Before the bell: The winners of peace

Will there be peace in Ukraine? Not only Ukraine, but also the European chemical sector is holding its breath. The reason is the upcoming meeting between Donald Trump and Russian President Vladimir Putin in Alaska this Friday, where they will discuss the war in Ukraine. Outside Ukraine itself, the European chemical industry has been one of the biggest losers from the conflict. Higher energy prices have given Europe a serious competitive disadvantage and pushed the sector into crisis. Shares such as BASF, Solvay, and Lanxess could benefit significantly from a peace deal if energy sanctions against Russia are eased. US investors, on the other hand, are far less affected by the war.

On Friday, the Nasdaq technology index posted its 18th record high of the year, led by Apple (+4.2%) and Alphabet (+2.5%). In Belgium, Lotus Bakeries (+10.9%) stood out as its new factory in Thailand is ahead of schedule.

In Asia this morning, lithium prices are making headlines, jumping 8% after miner CATL announced it would shut down a mine that produces 6% of global supply for at least three months. In Australian trading, peers PLS Ltd (+17.8%) and Liontown Resources Ltd (+18%) soared.

Attention will also be on whether the Bel20 can set a new record today—it has been 18 years since the Belgian index last hit its all-time high. A gain of just 0.5% today would be enough. We also expect a sharp rise for Nyxoah, after the Belgian medtech company received FDA approval to market its sleep-apnea chip in the United States. Later today, gold miners Barrick Mining and Franco-Nevada will report their earnings.

Golden times ahead for gold miners?

Over the past year, the gold price in US dollars has risen 39%, a surge not yet reflected in gold mining stocks. Here’s why: if a gold miner produces at 1,500 dollars per ounce and the market price is 2,000 dollars, the margin is 500 dollars per ounce. Any increase in the gold price magnifies profits significantly. A 50% jump in the gold price would triple the profit margin to 1,500 dollars per ounce.

It is therefore striking that Barrick Mining’s share price has risen only 35% over the past year—less than the gold price, despite this leverage effect. We believe this discrepancy cannot last. If gold prices remain at current levels for a prolonged period, a revaluation of the stock seems inevitable. But Barrick will have to prove it can control operating costs and maintain stable production volumes.

The banks give, and the banks take

It has been 18 years since the Bel20 set a new record. That record may well be broken this week. On Friday, the index closed at 4,733 points, just 23 points shy of its 23 May 2007 high. Back then, the US subprime mortgage crisis was worsening. A year later, the collapse of Lehman Brothers sent shockwaves through the global financial system and claimed Belgian victims—Fortis and Dexia among them. The Bel20 lost two-thirds of its value, and bank shares like KBC fell as much as 95%.

It is therefore poetic that, 18 years later, it is KBC’s strong performance that is now pushing the Bel20 towards a record. KBC has a 13% weighting in the index and has already gained 33.3% this year. Since its 2007 low, the share price has increased twentyfold, while also paying 38.10 euro gross in dividends.

Did you know…

Barrick Mining originally started as an oil and gas company called Barrick Resources. After heavy financial losses in that sector, founder Peter Munk shifted the company’s focus entirely to gold, transforming it into one of the world’s largest gold producers under the name Barrick Gold. Today, the company is also active in other commodities such as copper.

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