Well folks, as we enter the last two sessions of the week all of our trades since Monday having netted profits in the high single digits, led by our long and short recommendations on $BBAR (7.5%) and $CENTA (7.3%), respectively - let’s see if we can keep the gains going for a perfect week! Read on for a review of current market conditions, a short recommendation on Lufax Holdings as well as stories on China’s return to lockdowns and America’s most controversial doctor within this 159th Coachman’s Report!
Markets in Review
Equities do not seem to be slowing down this morning with premarket futures on the Dow, S&P and Nasdaq +12, 22, and 42 bps, respectively. This week’s 2% gain thus far has brought the index over the hump of its key 4000 point level - while any sort of upward price action likely means it will flirt with the 200-day moving average, it is highly likely to pullback and wait for the channel to narrow as participants wait for material newsflow next week such as the OPEC meeting and jobs report.
On a valuations basis, given this 5% advance since Nov 1, we can see the S&P drifting into a more frothy territory given the low quality of this earnings season and a sustained hawkish tone following yesterday’s FOMC minutes release. The index is currently trading at a 17.2 forward P/E, which is slightly below the historical average (18.5) and it's worth noting that a majority of issuers have negatively revised earnings guidance for Q4.
Short: Lufax Holding Ltd (LU-NYSE) | Timeline: 2 days
Lufax Holding Ltd (LU), which operates a technology-empowered personal financial services platform in China, reported substandard earnings yesterday after the market closed. The company missed discounted earnings and revenue estimates by 52.2% and 8.61%, respectively, while also reporting a 67.1% decrease in net profit as the company’s “core client base of small business owners continued to feel an outsized impact from a deteriorating macro environment, resulting in the company facing rising credit impairment losses and credit enhancement costs, weighing on profitability” (YongSuk Cho, CEO). (Full Story)
Referring to the chart, LU has suffered immensely amid macroeconomic trouble, dropping from highs of $6.70 from the start of the year. That said, the stock retraced into an ascending broadening wedge as traders showed some optimism going into this quarter’s earnings report, but it’s looking like a continuation downwards is imminent signaled by an extremely bearish Stochastic RSI on top of negative news.
Zooming out...
Back To The Lockdowns
After months of closures and the promise of a move away from zero Covid policies, millions of Chinese residents have been thrust back into lockdowns. Only hours after re-opening, Covid cases across many Chinese cities spiked leaving the government with seemingly no choice but to return to their previous viral reduction efforts.
The discontent from citizens is palpable, and the reimposed measures have led to incidents of violence not seen in years. Prime example being yesterday's brawl at Foxconn’s iPhone plant. While details are still murky, it’s rumored that clashes between workers, and riot police occurred due to discontent surrounding Covid restrictions, poor wages, and dismal food rations.
As for the impact on markets, if talks of prolonged restrictions continue oil will likely slide, especially with the potential OPEC production hike on the table. Moreover, consumer goods retailers may see a slowdown of inventory deliveries much like what was experienced throughout 2021, which after the summer’s inventory glut may help to continue the bullwhip effect. This new batch of lockdowns may also be detrimental to China’s youth unemployment figure, which is already sitting close to 19%.
Fauci Faces Fury
America’s most featured, albeit not most popular doctor was forced to take the stand on Wednesday amid an ongoing lawsuit into the White House’s social media censorship during the pandemic. Launched by two Republican attorney generals, the suit alleges that senior WH officials reached out to social media giants in order to block certain content, including discussions surrounding vaccine skepticism and the Hunter Biden laptop, from reaching the eyes, and minds of the public.
Tensions are high in advance of the conclusion of this suit, especially as discontent from lockdowns, mask mandates, forced vaccines, school closures, and what should be classified as “misinformation” grows in the months following the pandemic’s cessation.
Resultantly, Anthony Fauci was grilled for roughly seven hours, and although the deposition has already been ordered sealed by the courts, one Republican leading the suit has not been shy about Tweeting his take on the scenario. Eric Schmitt, the Attorney General of Missouri, has stated that Fauci purposefully censored the lab leak theory even though it had merit, and that lockdowns were defended. (Full Twitter)
Making headlines...
Binance’s Zhao Flags Possible $1 Billion for Distressed Assets
Crypto billionaire Changpeng “CZ” Zhao further outlined his plans to backstop the stricken industry, pledging to amass at least $1 billion for buying distressed assets and saying his Binance Holdings Ltd. will make another bid for bankrupt lender Voyager Digital. (Full Story)
Ukraine is attempting to retake a crucial spit of land that could disrupt Russia's missile barrages
Ukraine has confirmed that is trying to regain control of the Kinburn Spit — a thin stretch of land across much of the mouth of the Dnipro river that it lost to Russia in June. (Full Story)
Canopy Founder Linton Bets on Germany's Legal Cannabis Market With SynBiotic Stake
Linton, the former chairman of Canopy Growth Corp., acquired a stake in Munich-based SynBiotic SE when it raised capital last month, the company said in a statement Thursday, confirming a report from Bloomberg News. (Full Story)
ECB accounts show inflation fears justifying more rate hikes
European Central Bank policymakers feared that inflation may be getting entrenched at their last policy gathering so rates would need to rise further, the accounts of the Oct 26-27 meeting showed on Thursday. (Full Story)
Chart of the Day: World Cup Cash Flows
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