Archives of “May 2021” month

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Platinum and catalytic converters

  
  Analysis

More platinum demand?

This is one area to watch/investigate further that I cam across this week and wanted to bring to readers attention. Some of the research I read is quite hard to actually extract the significant information from, so here is a potted summary of the main points:

  • Platinum is discounted in price compared to Palladium. See the chart below and notice how from 2018 the price of Palladium went soaring higher, while Platinum moved flat to sideways.

More platinum demand?

  • Since 2016 car makers have been in discussion about replacing Palladium with Platinum. This was due to Palladium shortage and not Platinum prices. See here.
  • Fabricators expect platinum demand to increase from c.150koz this year to c1.5moz in 2025.
  • In Europe and China new lower emission levels have to be met by a specific data so all car models to be sold in Europe and China in 2021 had their emissions systems redeveloped over the preceding three years. This means that Platinum could already be used in place of palladium. This could add as much as 400koz to platinum demand in 2021

Rhodium

  • The drive for better emission levels means that more active metal is needed to work it’s purpose. This means that more platinum will be needed in each catalytic converter, so demand would only grow in order to meet higher emission standards. Look at the chart below to see how the combined demand for Platinum, Palladium and Rhodium is growing

diesel catalyctic converters

See here and here for some more detail on the above points from the World Platinum Investment Council. The caveat is that the group’s purpose is to stimulate Platinum investment, but facts are facts so don’t dismiss the research out of hand.

Eurostoxx futures -1.2% in early European trading

  
Analysis, Global Indices
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Risk on the defensive in early trades

  • German DAX futures -1.2%
  • UK FTSE futures -1.2%
  • Spanish IBEX futures -0.9%
There is some slight catching up involved to the declines in US stocks yesterday but for the most part, this reflects the defensive and sluggish sentiment today as well.
US futures are also marked lower, with S&P 500 futures down 0.4%, Nasdaq futures down 0.7%, and Dow futures down 0.2% to get things started on the session.
Major currencies are little changed but if the defensive posture keeps up, we may see some risk aversion flows start to seep in later in the day.

Nikkei 225 closes down by 3.08% at 28,608.59

  
Analysis, Global Indices

A torrid day for Japanese stocks

Meanwhile, the Topix closes down by 2.4% at 1,905.92. This is the worst showing by the Nikkei since the 4% plunge at the end of February trading.
The decline today sees both indices slip just below their respective 100-day moving averages with the Nikkei nearing support from the March and April lows at 28,300-400.
The drop here follows the sluggish sentiment since US trading yesterday, though mainland Chinese stocks are defying the odds late in Asia currently.
The Hang Seng is down 1.7% but the Shanghai Composite is up near the highs for the day now as it climbs by 0.4% after keeping lower earlier in the day.
US futures are still keeping rather defensive, with S&P 500 futures down 0.4% and Nasdaq futures down 0.7% ahead of European trading.

Goldman Sachs is worried about the prospects for ‘mega cap tech’ stocks – 3 big risks

  
  Analysis
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Via a Goldman Sachs analyst research note ICYMI (on Friday) covering huge technology shares like Facebook, Apple, Amazon, Microsoft and Alphabet (Google).

GS nominate risk #1 as higher taxes, commenting on plans from the Biden administration for higher corporate and capital gains tax rates:
  • proposed corporate tax rate hiked to 28% (note that Biden has indicated a 25% compromise rate)
  • “FAAMG stocks have appreciated by $5 trillion during the last 5 years, accounting for 29% of the S&P 500 market cap increase during that time” … and thus a drop in these stocks will have an outsized impact on index values
#2 is the ‘higher interest rates’ usual suspect:
  • low rates have been a key support for valuations for over ten years now
  • the time of near zero rates could be approaching an end though
  • “All five FAAMG stocks …  are especially sensitive to moves in long-term interest rates“
#3 is increased regulation … GS go as far as to say “Looking forward, the greatest fundamental risk to the continued market leadership of the five largest companies appears to be the potential intervention of regulators
  • … legal battles and investigations over their market power and competitive practices ranging from commercial litigation to DoJ and FTC antitrust lawsuits to Congressional probes”
GS do note on #3 though that Google has soared since the launch of the DOJ investigation (in October 2020 … price from circa $105 to circa $135).
Via a Goldman Sachs analyst research note ICYMI (on Friday) covering huge technology shares like Facebook, Apple, Amazon, Microsoft and Alphabet (Google).

China CPI and PPI data (for April) is on the schedule for today – preview

  
Analysis, Economy

Coming up at 0130 GMT, China inflation figures for April

  • China CPI expected 1.0% y/y, prior 0.4%
  • PPI expected 6.5% y/y, prior 4.4%
Quite the divergence in expectations. The PPI is ramping higher on the back of the surging prices of commodities
  • copper, tin, iron ore, plastics prices to producers in China (and elsewhere of course) have risen to the highest in a decade
  • supply constraints are a factor on this, along with rocketing demand
The impact on downstream pricing is lagging, hence the much expectations for the CPI. Much lower pork prices is a key holding down consumer inflation in China.
The data release is unlikely to impact major FX rates too much (barring any shock results).

Chinese researchers successfully develop a 62-bit programmable superconducting quantum computing prototype

  
  Analysis

At the University of Science and Technology of China.

I know just enough (i.e. not very much) to know this is a big deal. Great work! Related research was published in the academic journal Science on May 7.
The info comes via Xinhua (China state media), link here (depending on your language skills you may have to translate 😉 )
Meanwhile, we are all stuck trying to get chips for our automobiles!
At the University of Science and Technology of China.

US Stocks close at session lows. Even the Dow gives up gains

  
Analysis, US Market

Nasdaq tumbled to the downside. Closes below 100 day MA

The major stock indices all closed lower and at session lows. Even the Dow which was up for most of the day, is ending in the red. The Nasdaq tumbled to the downside with a over 2.5% decline. The S&P fell over 1% on the day after closing at a record on Friday. The Dow also closed at a record level and Friday.

The final numbers are showing:
  • S&P index -44.17 points or -1.04% at 4188.43. The low for the day reached 4188.13
  • Nasdaq -350.38 points or -2.55% at 13401.86. The low for the day came in at 13401.75
  • Dow -34.94 points or -0.10% at 34742.82. The low for the day reached 34741.57
  • Russell 2000 index -15.93 points or -2.59% at 2212.70
We know the indices closed at the lows, what were the highs?
  • S&P was up as much as 3.49 points or +0.08%.
  • NASDAQ’s high was -64.31 points or -0.47%
  • Dow’s high was up as much as 313.80 points or +0.90%
The volatility index rose 2.84 points from 17.02% to  19.53%.
Nasdaq tumbled to the downside. Closes below 100 day MA
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