Comment of the Day
17th July 2023
Eoin Treacy
Jul 18
Video commentary for July 17th 2023
A link to today's video commentary is posted in the Subscriber's Area.
European Power Prices Fall Below Zero With Green Power Boom
This article from Bloomberg may be of interest to subscribers. Here is a section:
Electricity prices across Europe are set to fall below zero this weekend as the continent experiences a
surge of summer winds combined with the peak season for solar generation.
The sub-zero prices are a preview of what’s to come for European power markets if a flood of planned renewable power production isn’t met with a shift in demand. The hope is that eventually larger electric car fleets, smarter grids and better battery technology will catch up, but for now the mismatch is a headache for policy makers and companies.
The risk is that a prolonged slump in prices could undermine the case for future investments, add costs for consumers and waste energy that could be used to cut demand for polluting alternatives.
Eoin Treacy's view
At the same time that record high temperatures are being posted across southern Europe, one would think that record high renewable energy production would be greeted as a serious benefit. Now, if someone could prevail on countries to invest that excess power in air conditioning, they would have a lot less to worry about. Instead people could enjoy the summer heat and regional economies would be more productive.
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Richemont Drops on Signs Luxury Demand Is Weakening in US, China
This article from Bloomberg may be of interest to subscribers. Here is a section:
Richemont led luxury-goods stocks lower amid concerns that demand in the US and China, two of the biggest markets for the industry, is starting to sputter.
The Swiss owner of Cartier reported a surprise drop in revenue from the Americas in the three months through June.
While Richemont’s sales from Asia rose sharply, China reported slower-than-expected economic growth Monday, signaling signs of a possible pullback in consumer spending.
Richemont fell as much as 8.2%, the steepest intraday decline in more than year. LVMH dropped as much as 3.7% and Hermes fell as much as 4.2%.
The luxury-goods industry has been counting on a rebound in China after that country’s reopening would make up for weakness in the US market. Now Richemont and its peers are contending with the prospect that its two main growth motors are weakening.
Last week, Burberry Group PLC (LSE:BRBY) said the low end of the luxury market in the US softened.
Eoin Treacy's view
Aspirational spending is heavily dependent on disposable income and availability of credit. The luxury goods sector thrived during the pandemic because consumers were flush with cash and had fewer options to spend it since travel and sports events were shut down. The sector leaped higher again when China’s lockdowns ended because investors were betting the post pandemic celebratory spending would be repeated. That has not been the case.
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Russia Pulls the Plug on Ukraine Grain Export Agreement
This article from Bloomberg may be of interest. Here is a section:
Moscow had repeatedly threatened to leave the pact, citing obstacles to its own exports. It last agreed to a two-month extension in May, which ends Monday. The corridor’s shutdown will hit key buyers like China, Spain and Egypt.
“Unfortunately, the part concerning Russia in this Black Sea agreement has not been fulfilled so far,” Kremlin spokesman Dmitry Peskov said, according to Russian news agency Tass. “Therefore, it is terminated.”
The move jeopardizes a key trade route from Ukraine, one of the world’s top grain and vegetable oil shippers, just as its next harvest kicks off. It also comes after Russia on Monday said Ukrainian drones damaged a key bridge to Crimea.
The pact — brokered by the United Nations and Turkey — has ensured the safe passage of almost 33 million tons of crop exports via the Black Sea since it was signed in July 2022, helping world food-commodity prices ease from the record levels reached after Russia’s invasion of Ukraine. However, it has been bogged down by red tape and slow vessel inspections in recent months.
Eoin Treacy's view
Russia’s munificence in allowing Ukrainian wheat exports only extends as far as its own self interests. With the trend of war not going according to plans, the argument for providing Ukraine with any form of assistance is less and less convincing. There has been a lot of handwringing within NATO at the reluctance of countries to fall into line in sanctioning Russia. That ignores the reliance many countries have on the base commodities it exports.
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Eoin's personal portfolio: commodity long initiated
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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