Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities global strategist Nigel Tupper is surprised by the resilience of global earnings revisions,
“Despite several recent bank failures, the Global Earnings Revision Ratio continued to show remarkable resilience in March and was unchanged at 0.79. The Ratio jumped in Europe from 0.83 to 1.12, and Europe is the only region with more upgrades than downgrades. By global sector, the Ratio fell the most for Energy and Tech Hardware and remains surprisingly high for Banks and Diversified Financials. The direction of earnings expectations could be key to equity market performance in 2023, so it will be interesting to monitor whether expectations can remain resilient as the impact of tighter monetary policy ripples through the economy. EM weakness offset DM improvement In March, the one-month Ratio improved in Developed Markets (from 0.72 to 0.84), including Europe (from 0.83 to 1.12), the USA (from 0.67 to 0.79) and Japan (from 0.63 to 0.69). In contrast, the Ratio fell in Emerging Markets (from 0.85 to 0.74) and Asia Pac ex-Japan (from 0.85 to 0.70). The Global Sales Revision Ratio improved marginally (from 0.89 to 0.94) but remains below 1.00 as downgrades outnumber upgrades”
“Global earnings revisions surprisingly resilient (BofA),” – (research excerpt) Twitter
Citi analyst Tom Mulqueen sees a buying opportunity ahead for copper miners,
“Copper prices have reached our prior 0-3 month point price forecast of $8,500/t, and we now see them falling to touch $8,000/t over the coming months, reflecting investor positioning unwinding further on likely ongoing concerns about U.S. deposits shifting from small to large banks and the implications for credit growth in the U.S.. Overall, we see this as a strong long-term buying opportunity, and explain some of copper’s unique characteristics that leave us bullish over the medium term. Our 6-12 month forecast is now $9,000/t, as we roll closer to 2024 (from $8,500/t).”
The pattern of lower first, then higher in the longer term, provides a window for investors to add copper miners to their portfolio at what might turn out to be bargain prices.
BMO chief economist Doug Porter sees some relief ahead for domestic food prices but only in the rate of growth, not nominal costs,
“Upstream food price pressures are ebbing somewhat, pointing to some moderation in grocery prices in the next 6-9 months. For example, Canada’s farm product price index has eased notably in the past year (mostly for crop prices, not livestock). After scorching 30%+ increases a year ago, the annual rises have moderated to single digits. Still, the latest 9.4% year-over-year is cause for concern. Also note that we are looking for a cooldown in price increases, not an outright pullback in the level of prices. Realistically, food prices may remain a serious thorn for central banks everywhere, and there’s not much monetary policy can do about reining them in.”
“Grocery prices: Food for thought (BMO)” – (research excerpt) Twitter
RBC Capital Markets analyst Wayne Lam is bullish on the future for North American lithium miners,
“We view potential for new domestic production of 400 Kt+ LCE over the coming decade, which would represent 18% of 2030E global supply vs relatively negligible output today. We view government support as key to advancing project development given historic challenges related to (1) permitting delays, (2) funding/capital overruns, and (3) operational execution in the mining space. The US has made this a clear priority via $2.8B awarded in Oct 2022 towards domestic manufacturing including grants for Piedmont’s Tennessee hydroxide plant ($142M) and Albemarle’s Kings Mountain facility ($150M), along with subsequent loans for projects including Ioneer’s Rhyolite Ridge ($700M). Comparatively, the Canadian government has been relatively slow to distribute funding but recently announced $344M towards development of critical minerals, while policymakers have highlighted potential for accelerated permitting and funding assistance. Companies that could benefit from increased government support include Frontier (road infrastructure), Sayona (carbonate plant), and Critical Elements (Rose construction). "
Diversion: “Why All the ChatGPT Predictions Are Bogus” – The Atlantic
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