David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Alibaba Caps $250 Billion Rally With Accelerating Sales Growth

    This article by Lulu Yilun Chen for Bloomberg may be of interest to subscribers. Here is a section:

    Alibaba Caps $250 Billion Rally With Accelerating Sales Growth – Alibaba’s “new retail” plan carries a simple premise -- to combine its online merchants with a vast swathe of physical stores now divorced from the internet, stripping out layers of profit-sipping middlemen and boosting Alibaba’s e-commerce in the process. Those outlets double as storage and delivery centers.

    But the execution involves a battery of expensive and time-consuming investments: buying into department stores such as Intime, setting up “smart” grocery stores like Hema, investing $15 billion into expanding its delivery network into remote regions, and enlisting some half-a-million mom-and-pop stores that now serve the countryside.

    Alibaba is trying to transform the way retailers large and small manage their inventory based on real-time demand. And drawing more physical customers into its network boosts its own online orders and provides abundant data to target future consumers.

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    Nickel Rallies Most in Five Years on Promise of Electric Cars

    This article by Yuliya Fedorinova and Martin Ritchie for Bloomberg may be of interest to subscribers. Here it is in full:

    The nickel market has caught fire, with prices posting the biggest two-day advance in five years.

    Nickel rose as much as 6 percent to $13,030 a metric ton on the London Metal Exchange, the highest since June 2015. That added to Tuesday’s 5.3 percent gain after Trafigura Group Pte joined Glencore Plc in unveiling bullish usage forecasts. In Shanghai, prices climbed by the daily limit.

    "Such breakthrough has been cooking long, backed by relative value and EVs," Richard Fu, head of Asia Pacific at Amalgamated Metal Trading Ltd., said by email.

    Nickel sulphate, a key ingredient in lithium-ion batteries, will see demand increase by half to 3 million tons by 2030, Saad Rahim, chief economist at Trafigura, said in an interview. That echoes bullish views from miner and trader Glencore. Batteries are likely to use more nickel and less cobalt in future, Rahim said.

    Nickel is now up 28 percent for 2017, vying with aluminum for the title of top base metal of the year.

    Chinese investors piled into Shanghai futures at the start of morning session, and prices were locked up by the limit just short of 100,000 yuan a ton, the highest intraday level since November.

    MMC Norilsk Nickel PJSC, which competes with Vale SA as the world’s top nickel producer, has warned that the market may have become too bullish too quickly. The company sees this year’s nickel demand from batteries at about 65,000 tons, compared with total usage of 2 million tons, according to Anton Berlin, head of analysis and market development. It will take a few years for EVs to become a significant consumer, he said.

     

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    Ford Leads Truck Boom as U.S. Auto Sales Seen Beating Estimates

    This article by Jamie Butters, Keith Naughton and David Welch for Bloomberg may be of interest to subscribers. Here is a section:

    Ford F-Series deliveries surged 16 percent for their best October since 2004, and the automaker’s total U.S. sales beat analysts’ estimates. Demand also jumped for GM’s Chevrolet Silverado and GMC Sierra, Fiat Chrysler Automobiles NV’s Ram pickup and Nissan Motor Co.’s Titan full-size trucks.

    The strong showing by pickups is a positive indicator both for carmakers’ profits and the U.S. economy. Companies added more workers than forecast to U.S. payrolls last month as employment in the construction industry -- a sector closely tied to truck sales -- climbed to the highest in more than a decade. Automakers also are benefiting from consumers in Texas, the nation’s top truck market, continuing to replace vehicles damaged by Hurricane Harvey.

    “We did see continued hurricane replacement at the beginning of the month,” Michelle Krebs, an analyst at car-shopping website Autotrader, said by phone. “The economic factors are also in trucks’ favor. People are back to work and construction activity is up, which is good for truck sales.”

     

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    Email of the day on low interest rates driving the stock market

    I was listening to a podcast at Epsilon Theory and they were discussing their observation of S&P EBITDA growth being significantly lower than Net Income growth. This would signify that the artificially low interest rates being the prime driver of earnings which poses a scary scenario. I can't seem to find an updated chart. Can you add to the Chart Library? Thank you!

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    BOE Rate Increase May Not Be Enough to Revive Brexit-Vexed Pound

    This article by Charlotte Ryan for Bloomberg which offers a summary of thinking on the Pound heading into the BoE meeting on Thursday. Here it is in full: 

    The Bank of England may increase interest rates this week for the first time in more than a decade, but that won’t be enough to buoy the pound, according to strategists.

    Markets almost fully price in a 25-basis-point increase in the BOE’s key rate on Thursday, meaning investors are ill- prepared for a disappointment. Should Governor Mark Carney and fellow policy makers keep policy on hold, or deliver a one-time hike that merely reverses the emergency cut after the Brexit vote, sterling could add to the last two weeks’ declines, according to Ross Walker, an economist at NatWest Markets.

    The U.K. currency has declined 1.8 percent against the dollar during October as concerns about the lack of progress in Brexit negotiations weighed on investor sentiment. It snapped a two-day decline on Monday, gaining 0.3 percent to $1.3161 as of 9:11 a.m. The yield on 10-year U.K. government bonds fell 1 basis point to 1.34 percent.

    “Sterling needs a hawkish hike in order to rally,” said Walker. “The pound could come under pressure” otherwise, he said.

    While money-market pricing suggests an 89 percent probability that the Monetary Police Committee will tighten on Thursday, banks including Credit Suisse Group AG and Barclays Plc expect a “one-and-done” move. Investors will look to the language of the MPC minutes, vote split and the quarterly Inflation Report to gauge the policy outlook further ahead.

    “I’d prefer to go into the meeting” with a short position on sterling, said Steven Barrow, head of currency strategy in London at Standard Bank. “There is a reasonable enough chance they don’t raise rates. We’ll have to see what comes out from the statement the bank puts out.”

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    The Millennial State of Mind

    Thanks to a subscriber for this report from Bain and Co. which focuses on the luxury goods sector and may be of interest. Here is a section: 

    The luxury industry has entered a “new normal,” characterized by lower growth. To succeed in the next decade, brands will need to refocus on their customers to better anticipate and cater to their needs. The younger generation will be key: New research by Bain & Company and Farfetch estimates that millennials will represent 40% of the global personal luxury goods market by 2025.

    • The characteristics of millennial behavior are already seeping through to older generations - which accounted for 73% of luxury purchases in 2016.

    • This generates a widespread “millennial state of mind” that requires brands to act. It is characterized by three main traits:
    – Uneasiness. Digital interaction with peers is on the rise when choosing to purchase a product.
    – Urgency. “I want it fast and I want it now.” The time to make a purchase is decreasing, with younger customers taking one-third less time than older customers to make decisions.
    – Uniqueness. Consumers now expect brands to align with their personal values and passions.

    • Today, 70% of luxury purchases are influenced by online interactions, which means at least one digital interaction has taken place with the brand or the product before those purchases.
    – 14% of consumers from the ages 18 to 24 complete their first luxury purchase online. – Digital traffic to websites of luxury brands is double the amount of store visits.

    • By 2025, online and monobrand stores will become the two largest channels for luxury sales, each accounting for 25%.

     

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    Bitcoin Futures Could Open Floodgates Into Crypto Markets

    This article by Camila Russo for Bloomberg may be of interest to subscribers. Here it is in full:

    Bitcoin is spiking to a record after CME Group Inc. said it’s planning to launch bitcoin futures as the move could open the floodgates of investors who have been standing on the sidelines as bitcoin soared over 500 percent this year.
    The cryptocurrency jumped as much as 5.2 percent to $6,416.39 after the CME said it will start offering trading the derivatives in the fourth quarter. Futures will be settled in cash based on a bitcoin index that CME started calculating in November. 

    The move comes after the Chicago Board Options Exchange said in August it’s exploring bitcoin derivatives opportunities, while the Commodity Futures Trading Commission in July registered cryptocurrency trading platform LedgerX as the first federally regulated cryptocurrency derivatives exchange and clearinghouse.

    With bitcoin futures becoming mainstream, the next logical step seems to be a bitcoin exchange-traded fund, as the Securities and Exchange Commission had cited the lack of derivatives as one of the reasons for rejecting approval of the funds. ETFs and derivatives are likely to make bitcoin trading a lot more palatable for hedge funds and mutual funds, as the instruments will allow them to hedge for the digital asset’s volatility and avoid some of the hassles of investing in bitcoin directly.

     

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