Sector movers: Commodities outperform despite US dollar strength
By Alexander Bueso
Date: Friday 06 May 2022
(Sharecast News) - Oil&Gas topped the leaderboard again on Thursday despite it being of a rollercoaster day for crude oil futures, the latter in part due to US dollar strength.
Shell accounted for the lion's share of gains with its shares rising back to their late 2019 highs on the back of the oil major's latest quarterly results.
Adjusted earnings rose 43% from the previous quarter to $9.13bn, beating the average of analysts' forecasts provided by the company of $8.67bn and trebling the $3.13bn reported a year earlier.
In the background, nearly all the major stock market indices on both sides of the Pond carved out a big reversal following early sharp gains.
The FTSE 100 was the exception to the rule, mainly due to the fact that many of its constituents were US dollar earners.
Strength in the oil patch could also be linked to the underlying strength in energy futures and ongoing talk of further sanctions on Russian oil and gas in the pipeline.
Worth noting, reports indicated that negotiations between Kyiv and Moscow to try and put an end to the war reportedly remained "difficult", according to one Russian negotiator.
On that note, analysts at JP Morgan told clients that their European Quant Macro Index had now entered the 'contraction' phase.
"This change in our systematic model suggests capital preservation is likely to become a dominant theme, and investors may find more opportunities in low Volatility, high Quality and large Cap equities than before."
"Our Quantitative view is more defensive than JPM's house view which is more positive and constructive on both the cycle and cyclical equity exposure."
For their part, drawing lessons from the 1970s and 1980s, when inflation was also elevated, analysts at Citi said that at this stage of the cycle it was Commodities that outperformed.
Stocks follow suit again mid-cycle "after some initial ingestion" while credit remains pressured and bonds should not be bought until "the very tail-end of the cycle".
And Precious Metals & Mining issues were indeed also high on the leaderboard.
Going in the other direction, Autos&Parts were at the bottom of the pile after analysts at Deutsche Bank took an axe to their target price for Aston Martin Lagonda.
They cut their target from 1,800.0p to 1,300.0p.
"Moreover, 2023 remains the key year to watch as financials need to turn and especially [free cash flow] need to become positive," the analysts from Deutsche said.
"Fundamentally, the business is trending into the right direction with good ASPs and a sound order book. That said, we see the shares reflecting this already. Hold."
Top performing sectors so far today
Oil, Gas and Coal 7,801.01 +2.23%
Precious Metals and Mining 11,257.34 +2.08%
Real Estate Investment Trusts 3,068.14 +1.78%
Gas, Water & Multiutilities 6,551.09 +1.57%
Electronic & Electrical Equipment 9,508.40 +1.18%
Bottom performing sectors so far today
Automobiles & Parts 2,266.52 -6.17%
Non-life Insurance 2,840.13 -4.19%
Personal Goods 26,215.50 -2.70%
Travel & Leisure 6,530.67 -2.34%
Life Insurance 6,444.66 -2.11%
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