Before the bell: War or Peace?

Wall Street remained closed, but in Hong Kong, tech stocks continue to be bought up. In Europe, investors are focusing on defense.

Even with Wall Street on pause, there was still plenty of action in the markets. In Amsterdam, Prosus (+3.4%) saw a strong rise, thanks to the excellent performance of its key holding, Tencent. ArcelorMittal (+2.4%), also listed in Amsterdam, performed well. Meanwhile, in Frankfurt, defense stock Rheinmetall (+14%) surged as investors bet on increased military spending by Europe and NATO. Since Russia’s invasion of Ukraine in February 2022, the stock of the German weapons and military vehicle manufacturer has skyrocketed by 770%. In Brussels, the Bel20 (+0.1%) barely moved. Umicore (-2.3%) continued to slide, while UCB (+1%) and Argenx (+1.1%) recovered some of their losses from Friday.

Asian markets are rallying this morning. The Topix in Tokyo rose by 0.5%, with Nissan Motor (+4.5%) and Mitsubishi Motors (+7.9%) leading the way. In Hong Kong, tech stocks are still being snapped up following the meeting between the Chinese president and executives from the country’s largest technology firms. The Hang Seng Index is up 1% and at one point this morning had gained as much as 2.3%. Alibaba (+2%), Tencent (+1.7%), and BYD (+2.1%) are among the favorites. Greenyard confirmed its forecast for its fiscal year this morning after reporting 5.6% revenue growth over the first nine months. After the market closes, EVS will release its earnings, and in the U.S., Occidental Petroleum is set to report.

War Rhetoric

In Frankfurt, shares of steel producer ThyssenKrupp soared 19.8% following a buy recommendation from Bank of America. According to the analyst, the company’s defense division is worth between 1.3 and 1.6 billion dollars—roughly half of ThyssenKrupp’s current market value. The analyst remains highly bullish on the stock, maintaining a price target of 8 euros per share. Currently, the stock trades at 5.61 euros, implying an upside potential of over 40%. Another factor contributing to the sharp rally is the high level of short interest in the stock—up to 12% of outstanding shares had recently been shorted. As short sellers scramble to cover their positions, they are now likely switching sides and becoming buyers.

Weak as Iron

While investors are showing interest in German steel, iron ore producers are not faring as well. This morning’s earnings report from Anglo-Australian mining giant BHP made that clear. The company, which operates on a fiscal year basis, released results for the past half-year, revealing a profit decline from 10.3 billion to 8 billion dollars. The primary culprit? Weak demand from China. Historically, iron ore mining has been BHP’s core business, but its CEO is now shifting focus toward copper production. That decision seems justified. While the iron ore division’s earnings dropped 26%, the copper segment’s operating profit soared 44% to 5 billion dollars. Investors appear to share the CEO’s optimism. Despite the disappointing results, BHP’s stock only fell 0.4% on the Sydney exchange this morning.

Did You Know …

that Baidu’s stock lost nearly 7% in Hong Kong yesterday? This morning, the decline continues. Observers have noted that Baidu’s CEO, Robin Li, was notably absent from the high-profile meeting between Xi Jinping and Chinese tech executives, unlike other industry leaders.

This article was translated from Dutch and was originally published on Spaarvarkens.be.