Before the bell: sharp losses in Asia

The sharp rise in oil prices will push inflation higher, but central banks are keeping interest rates unchanged for now. Stock markets are declining worldwide.

The US central bank announced yesterday that it will leave its benchmark interest rate unchanged for now, keeping it in the 3.5% to 3.75% range. That decision was widely expected. Nevertheless, Wall Street retreated, with notable losses for both the S&P 500 (-1.4%) and the Nasdaq (-1.5%). Perhaps investors were disappointed by the prospect of only one rate cut over the course of the year. But it may also be that markets are realising that even that single rate cut is far from certain, given the sharp rise in oil prices in a short period of time. A barrel of North Sea crude still cost 101 dollar yesterday morning, but today it is already close to 112 dollar. That is positive for oil producers, although the daily gains of Chevron (+0.3%), Occidental Petroleum (+1.1%), TotalEnergies (+1.3%) and BP (+1.7%) remain limited. Shell (-0.4%) even declined slightly. On European markets, losses were on average limited to 0.6%. However, because Wall Street continued to fall after European markets had closed, there is a strong likelihood that we will also open lower this morning.

In Asia, selling pressure is already clearly visible today. In Hong Kong, the Hang Seng is down 1.9%, while in Tokyo the Topix is losing 2.6%. Tokyo Electric Power (-9.6%) is giving back a large portion of yesterday’s gains. Tencent Music Entertainment (-8.2%) disappointed with its quarterly results. At parent company Tencent (-6.2%), results were solid, but investors are concerned about high investments in AI. Alibaba (-4.4%) will report its results later today. Following the Federal Reserve, the European Central Bank will also announce its interest rate decision today. Although inflation is expected to rise, we still anticipate that the ECB will keep euro interest rates unchanged at 2% when it communicates its decision at 2:15 pm. Quest for Growth is distributing a coupon of 1 euro per share, as the investment company implements a capital reduction. Reporting results today are Nyxoah, Lanxess, Titan, Fastned and FedEx.

Let the sun shine

“You’d be crazy to buy car manufacturers’ shares today,” I read yesterday. In the Lynx debate, I also heard that shares of Chinese car manufacturers have no place in your portfolio. Yet this morning it is precisely those shares that are rising: Xiaomi (+3.2%), BYD (+1.1%) and Geely (+0.9%). Elsewhere, markets are mostly showing heavy losses. It suggests that these companies still have value. Electric cars are, after all, batteries on wheels. And with some solar panels and a sunny day like yesterday, the sun did exactly the opposite of oil markets: it charged your home and other batteries at a cost of 0.0 euro. Let fuel prices rise. I will drive to Jabbeke shortly for a lecture and then to Zaventem to record a podcast, all powered 100% by sunlight. And what is good in life may also be good in my investment portfolio. My view.

Palantir becomes a little Belgian

The newspaper De Tijd reports this morning that Palantir (-1.5%) has opened a subsidiary in Brussels. The company is likely doing so to secure defence contracts from the Belgian government and NATO. The data company is controversial, as it supplies both the Israeli army and the US immigration service ICE. You already know that I do not invest in defence companies. But beyond that, Palantir is also very expensive. With a market capitalisation of 365 billion dollar, investors are currently paying 224 times earnings and even 81.5 times revenue. While new contracts from Belgian and other governments may well increase profits—at our expense—the investment still appears risky.

Did you know…

that a film starring Labubu is in the works? The producer and director previously had success with Wonka and Paddington. The monster dolls are owned by the Chinese listed toy manufacturer Pop Mart.

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