BOJ pauses (again)
The Japanese yen sank 1.6% to 1990-lows of 151.5 per dollar as the Bank of Japan disappointed investors by only making minor changes to its monetary policy. The BoJ kept its policy rate steady at -0.1% and maintained the 10-year JGB yield target at around 0% and made small adjustments to its yield curve control policy. The central bank re-defined 1% as a loose “upper bound” rather than a rigid cap and removed a pledge to defend the level with offers to buy an unlimited amount of bonds. The BOJ also revised its inflation outlook upwards for the fiscal years 2023, 2024 and 2025, anticipating that underlying CPI inflation will see a gradual rise toward the 2% price stability target. However, they emphasized that this increase should be supported by a virtuous cycle of rising prices and wages. Again, the BOJ is trapped between in a rock and a hard place — raise rates and service its (enormous) debt, or retain negative (!) interest rates and let the USD wrecking ball continue…
NZ/AUS
The New Zealand market (NZX50 Index +0.2%) was up as it ended a 7-day losing streak.
Port of Tauranga > upgrading to overweight – the stk is sitting at 5 yr lows — NPAT guided down about ~10% and weak volumes from freight. Buy the ‘fear’ — it’s an infrastructure stock, still NZ’s largest port, and freight needs to come here somehow. Expecting weak performance in the next year — like our other perennial favourite Mainfreight, it’s one to hold during the cycle. We also anticipate foreign investor legislation changes under a National-led govt, which may make infrastructure assets attractive to overseas investors.
Resignations > Fonterra CFO Neil Beautmont has resigned after eight months on the job. Rival Synlait and A2 have taken batterings this year, down 60% and 40% YTD, while Fonterra has remained relatively flat. Also noting TradeWindow director Diana Puketapu has resigned — she won’t be replaced.
The Australian market (ASX200 Index, +0.1%), edged up for the final day of October, to end the month down -3.5%, most sectors were up but these gains were offset by losses from materials and tech stocks.
Lithium > Billionaire Chris Ellison’s Mineral Resources has taken a 19.8% stake in Wildcat Resources, which has multiple lithium prospecting projects. Preference in lithium sector remains Lynas, which is sitting pretty on the back of a revised operating license for its facility in Malaysia.
US and UK
Tesla shares are down -20.5% for the month, and down -33.5% from its 12-month-high reached in July — the selling extended due to updates from its battery supplier Panasonic flagged concerns of sluggish demand for EV batteries. Nvidia, which has had a magnificent run this year driven by AI hype is down -7% in August, and down -20% from its all-time high – Nvidia shares are currently down in after-hours trade, after its chip-making peer AMD fell on weak revenue outlook despite a strong earnings beat for the third quarter.
Caterpillar shares were up on its earnings beat while flagging on a minor revenue gain for the fourth quarter as they citing a slowdown in activity.
Noticing a theme that most companies are still beating expectations for the third quarter results, however, guidance for the majority is falling short of market expectations highlighting tough economic conditions ahead. Note chart below.
WeWork doesn’t work > Unsurprisingly, the company once valued at $47bn is now looking at filing for bankruptcy — this follows the company skipping $95mn of interest payments on October 3. Reminded of the phrase “ends with no a bang, but a whimper”.
Vodafone Plc > finally sold its underperfoming operations in Spain, for about €5bn to Zegona Communications. As is per for Vodafone, it’s not a straight cash offer — the telco will receive €4.1bn in cash plus up to €900mn in redeemable preference shares of Zegona. Overseas telcos are trading at very low valuations — Vodafone 2x earnings (you read that right), Verizon 7x earnings, and AT&T trading at 15 yr lows. Maybe some ‘cigar butts’ here.
Beer > Good graph from the FT showing the changing beer fortunes in America — Buderweiser and Bud Light have been tipped down the kitchen sink (a reaction to “wokeism”), whereas Modelo has become the undisputed winner of the “beer wars”, topping Bud Light as the most sold beer.
Tidbit from Bloomberg > UK firms in fin distress soar
As always, we’re asking what’s the read-through. Those who are saying “this time it’s different” should be wondering how this data plays into it.
UK pt. 2 > Company insolvencies are at their highest since post-GFC.
Eurozone CPI
Eurozone inflation came in at +2.9% for October, reaching its lowest level in over two years – and below expectations of +3.1%. Meanwhile core CPI also cooled to +4.2%, its lowest level since July 2022. Both rates are still above +2% target by European Central Banks. It appears the fight to bring down inflation is nearing, but still a little bit more to do – and a risk of over-easing too soon. Worth noting the divergence occurring here — US CPI is ticking up as of late while the Eurozone is getting under control…
