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31 January 2020
Video commentary for January 30th 2020
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: stock markets rebound following WHO announcement, Hong Kong shares extend pullback ahead of the mainland markets reopening Monday, Negative yielding debt total increases to $13 trillion, high yield spreads pop on the upside. oil and gold steady.
Carnival Ship in Italy Lockdown as Suspect Virus Traps 7,000
This article by Alberto Brambilla and Jonathan Levin for Bloomberg may be of interest to subscribers. Here is a section:
The ship was bound for La Spezia in the Liguria region, with 1,000 crew and 6,000 passengers, 750 of whom came from China, a port spokesman said.
Eoin Treacy's view
It is looking like the ill person did not in fact have the coronavirus but the fact that 1/8th of the passengers are from China highlights just how influential Chinese tourists are for the global sector. The cancelling of flights both to and from China is going to have a material effect on all tourist destinations and the longer it lasts the greater the impact will be.
World's First Sub-Zero 10-Year Sovereign Syndication Is Popular
This article by James Hirai and Hannah Benjamin for Bloomberg may be of interest to subscribers. Here is a section:
The order deluge meant Austria joined the likes of Spain and Italy in setting demand records this month as investors chase the safety of bonds. Fears that the spread of the coronavirus will derail an economic recovery have sent yields tumbling, fueling a huge jump in the world’s stockpile of
negative-yielding bonds.
Austria’s Treasury ended up placing 3 billion euros of the 10-year bonds Wednesday with a yield of minus 0.111%. For investors, that’s still more appealing than equivalent German debt trading at around minus 0.40%. The European Central Bank has a minus 0.50% deposit facility rate.
“Despite the negative interest rate, the issue was met with very strong demand and the transaction was 10-times oversubscribed,” Markus Stix, managing director of Austria’s Treasury, said in a statement.
Eoin Treacy's view
The total of negative yielding debt continues to rebound, led by a surge in demand for Eurozone sovereign bonds. The total now sits above $13 trillion and has clearly broken the downtrend evident since August.
Shell Dives With Scaled Down Buyback Program a Key Concern
This article by Filipe Pacheco for Bloomberg may be of interest to subscribers. Here is a section:
Morgan Stanley (equal-weight, PT 2,270p) says 4Q results should trigger “a negative response,” as both earnings and cash flow were lower than consensus expectations and gearing increased on a quarterly basis
Analysts Martijn Rats and Sasikanth Chilukuru say that while integrated gas was largely hit by lower trading profits, margins within chemicals appear to have been hit more than expected by the weaker macro
Oil products and upstream seen benefiting from strong marketing results and higher production volumes, respectively
RBC (sector perform, PT 2,600p) says the decision to reduce the quarterly run rate for its buyback to $1b from $2.75b into 2020 was largely factored into the stock’s recent performance and the new rate “looks well covered,”
Given gearing is 29%, analyst Biraj Borkhataria says that “Shell is right to be more cautious”
Eoin Treacy's view
Royal Dutch Shell took a big bet on natural gas and has succeeded in getting the product to market from its massive Australian offshore facility. The challenge is there is no intense competition in the LNG market as major producers vie for market share. Meanwhile Shell is also looking at lower oil prices and increasingly aggressive emissions regulations all over the world.