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Euro rally hits a wall

Euro falls sharply The euro has reversed directions on Wednesday and is sharply lower. In the European session, EUR/USD is trading at 1.0663, down 0.67%…

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Euro falls sharply

The euro has reversed directions on Wednesday and is sharply lower. In the European session, EUR/USD is trading at 1.0663, down 0.67% on the day. The euro was up 1.29% on Monday and extended its gains on Tuesday, hitting a 4-week high, after ECB President Lagarde announced that the ECB would raise interest rates in July.

On the data front, there weren’t any surprises out of Germany. GDP in Q1 rose by 0.2% QoQ, as expected. Compared to Q4 of 2019, the quarter prior to the Covid-19 pandemic, growth was 0.9% smaller, which means that the economy is yet to fully recover from the Covid crisis. The war in Ukraine and Covid-19 have resulted in supply chain disruptions and accelerating inflation, which has hampered economic growth.

German confidence remains in deep-freeze

German GfK Consumer Sentiment came in at -26.0 in May, a slight improvement from the April reading of -26.6, which marked a record low. Not surprisingly, consumers put the blame for their deep pessimism on two key factors – the conflict in Ukraine and spiralling inflation. The GfK survey also found that consumer spending has weakened, as high costs for food and energy have reduced spending on non-essential items.

The ECB Financial Stability Review, published twice a year, echoed what German consumers are saying. The report bluntly stated that financial stability conditions have deteriorated in the eurozone, as the post-Covid recovery has been tested by higher inflation and Russia’s invasion of Ukraine. The report noted that the economic outlook for the eurozone had weakened, with inflation and supply disruptions representing significant headwinds for the eurozone economy.

Given this challenging economic landscape, the euro will be hard-pressed to keep pace with the US dollar.

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EUR/USD Technical

  • There is resistance at 1.0736 and 1.0865
  • EUR/USD is testing support at 1.0648. The next support line is at 1.0519

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Visualizing A Decade Of Population Growth And Decline In US Counties

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population…

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Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population changes.

If an area sees a high number of migrants, along with a strong birth rate and low death rate, then its population is bound to increase over time. On the flip side, as Visual Capitalists Nick Routley details below, if more people are leaving the area than coming in, and the region’s birth rate is low, then its population will likely decline.

Which areas in the United States are seeing the most growth, and which places are seeing their populations dwindle?

This map, using data from the U.S. Census Bureau, shows a decade of population movement across U.S. counties, painting a detailed picture of U.S. population growth between 2010 and 2020.

Counties With The Biggest Population Growth from 2010-2020

To calculate population estimates for each county, the U.S. Census Bureau does the following calculations:

      A county’s base population → plus births → minus deaths → plus migration = new population estimate

From 2010 to 2020, Maricopa County in Arizona saw the highest increase in its population estimate. Over a decade, the county gained 753,898 residents. Below are the counties that saw the biggest increases in population:

Phoenix and surrounding areas grew faster than any other major city in the country. The region’s sunny climate and amenities are popular with retirees, but another draw is housing affordability. Families from more expensive markets—California in particular—are moving to the city in droves. This is a trend that spilled over into the pandemic era as more people moved into remote and hybrid work situations.

Texas counties saw a lot of growth as well, with five of the top 10 gainers located in the state of Texas. A big draw for Texas is its relatively affordable housing market. In 2021, average home prices in the state stood at $172,500$53,310 below the national average.

Counties With The Biggest Population Drops from 2010-2020

On the opposite end of the spectrum, here’s a look at the top 10 counties that saw the biggest declines in their populations over the decade:

The largest drops happened in counties along the Great Lakes, including Cook County (which includes the city of Chicago) and Wayne County (which includes the city of Detroit).

For many of these counties, particularly those in America’s “Rust Belt”, population drops over this period were a continuation of decades-long trends. Wayne County is an extreme example of this trend. From 1970 to 2020, the area lost one-third of its population.

U.S. Population Growth in Percentage Terms (2010-2020)

While the map above is great at showing where the greatest number of Americans migrated, it downplays big changes in counties with smaller populations.

For example, McKenzie County in North Dakota, with a 2020 population of just 15,242, was the fastest-growing U.S. county over the past decade. The county’s 138% increase was driven primarily by the Bakken oil boom in the area. High-growth counties in Texas also grew as new sources of energy were extracted in rural areas.

The nation’s counties are evenly divided between population increase and decline, and clear patterns emerge.

Pandemic Population Changes

More recent population changes reflect longer-term trends. During the COVID-19 pandemic, many of the counties that saw the strongest population increases were located in high-growth states like Florida and Texas.

Below are the 20 counties that grew the most from 2020 to 2021.

Many of these counties are located next to large cities, reflecting a shift to the suburbs and larger living spaces. However, as COVID-19 restrictions ease, and the pandemic housing boom tapers off due to rising interest rates, it remains to be seen whether the suburban shift will continue, or if people begin to migrate back to city centers.

Tyler Durden Sat, 07/02/2022 - 21:00

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Tesla EV deliveries fall nearly 18% in second quarter following China factory shutdown

Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s…

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Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s extended COVID-19 lockdown and challenges around opening factories in Berlin and Austin took their toll on the company.

This is the first time in two years that Tesla deliveries, which were 310,048 in the first period this year, have fallen quarter over quarter. Tesla deliveries were up 26.5% from the second quarter last year.

The quarter-over-quarter reduction is in line with a broader supply chain problem in the industry. It also illustrates the importance of Tesla’s Shanghai factory to its business. Tesla shuttered its Shanghai factory multiple times in March due to rising COVID-19 cases that prompted a government shutdown.

Image Credits: Tesla/screenshot

The company said Saturday it produced 258,580 EVs, a 15% reduction from the previous quarter when it made 305,407 vehicles.

Like in other quarters over the past two years, most of the produced and delivered vehicles were Model 3 and Model Ys. Only 16,411 of the produced vehicles were the older Model S and Model X vehicles.

Tesla said in its released that June 2022 was the highest vehicle production month in Tesla’s history. Despite that milestone, the EV maker as well as other companies in the industry, have struggled to keep apace with demand as supply chain problems persist.

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Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis?

It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record…

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It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record passenger numbers and 2020 was expected to be better yet. Low cost airlines were expanding aggressively, as they had been for years, and national carriers, in response, had made strides in cutting costs and introducing other efficiencies.

Then the Covid-19 pandemic struck, devastating the sector. Over the early part of the pandemic when international travel was severely restricted, airlines operated skeleton schedules. Severely reduced capacity, and schedules regularly interrupted by new lockdowns and shifting government policies bedevilled the sector for the next two years.

Even over the past few months which have seen most pandemic-related travel restrictions drop, a spate of new problems has hampered the sector’s recovery. Staff shortages, the result of a combination of the continuing need for those that become infected with Covid-19 to isolate and a tight labour market, have been a major headache. London-listed easyJet recently cut its capacity forecasts as a result of staffing issues.

And last week over 700 Heathrow airport staff voted to strike over the peak summer period, which promises chaos, and hundreds of cancelled flights, if an agreement can’t be reached over pay in the meanwhile. Staff at three Spanish airports are also calling for industrial action this summer and strikes are a threat elsewhere around Europe’s favourite holiday destinations.

Sky high fuel costs will also put pressure on margins this summer and potentially well into next year and a growing cost of living crisis sparked by inflation levels at 40-year highs will not help demand.

Airline share prices have predictably slumped since the onset of the pandemic. EasyJet’s valuation is down over 50% in the past year and over 75% since summer 2018. Its shares haven’t been worth as little as they currently are since early January 2012.

easyjet plc

Hope on the horizon?

But despite the fact the immediate future still looks tough for airlines, there are a number of reasons why investors might consider dipping into their stocks now or in the months ahead.

The first is that the bulk of the problems that have crushed airline valuations over the past couple of years have been external factors outwith control and unrelated to the underlying quality of companies. They are also all problems that are expected to be temporary and will ease in future. Covid-19 restrictions are, with the notable exception of China, no longer a big issue and hopefully won’t return. And even China recently reduced its mandatory quarantine period for anyone arriving in the country from two weeks to seven days.

That’s still problematic but a sign that an end to the dark cloud of the pandemic may finally be in sight. Most airlines were forced to either take on significant new debt or raise cash through equity issues that diluted existing shareholders, or through mechanisms such as selling and leasing back aircraft.

It will take time for that gearing to be unwound and balance sheets brought back to health. But the sector will eventually recover from the pandemic which should see higher valuations return, providing a buying opportunity at current depressed levels.

Airlines that have come out of the pandemic in the strongest positions will also likely gain market share from weaker rivals, improving their future prospects. British Airways owner IAG, for example, currently has access to more than £10 billion in cash after raising capital to cover losses over the pandemic. EasyJet has access to £4.4 billion. That means both should be well placed to cover any continuing short term losses until passenger numbers return to 2019 levels and push their advantage over less well-capitalised rivals.

Both IAG and easyJet have also seen their passenger capacity improve significantly in recent months. Over the all-important summer quarter to September, the latter expects its passenger capacity to reach 90% of 2019 levels despite the ongoing operational challenges. IAG expects to return to 90% of 2019 capacity over the last quarter of the year.

A full recovery to 2019 levels is possible by next year even if higher costs are likely to mean ticket price increases are inevitable. That does pose a risk for near-term leisure travel demand but there is confidence that remaining pent-up demand from the pandemic period will help soften the impact on discretionary spending on international travel that might have otherwise been more pronounced. Western consumers have also, the pandemic period apart, become so accustomed to taking foreign holidays that some analysts now question if they should still be considered discretionary spending rather than a staple.

Despite the transient and external nature of the problems that have hit easyJet’s valuation, not all analysts are convinced the current share price offers good value even despite its depressed level. They still look relatively expensive given the risks still facing the sector at a forward price-to-earnings ratio of close to x160.

iag

IAG could offer better value, currently trading at a price-to-earnings ratio of just x5.8 for next year. It is also expected to reverse return to a healthy profit by 2023. The company also has exposure to the budget airline market through Vueling and Aer Lingus and while it abandoned its move to take over Air Europa late last year it shows it has ambitions to further expand in this area. And it has plenty of capital available to it to make major acquisitions that could fuel growth when the sector recovers.

IAG’s cheap valuation does reflect the risks it faces over the next couple of years but for investors willing to take on a little more risk the potential upside looks attractive.

A dollar-denominated airline stock play

On the other side of the Atlantic, American airlines also suffered during the pandemic but are now recovering strongly. For British investors, dollar-denominated U.S. stocks also offer the attraction of potential gains in pound sterling terms as a result of a strengthening U.S. dollar. The Fed’s more aggressive raising of interest rates compared to the ECB or Bank of England is boosting the dollar against the pound and euro and it is also benefitting from its safe haven status during a period of economic stress.

One U.S. airline that looks particularly interesting right new is Southwest Airlines, the world’s largest low cost carrier. The USA’s domestic travel market has recovered so strongly this year that Southwest expects its Q2 revenues to be 10% higher than those over the same three months in 2019. It’s already profitable again and earnings per share are forecast to come in at $2.67 for 2022 and then leap to $3.84 in 2023. It’s a much more profitable operator than easyHet.

It also, unusually for an American airline, hedges a lot of its oil. That’s expected to see it achieve much better operating margins this year, predicted to reach 15.5% in Q2,  than other airlines being hit by much higher fuel costs. The company isn’t immune to the risk of the impact the inflationary squeeze could have on leisure travel but is seen as one of the most resilient airlines in the sector. It could be a better bet than either of its two London-listed peers.

The post Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis? first appeared on Trading and Investment News.

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