2023 Value stocks tend to be positively correlated with higher inflation. In 2022, high inflation was a result of rising commodity prices, labour shortages, and fiscal stimulus provided by Western economies, whilst Growth stocks were penalised for their lofty valuations. Value-based stocks flourished on commodity supply constraints and cheaper valuations amidst a rising rate environment. Much of this is now priced into Value stocks. Most Value stocks’ earnings growth and valuation re-ratings rely on higher commodity prices or interest rates or a factor outside of their control. Owing to this, we still believe there are opportunities where constrained supply in the absence of falling demand will continue to support higher prices. There are significant prospects in Europe and Asia where discounts remain wide and sizeable valuation gaps exist across sectors. Europe’s energy sector accounted for two-thirds of Europe’s EPS (earnings per share) growth in 2022. The continuing trend of capital discipline, resilient earnings, and high shareholder returns should keep attracting flows into the sector in 2023. We expect Value stocks to be in better shape to withstand the global economic slowdown. Historically, the Value factor has demonstrated resilience during periods of interest rate volatility. Conclusion There is considerable uncertainty about how 2023 will unfold. As the key focus moves from inflation to a recession in 2023, it opens up the possibility of several outcomes for central banks and interest rates. Keeping this in mind, 2023 may well be a tale of two halves, with higher interest rates in the first half, followed by lower rates in the second half as a global recession takes centre stage.
ICEUS:MWL1!
by aneekaguptaWTE
European Gas March 2023: Bullish and Bearish FactorsThe idea has two parts: fundamental and technical analysis . The latter is based on the weekly chart. On the fundamental side , several essential and minor factors affect and could affect March 2023 price change. Let's divide them into three groups. Bullish : Russian shutdown of gas supply to Europe Russia has cut its European flows for the last months so that a total shutdown would be possible. Russian gas remains crucial for the European economy despite the American armada of LNG ships. Freeport LNG plant Restart Shift The company plans to restore the plant in January 2023. A possible postponement would support TTF prices in the winter season. Limitations of US Gas Exports Last winter, some US Senate members suggested limiting or prohibiting US LNG export. They estimated that the change would increase US gas supply for the internal US market, especially for New England, which is dependent on the import of gas from the gas-production states getting gas via pipelines and LNG. They said the prohibition would reduce high gas prices for customers and industry. In July, LNG winter 2023 prices for New England touched a record high of $40/MMBtu, while Henry Hub traded at about $8.6/MMBtu. I suppose that senators would return to the idea, especially since the US elections are in November. Although the risk is low, its realization could dramatically affect the TTF price assessment. Analysts and think tanks have considered possible Russian gas cuts but haven't accessed a potential US gas supply reduction. French Nuclear Plants Outages Since the end of 2021, the French nuclear industry has been weak with planned and unplanned maintenance. As a result, nuclear output has lost more than 40% YoY of its output. While serious issues are unlikely to arise, new minor obstacles could buoy TTF prices. Dry Summer The continuation of the European 2022 dry summer led to abbreviated hydropower production. On the back of hydropower reduction, natural gas-power generation increases its output and gas consumption, driving subdued gas injection into storage facilities. Subdued gas injection in summer means less gas for winter, creating a possible gas deficit. Bearish: Slowing European Economy and Demand Destruction High inflation induced by the monetary policy of 2020-2021 provokes a decline in real incomes and makes some industrial production unprofitable or near break-even. These debilitate aggregate demand, particularly industrial output of fertilizers, ceramics, and other chemicals. Industries that are heavily reliant on gas are cutting their gas consumption today. Lasting historically high gas prices would promote a decrease in gas utilization. The demand destruction could happen among all consumers: power, industrial and individual. A new recession is near. ECB monetary policy with a growing rate also adds problems to the economy. The rate is still tiny, but debt bubbles are sensitive to interest rate change. The bust of bubbles would drop economic growth and curtail gas demand pushing TTF prices down. Slowing world economy The world economy suffers from high prices losing economic growth momentum. A move into a recession would trigger a decline in gas consumption lowering LNG gas prices and letting LNG producers increase LNG sendout to Europe. Voluntary Demand Reductions of 15% and Gas Rationing Energy ministers of Europe adopted plans to voluntarily cut gas demand by 15% from August until March 31, 2022. In case of emergency, like near zero Russian flows, the voluntary reduction changes to mandatory. i.e., gas rationing. The actions could divert rising prices. Covid Lockdowns in Europe Europe has prepared different measures to withstand possible gas issues in winter. Besides voluntary reduction or rationing Europe could return to the lockdowns of 2020, when gas consumption dramatically went down because industrial production of goods collapsed. Since June 2022, the media has published news about a new variant of Covid. Countries could impose Covid-related limitations this fall. Unstable gas consumption and gas shortage would drive for a Covid or climate lockdown. A good measure to cut gas demand and destroy the economy. Covid Lockdowns in China Despite possible lockdowns of 2022-2023 in Europe, lockdowns in China happened in the last months and could be imposed again. An effect of prohibitions has hit the Chinese economy and cut gas consumption resulting in freeing up the supply for other consumers, i.e., Europe. New Chinese lockdowns would mean more gas for Europe. Joker : The joker that could be a bullish or bearish driver is the weather. They can't predict winter weather today. Lasting temperatures above season norms in winter could be a lifesaver for Europe, dropping gas consumption and its prices. Cold spells and lingering temperatures under the winter season average would lift prices significantly. Near-average temperatures would put the significance of the factor on hold. While in summer, it is vice versa. Temperatures above the norms slow gas storage injection and slightly increase a lack of gas risk in the winter season. On the technical side , there are no resistance levels cause the contract is traded near its record high. Only psychological levels like €200/MWh , €300/MWh , and higher. On the bulls' side, there are many support levels. For those practicing buy a bounce trading , essential levels are €125/MWh , €100/MWh , and €86/MWh . The last one developed in the December 2021-April 2022 period. I estimate that Gazprom made a significant contribution to its existence. Gazprom's export price to Europe, which was pegged to a fusion of lagged prices of fossil fuels, including TTF, was near to €86/MWh . So when the market price rose significantly above the level, market participants cut their demand because Gazprom sold cheaper. When the price tried to break through €86/MWh and went down, Gazprom trimmed its flows to Europe. All in all, this helped the company to control its revenues on the same level. Since then, it has not been the case because Gazprom has changed its approach. Finally, I am afraid to forecast the price on the expiration date. I suppose the price would remain volatile, and we could see spikes above €200/MWh in the winter season. Thank you for your reading, and have profitable trading! Comment your thoughts!
ICEEUR:TFMH2023
by Nikita_Kalinin
**Long Nikkei Short DAXPost BOJ decision which is USDJPY supportive, we could expect the Nikkei to recover from recent weakness. Since it remains a choppy Equity Environment, selling DAX against it (delta hedge) makes sense from a relative price perspective and looking at technical levels, along with oscilators. Another way would be to buy Upside calls on Nikkei (cheap in Impiled volatilities) and selling upside on DAX (call vs. Calls strategy) I will keep it plain vanilla though
OSE:NK2251!
by ArisopeCapital
1
EUR/JPY - SHORT; Geopolitics matters - Center stage.Given the inevitability of; 1) An abject Chinese population collapse - already under way -, necessitating the consequent *** massive DEurbanization, DEindustrialization *** (leaving in its wake ~800 million subsistence "gardeners" - No, not even farms, in the traditional sense of scale!); 2) Japan having *** the only other (beside the US) long range Navy *** capable to protect shipping/supply lines, anywhere on the globe; (While China couldn't defend it's own coast line, if push came to shove. All that The "Chinese Menace" propaganda is laughable, at best. China is already dead, it just hasn't rolled over, yet, fully.) 3) The EU's obvious, ongoing Hara Kiri (the kind that would fill every samurai with envy), the demise of the Euro is a foregone conclusion. (How long for total EU disintegration?? ... A) Most likely measured in a couple years; B) It is well under way!. 4) Germany's full and unmitigated retreat from a collapsed Chinese market - the US filling the vacuum in every imaginable corner on the globe; 5) Japan being *** the only other (alongside Taiwan, S. Korea and the US) precision manufacturer of high-technology, of any scale ***; 6) ... ... 12) ... There are at least a dozen existential reasons - already well within grasp! - all of which will leave Japan likely the only industrial power standing in Asia, while Germany (as is the whole of Europe) will be forced to backtrack to the '60s. - Not to the 1960s, no ... to the 1860s! The technicals are also favorable to start shorting this pair from here, ... on and on ... onto forever. p.s. The rise of France in Europe and Japan's in Asia - relative to their current industrial and geopolitical pull- is all but a foregone conclusion. France being the "youngest" industrial and agricultural power in the EU while Japan, having survived - so far - their own demographic apocalypse, will have ring side seats to revel in the total and abject Chinese collapse. Germany also "only" lacks any and all domestic energy or food resources (except Sauerkraut), while also beset with a demographic apocalypse that is about to hit its full stride.
Short
by Nemo_Confidat
THE EASIEST ARBITRAGE EVER IS RIGHT IN FRONT OF OUR EYES? LONG US, SHORT EU Hello, these two charts seem to show an identical background situation for the two economies (US and German), however, the economy in US and EU is very different (among other explanations, TFP - total factor productivity is, and always has been positive in the US, while it is negative and, most importantly, decreasing since many years in Europe; US has never lowered rates below 0, while Europe did, breaking the Marxist M-G-M model, which means Money-Goods-Money1 cycle, and transforming it into a mere M to M1 model, money to money1, where M1 >M, skipping the "Goods" part of the cycle, basically creating a system where Money that creates other money out of thin air). The markets (especially the European ones) are discounting the fact that there will be no recession based on last data, and that we will have a soft landing after all in US. I believe this will not be the case but it is not important now. The important thing is that, European investors are believing that the same will happen in EU, where, however, the increase of interest rates is far from being done, and inflation has not peaked yet! Surprisingly, European investors are continuing to consider the two economies as identical, simply because in the last 40 years they moved together. However, they forget the 10-15 years of QE and the fact that the world after it will not simply continue to be the same as before, as we simply can erase these 15 years of history and put in conjunction the two extremities. They are pricing the two markets as it they were at the beginning of capitalism, while we are probably at the end of it, or better at a new phase of it. A phase in which US adapted to the MDM model by increasing the productive cycle (they have companies like Tesla, Amazon, Google) while in Europe we persevered in the aberration of the M-> M1. LONG US (Dow jones), SHORT EU (Dax) IThis is why, n my opinion, what we have in front of us is a win-win situation. If the markets will continue, in my opinion wrongly, to consider these two markets almost perfectly correlated, while they are going up even if at least one of the two will have a recession ahead, we will be covered in any case. case 1 - recession in USA, recession in EU the recession will hit stronger in Europe-> The position will lose on long US less than what it would gain from the short on EU (DAX) case 2 - no recession in USA, recession in EU double gain (from the on long US and from the short on EU) case 3 - no recession in USA, no recession in EU US economy will perform better then EU : the long position on US will gain more than what it would LOSE from the short on EU It is worth noting that both indices are surprisingly at 8% from their respective peaks of 2021 but the strength of the trend (red line on the second indicator - DMI) is very low. Of course, the strategy will need to be adjusted with the sizes so that every side has the same notional value in USD - What do you think?
DJ:DJI
by edutradinguru
Short STOXX EUROPE 600 OIL & Gas sectorWe are having here a very well structured trade idea, exploiting the confluence of high important technical factors, mean reverting stance, and extreme positioning in the Oil and Gas space thanks for a Long Inflation lean by most investors this year. Into year end and preparing for 2023, Fact is that after such a good performance some will be tempted to take profit especially with a potential FED pivot in [/b preparation based on Inflation peaking. Saying it simply and pragmatically : if you made money being long the sectors or High dividend stocks in that space, that's a great achievement, but the forward looking factors are clearly pointing lower. the USD price action is clearly indicating of Inflation peaking and is highly supportive of this trading idea. Bottom line: Sell / Short SXEP Sector using this Multi Month horizontal trendline and overbought technical indicators
FShort
by ArisopeCapital
1