The situation of Chinese real estate companies continues to be worrisome
The stock indices had a very positive day yesterday, driven by banks and semiconductor companies that published better than expected results and business expectations. Moreover, the negative sentiment that had prevailed for the past two weeks seemed to dissipate due to yesterday's earnings.
The S&P500 index experienced its most significant rise in months with an advance of 1.7%. It distanced from the support zone located at 4250, making itself vulnerable to losses of greater depth. With yesterday's gains, it has managed to break above the 100-day SMA line and close to the resistance around 4474.
However, the elements of uncertainty that had caused the substantial corrections in the indices are still present.
The previous day we knew that the Federal Reserve was ready to start tapering, although the Treasury bonds seem not to have taken notice and have continued to drop yields to 1.51%. The situation of Chinese real estate companies continues to be worrisome. Evergrande's default in the payment of interest on the debt in dollars and the increase in energy price hint at a brake on economic growth. The inflationary tensions, far from retreating, continue without pause.
Yesterday, the inventory figures published for oil by the Energy Information Administration showed enormous growth to 6.08M from the only 0.7M expected. It is a figure that would have caused a price drop; not only was it not sold, but it rose almost a dollar on the day, eliminating the possibility of bearish divergences from a technical analysis point of view in the daily RSI. It approaches the maximum level reached two days ago of 82.16.
The cause behind this enormous demand is the rotation from natural gas to fuel oil in electric power generating plants due to the increase in gas price, which has been the most used fuel for electricity generation. This increase in demand would represent around 500k BPD, which counteracts the increase in production recently approved by OPEC+.
Suppose this situation of tension in energy raw materials continues. In that case, pessimistic sentiment will soon return to the market due to its negative repercussions on global growth because of the relationship they have with inflationary tensions that each time seem to be not as transitory as the bankers insist on considering.
Sources: Bloomberg.com, Reuters.com
The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.
As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).
The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.
The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.
JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors