A rallying call for investors has been sounded by the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.
It comes from Nigel Green of deVere Group as global markets have got off to a confident start to the year.
The MSCI gauge – the global stock market index – has rallied 9% so far this year after slumping nearly 20% in 2022.
He notes: “The re-opening of China, weaker gas prices, and growing signs of a ‘soft landing’ for the U.S. economy as it appears that the Federal Reserve is reducing inflation without creating significant unemployment, are amongst the factors which have improved the outlook for global markets.
“This is causing a bullish sentiment as investors believe that many of 2022’s headwinds are now in the rear-view mirror.”
He continues: “The worry over corporate earnings in the first half of 2023 is a near-term concern, but one that investors appear reasonably happy to look beyond.
“Investors are looking ahead to the second half of the year, and to a global economic recovery underlined by an end to interest rate hikes from the major central banks by mid-summer, and possibly rate cuts at the end of the year as inflation falls sharply on a year-on-year basis.”
Market volatility in recent times has lowered valuations of some high-quality equities. This, says Nigel Green, will now be being used by savvy investors “to create better long-term investment opportunities and generate higher income for investors. They will be currently viewing this backdrop as a buying opportunity to top-up their portfolios.
“Inflation will still be an issue for a while to come, but less so as we move through the year.
“But it is likely that investors will be seeking to increase exposure to growth stocks, especially the currently undervalued ones, as cost of living eases and global growth picks up momentum.”
The deVere CEO concludes: “With a better year already underway way and the market currently low, investors should be positioning portfolios to take advantage of a brighter outlook. Many will be moving fast, so as not to miss the opportunities.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
On H4, the quotes are under the 200-day Moving Average, which indicates prevalence of a downtrend. The RSI has bounced off the support level. As a result, a downward breakaway of 2/8 (0.9155) is expected, followed by falling to the support level of 1/8 (0.9094). The scenario can be cancelled by rising over 3/8 (0.9216). In this case, the pair may rise to the resistance level of 4/8 (0.9277).
On M15, the lower line of VoltyChannel is broken away. This increases the probability of further falling.
XAUUSD, “Gold vs US Dollar”
On H4, the quotes are above the 200-day Moving Average, which indicates prevalence of an uptrend. The RSI has bounced off the support level. Further growth to the resistance level of 8/8 (2000.00) should be expected. The scenario can be cancelled by a downward breakaway of the support level of 6/8 (1937.50). This might entail falling to 5/8 (1906.25).
On M15, the upper line of VoltyChannel is broken away, which confirms the uptrend and a high probability of growth.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 0.03%, and the S&P 500 Index (US500) was down by 0.02%. Technology Index NASDAQ (US100) lost 0.18% yesterday.
The US reporting season continues to gain momentum. Tesla (TSLA) had a great fourth quarter thanks to a 37% increase in revenue. Tesla stated that under any scenario, they are prepared for short-term uncertainty but are focused on the long-term potential of autonomy, electrification, and energy solutions. IBM Corporation (IBM) on Wednesday reported its highest annual revenue growth in a decade and beat Wall Street expectations for the fourth quarter. The company also projected year-over-year revenue growth. But despite the good report, the company’s stock fell on the release of the report. Economists attribute this to the fact that they are not confident that the company can deliver such results, given the weak macroeconomic backdrop. Shares of Alphabet (GOOGL) increased losses from the previous day, falling more than -2% after the tech giant cut another 1,800 jobs on Wednesday.
As expected, the Bank of Canada raised its overnight rate by 25 basis points to 4.5%. An accompanying statement said that if economic developments are broadly in line with MPR’s forecast, the Board of Governors expects to keep the discount rate at its current level. The Bank of Canada may be the first bank among major economies to end its tightening cycle.
Equity markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.08% yesterday, French CAC 40 (FR40) gained 0.09%, Spanish IBEX 35 (ES35) lost 0.16%, and British FTSE 100 (UK100) was 0.16% lower.
The German government said on Wednesday that it expects economic growth this year, not a recession, as Europe’s largest economy has successfully weathered the energy crisis and supported consumers and businesses hurt by higher energy prices. The outlook for 2023 improved to 0.2% growth from a 0.4% contraction expected in October, when Germany feared it would run out of natural gas used to power factories, generate electricity, and heat homes this winter.
Recession risks in the UK are rising because of record shortages and falling production. Factories are cutting production at a record pace, business activity is falling, and the labor market is also starting to signal trouble. Traders are betting that the Bank of England will reverse course and cut its key interest rate later this year to support the weakening economy. But before the rate cut, the central bank is expected to make two more rate hikes of 0.25-0.5%.
Yesterday, Germany approved the supply of Leopard tanks to Ukraine. At the same time, the US also indicated that it would transfer 31 Abrams tanks. Following this news, the Russian embassy issued a tweet indicating that Germany’s decision to approve the delivery of Leopard tanks to Ukraine is extremely dangerous and takes the conflict to a new level. The conflict is expected to escalate in the coming weeks.
Volatility in the oil market has declined because of the holiday week in China. But optimism about the surge in demand from China remains, so with the current level of production by OPEC countries, analysts see further growth in oil quotes. The only constraint to growth is the increase in strategic crude stocks for the 4th week in a row.
Asian markets also traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.35%, and China’s FTSE China A50 (CHA50) did not trade and will not trade until the end of the week due to holidays. Hong Kong’s Hang Seng (HK50) also did not trade, India’s NIFTY 50 (IND50) decreased by 1.25%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.30%.
S&P 500 (F) (US500) 4,016.22 −0.73 (−0.018%)
Dow Jones (US30) 33,743.84 +9.88 (+0.029%)
DAX (DE40) 15,081.64 −11.47 (−0.076%)
FTSE 100 (UK100) 7,744.87 −12.49 (−0.16%)
USD Index 101.64 −0.28 (−0.27%)
Important events for today:
– US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
– US GDP (q/q) at 15:30 (GMT+2);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
A golden cross is when the asset’s 50-day simple moving average (SMA) crosses above its 200-day SMA.
Such an event indicates that this asset’s prices have been climbing of late, enough to be higher than its longer-term average.
At the time of writing, the gap between those two widely-followed technical indicators now stand at less than 4 points on the SP500m.
When it happens, the “golden cross” tends to send a “bullish” signal to traders, suggesting there could be more gains in store.
NOTE: The S&P 500 index is a benchmark which measures the overall performance of US stock markets.
How has SP500m performed after forming a “golden cross”?
Here’s how the SP500m has fared following its past three “golden crosses”:
July 2020: S&P 500 climbed by a further 50%, culminating in its current record high registered over a year ago, in early January 2022.
End-March 2019: S&P 500 climbed by another20% as it came tantalisingly close to the 3400 mark, before the steep dropoff in February 2020 as the Covid-19 pandemic gripped global markets.
April 2016: S&P 500 advanced by another 40% until its then-peak in September 2018
Upcoming events that could rock the SP500m:
1) Federal Reserve decision: Feb 1
The world’s most important central bank is back in action again next week.
On February 1st, the Fed is due to announce how much higher it will send US interest rates.
At the time of writing, market forecasts are based on the following:
Fed will hike by 25 basis points (bps) on Feb 2nd.
Fed will hike again by a further 25 bps sometime after next week’s meeting, but no later than June 2023.
That would bring US interest rates from the current 4.5% up to around 5%.
The Fed will then keep its benchmark rate at around that 5% mark for a while, before cutting interest rates later this year.
Note that, generally, many asset classes such as stocks, gold, and even cryptos do not enjoy US interest rates moving higher.
Hence, if the Fed signals its intentions to move US interest rates even higher past the market-forecasted 5%, that could drag the SP500m lower.
However, if the Fed signals that it’s indeed ready to pause its rate hikes, that could translate into more gains for the SP500m.
2) Big Tech Earnings: Feb 2nd
Apple, Alphabet (Google’s parent company), and Amazon are all due to report their respective earnings from Q4 2022.
What are “earnings” and why does it matter?
These quarterly earnings announcements are when public-listed companies reveal just how good a job they did at earning profits over the prior quarter.
Markets tend to “reward” the companies whose earnings either came in better than expected, or are confident about their ability to keep earning higher profits in the near future.
The reward = traders and investors buy up these stocks and send their prices higher.
However, if the company’s financial performance disappointed markets, or if the company’s management are concerned about tougher times ahead for the business, that could prompt markets to sell the stock and send its share price lower.
Why are earnings out of Apple, Alphabet, Amazon so important for the S&P 500?
Note that these stocks are some of the biggest in the world.
Combined, all three stocks have a market cap of almost 4.5 Trillion (with a “T”) US dollars. That accounts for almost 13% of the S&P 500’s total market cap of about US$35 trillion (as of market close on January 25th).
Hence, given their enormous size, how markets react to the earnings out of these 3 tech titans should have a major impact on how the S&P 500 performs as a whole.
Note that all 3 will report their respective earnings after US markets close a week from today – Thursday, February 2nd.
Hence, expect to see a major reaction in the S&P 500 when the US stock market reopens on February 3rd – the day following the earnings release by Apple, Alphabet, and Amazon.
What’s next after golden cross?
If such a bullish technical event does happen for the SP500m, equity bulls (those hoping stocks will move higher) will be looking to next conquer the following resistance levels:
4060: downward upper trendline that began since January 2022 record high.
4105.6: early December cycle high
4144.2: December 13th intraday peak
A closing price above the 4144.2 intraday peak would signal a bullish breakout of the year-long downtrend.
Such price action may well entice even more stock bulls back to the fore.
However, if market sentiment turns sour that could drag the S&P 500 back below the psychologically-important 4,000 mark.
From a fundamental perspective, this could be due to any of the following:
disappointing US earnings
a still-hawkish Fed
growing fears of a US recession
other risk-off events
If so, then the following support levels will start to likely tempting to equity bears (those who believe that stock prices will fall):
Rising trade tensions between the U.S. and the European Union, two of the most important global leaders when it comes to climate policy, could undermine key climate initiatives of both governments and make it harder for the world to put the brakes on climate change.
The two have clashed over the 2022 Inflation Reduction Act’s requirements that products be made in America to receive certain U.S. subsidies. The EU recently announced plans for its own domestic-only clean technology subsidies in response.
The U.S. and EU also now have competing carbon tariff proposals, and these could end up undermining each other.
In December 2022, the EU reached a provisional agreement on a carbon border adjustment mechanism. It will put carbon-based tariffs on steel, aluminum and other industrial imports that aren’t regulated by comparable climate policies in their home countries. The Biden administration, meanwhile, proposed a “green steel club” of nations that would cooperate on reducing emissions by levying tariffs on relatively high-emission imports.
At first glance, the two approaches might seem similar. But the EU and U.S. proposals reflect starkly different and arguably incompatible visions for the intersection of climate and trade policies.
A failure to align approaches risks further stoking trade tensions and would likely have international repercussions. Without multinational coalitions, dirtier, lower-cost competition will undercut emerging low-carbon technologies.
A strong transatlantic partnership is a prerequisite to greening the global economy. Without creative compromises and skillful diplomacy, the EU may find that its tariffs lead to reprisals rather than reciprocal action, and the U.S. quest to create climate clubs will not get off the ground.
EU’s textbook approach to tariffs
The carbon border adjustment mechanism, or CBAM, is tied to the EU’s flagship climate policy, its emission trading system. The system requires large European factories and other greenhouse gas emitters to purchase allowances for each ton of carbon dioxide they release. It’s a form of a carbon price.
However, if only European industries have to pay this carbon price, the EU risks domestic production’s losing out to imports from countries with weaker regulations on emissions. This phenomenon, referred to as “carbon leakage,” can result in even dirtier industrial production.
To date, the EU has avoided carbon leakage by compensating domestic producers of certain industrial products with free emissions allowances. But that approach is becoming increasingly expensive as the carbon price rises, with a recent trading range of 70 to 100 euros per metric ton. The CBAM makes it possible to phase out these free allowances by phasing in tariffs on imports from countries without comparable carbon pricing policies. Once finalized, the tariffs could be applied starting in 2026.
How the EU’s carbon border adjustment would work.
The CBAM has been met with some international outrage, with the “BRICS” countries – Brazil, Russia, India, China and South Africa – calling it “discriminatory” and a U.S. senator accusing the EU of going “rogue.”
In reality, the CBAM treats domestic products and imports equally by applying the same carbon price, just as any economics textbook recommends. It also aims to further global climate action by giving other countries the incentive to implement their own carbon pricing policies.
Biden’s climate club approach
Unlike the EU, the U.S. has failed to adopt a national carbon price despite several attempts. The Inflation Reduction Act instead fills the federal climate policy void largely by offering subsidies for producing clean energy.
However, subsidies to American producers won’t reduce emissions from other countries’ production of internationally traded products.
For example, steel accounts for 11% of global carbon dioxide emissions, with the vast majority from East Asia, including 53% of global production from China. Transforming Chinese production is therefore critical to lowering emissions.
Encouraging a global shift to cleaner production methods will require international cooperation, including trade measures that enable expensive low-carbon investments and penalize high-emissions steel production.
President Joe Biden needed an approach to climate tariffs that would benefit U.S. producers without requiring a politically untenable carbon price. His proposed green steel club is an agreement among countries that would commit their steel and aluminum industries to meeting certain emissions standards. Tariffs would be imposed on imports that exceed the standard or come from countries that are not signatories to the agreement.
Most U.S. manufacturers would benefit. U.S. steel typically produces fewer emissions than its competitors. The desire to exploit this “carbon advantage” has taken hold with politicians on bothsides of the aisle.
Biden’s plan could be the first “climate club” of nations, consistent with the recommendations of an increasing number of policy experts. In a recent book, Charles Sabel and David Victor suggest building on the international success in phasing out ozone-depleting chemicals: The Montreal Protocol used a combination of cooperative learning, penalties and pools of resources for countries in need of technical and financial support.
Creative ways to cooperate
The two visions for climate policy tariffs involve different paths toward somewhat different goals, so they cannot easily be reconciled. The premise of the EU strategy is that tariffs are necessary to ensure that climate policies impose the same costs on domestic and foreign emitters. In contrast, the U.S. is proposing tariffs that penalize producers with high emissions.
The U.S. cannot pursue the EU approach without some form of a national carbon price. At the same time, the EU is unlikely to abandon its long-planned and laboriously negotiated CBAM, particularly to partner with a White House that may have a different occupant in two years.
There are, however, pathways forward that blend elements of both visions.
For example, parts of the CBAM, including the linkage to the EU carbon price, could be included as elements of climate clubs, including Biden’s green steel club. That may enable the EU to retain hard-fought progress on its emissions trading system.
Alternatively, some U.S. senators are pushing legislation to create a U.S. carbon border adjustment, including a domestic carbon price and a tariff on imports of some energy-intensive products like steel and aluminum. Bipartisan support for such legislation would create a basis for a durable compromise with the EU. However, even a narrow carbon price on industrial products may not be politically viable in the Republican-controlled House of Representatives.
Looking ahead
Any unilateral use of tariffs will strain sensitive geopolitical relationships.
By pursuing compromise rather than conflict, the U.S. and EU can leverage their joint economic strength to create a powerful coalition that encourages low-carbon industrial production around the globe, including in China and India, without ceding domestic advantages.
In our view, both sides have ample reasons to find common ground.
Investment from VC investors PUSH Ventures and aws Gründerfonds
Investment & planned strategic partnership with Erste Group
25 JANUARY 2023: Valutico, the web-based valuation platform, announces that it has closed its first financing round with outside investors. Existing investors also participated in the round, totalling equity funding in the mid 7-figures.
Investments from Venture Capital firms PUSH Ventures and aws Gründerfonds will make a substantial impact on the business, not only from a product and service perspective but also by gaining their invaluable expertise.
Vienna-based Erste Group is also participating in the financing round and intends to enter into a strategic partnership with Valutico to help further digitalize the bank’s processes around valuation and corporate lending.
Valutico will apply the funding raised in this round of financing to further accelerate its growth, deliver on its product roadmap, and grow its product and engineering teams.
Valutico provides software for data-driven valuation analysis
Valutico serves the Financial Services and Investment Management industries with data-driven tools to conduct valuation analysis more efficiently. In an area dominated by slow and error-prone spreadsheets, Valutico empowers businesses and experts to perform accurate valuations in a fraction of the time it used to take while solving the issue of complex tools, lack of data sources and time-consuming reporting. Valutico’s globally distributed and fast-growing team of 60 employees currently proudly serves around 600 clients in over 85 countries.
Recent innovative product extensions of the existing valuation models, which currently focus on the financial value of a company, include the integration of the Capitalised Earnings Method and Venture Capital (VC) Method. But Valutico is also working on a robust qualitative and quantitative module for the holistic assessment of an organisation’s impact on the environment, society and governance (‘ESG’).
Paul Resch, Co-Founder & CEO comments:
“The new funding rounds off an outstanding year for the company and will allow us to double down on our growth path and continue to innovate around the question of what “value” means in a business context. The benefits of Valutico’s platform are already being felt across the financial landscape and this recent funding helps us strengthen our offering and broaden our positive impact. We are using this opportunity to reinforce our commitment to our clients and we look forward to the road ahead!”
Laurenz Simbruner, Founding Partner at PUSH Ventures comments:
“Paul and the team have shown an impressive track record building a fantastic product for a global audience of business customers. We are super excited to support Valutico on its way to becoming a world leader in the financial services software industry.”
Christoph Haimberger, Managing Director, aws Gründerfonds comments:
“Our investment allows Valutico to grow beyond legacy valuation tools, in ESG and digital usability. A value-driven combination of our investment thesis into “Green Winners” and “Digital Winners”. We are thrilled to be part of the journey with the outstanding and globally ambitious Valutico team.“
Ingo Bleier, Board Member for Corporates Banking & Markets at Erste Group comments:
“At Erste, we are committed to improving our ability to analyse and apply data in order to gain a better understanding of our customers’ needs and to develop our offering accordingly. That’s why we are exploring how Valutico‘s innovative valuation platform can help us to further digitalize part of our process in the corporate banking and underwriting business.”
About Valutico
Valutico is the world’s leading valuation platform. Valutico’s all-in-one software allows finance professionals to value a company in minutes, by providing data-driven tools to conduct analyses faster and more accurately.
Used by more than 600 financial firms in 85 countries, Valutico is an emerging force in the world of business valuations. The powerful platform is popular amongst professionals in advisory roles such as in Corporate Finance, M&A, and Tax and Audit, as well as Investment Managers in Private Equity, Venture Capitalists, and Family Offices. Large corporations also use Valutico for Strategy, Financial Reporting, and Investor Relations.
Founded in 2017, and headquartered in Vienna with subsidiaries in the US and UK, Valutico operates worldwide with an ever-expanding network of valuation practitioners who use Valutico’s platform, consultancy services, and valuation trainings. Valutico’s mission is to make the complex process of company valuations simple, and to support accurate valuations for a well-functioning economy.
About aws Gründerfonds
The aws Gründerfonds is an Austrian venture capital company and has at its disposal investment capital of around 70 million euros. The investment focus is on Austrian startups with high growth potential for seed and follow-on financing in the start-up and early growth phase (Later Seed and Series-A). Co-investors from the international network are actively involved. The aws Gründerfonds sees itself as a long-term, stable partner and offers entrepreneurial venture capital with active support. So far, together with co-investors, more than EUR 566 million have been invested in 45 companies, and numerous exits have been successfully completed.
About PUSH Ventures
PUSH Ventures is an early-stage venture capital firm investing in outstanding teams with convincing products and high growth potential. PUSH Ventures has been active as investor and has a strong belief in the megatrend of digitalisation and technological advances for the creation of value. Focus areas include health and the future of the planet in Europe, especially Austria and Germany.
About Erste Group
Founded in 1819 as the first Austrian savings bank, Erste Group went public in 1997 with a strategy to expand its retail business into the CEE region. Since then, Erste Group has grown to become one of the largest financial services providers in Central and Southeastern Europe, where it services around 16 million customers.
At the resistance level, gold has formed a Hanging Man reversal pattern. The pair is now going by the signal in a descending wave. The goal of the correction might be 1915.00. Upon testing the support level, the pair will get the chance for bouncing off it and continue the uptrend. However, the price may grow directly to 1945.50 without testing the support level.
NZDUSD, “New Zealand Dollar vs US Dollar”
On H4, at the resistance level, the pair has formed a Shooting Star reversal pattern. The pair may now go by the signal in a descending wave. The goal of the pullback might be 0.6445. After a bounce off the support level, the pair might get the chance to continue the uptrend. However, the price may grow to 0.6550 without any correction.
GBPUSD, “Great Britain Pound vs US Dollar”
On H4, at the support level, the pair has formed a Hammer reversal pattern. The instrument may now go by the signal in an ascending wave. The goal of the growth might be the resistance level at 1.2430. However, the price may correct to 1.2275 and continue the uptrend after a pullback to the support level.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
It probably won’t be a surprise to you that Elliott Wave International is an advocate of technical analysis. After all, the Elliott wave method is a form of technical analysis.
You probably know that the term “technical analysis” refers to analyzing the behavior of financial markets themselves — generally by studying charts — as opposed to “fundamental” analysis, which is based on news and events outside of financial markets.
One of the many classic technical-analysis chart patterns is known as a double top. (Conversely, a double bottom is the same reversal formation after a significant prior down move.) Getting back to the double top, the first price high (or top) is followed by a moderate decline. The price then rises into the same territory as the prior high, which is the second top.
In August, the European Financial Forecast, a monthly Elliott Wave International publication which covers European financial markets and is also part of the monthly Global Market Perspective, said:
Natural gas has formed a bearish double top.
Keep in mind that this analysis was provided even though energy analysts were calling for natural gas prices to remain elevated due to “fundamentals,” for example, “supply strains.” Here’s a July 25 headline (The Financial Times):
Traders expect European gas prices to remain elevated for years to come
Instead of remaining elevated, the price of natural gas fell, which was right in line with our analysis of that double top in the August Global Market Perspective.
The JanuaryGlobal Market Perspective provides a review with this chart and commentary:
The chart illustrates the continuous natural gas futures contract that trades on the New York Mercantile Exchange.
In August, we illustrated this contract along with 15 other key commodities and stated that gas prices had formed a bearish double top. In a matter of weeks, futures collapsed 50% and penetrated a key technical support level at [a key Elliott wave]. The same support level failed again last month.
True, not all analysis based on a market’s “technicals” works out as expected, but often, it does — or at least gets very close.
See how Elliott Wave International’s global analysts apply Elliott wave and technical analysis to other financial markets — free — for a limited time.
This article was syndicated by Elliott Wave International and was originally published under the headline Natural Gas: Here’s What Happened After a “Double Top”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
An analyst says Defense Metals Corp. is well-positioned to benefit from demand for rare earth elements with its continued high-grade results in British Columbia.
This week it released drill results from eight core holes totaling 2,104 meters. One hole, WI22-73, returned the second longest REE-mineralized intercept of the 2021 and 2022 Wicheeda drilling campaigns, which totaled more than 10,000 meters in 47 core holes.
“We think Defense Metals is well positioned to benefit from growing demand for rare earths used in electric vehicle batteries, metal alloys, and advanced technology applications,” wrote analyst Mark Reichman in a note for Noble Capital Markets on Wednesday.
“Data from the 2021 and 2022 drilling programs will be incorporated into a preliminary feasibility study (PFS) which is expected to be completed by the fourth quarter of 2023,” Reichman wrote. “In addition to [the] significant potential to expand the resource and extend the mine life beyond 19 years, we expect grade enhancement and the meaningful conversion of inferred to indicated and potentially measured resources.”
Reichman rated the stock Outperform with a target of CA$0.70. Its price on Thursday was CA$0.315.
The Catalyst: New Drill Results
Source: Defense Metals Corp.
The new results were from two explorations, three resource delineations, and three pit slope geotechnical core drill holes, the company said. Hole WI22-73 intercepted 1.42% total rare earth oxide (TREO) over 221.7 meters. Hole WI22-74 assayed 3.77% TREO over 30 meters and 2.52% TREO over 59 meters at mid-hole depths, the company said, with a broader zone average of 2.03% TREO over a 192-meter interval.
The 2022 drill program comprised of 18 core holes totaling 5,510 meters. Results have been announced for 16 holes. The results of the last two are expected shortly, Reichman wrote.
“We firmly believe Wicheeda is one of the best rare earths projects globally, and we eagerly look forward to advancing the project during 2023,” said Defense Metals Director Kristopher Raffle.
Three other holes, WI22-75, WI22-66, and WI22-65, all collared outside of the deposit, did not return significant REE mineralization.
Elements in High Demand
Defense Metals hopes to produce as much as 10% of the world’s light REEs to reduce reliance on China, which has about 85% of the world’s REE processing capacity. Political issues between the United States, China, and Taiwan put that vital supply at risk, as well as pressure from within China itself.
REEs are in high demand in the new green economy for purifying water, MRIs, fertilizers, weapons, research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs).
A preliminary economic assessment (PEA) for Wicheeda in 2021 showed an after-tax net present value of CA$512 million. Its 43-101 technical report showed a 5 million tonne indicated resource at 2.95% total rare earth oxides (TREO) and a 29.5 million tonne inferred resource averaging 1.83% TREO.
“DEFN is a best-of-breed North American REE developer that is well-positioned to its leverage growing global REE demand and government support to become part of a North American REE critical metals supply chain,” Gray wrote.
Wicheeda could help fill the resource gap with China, Reichman said. “The assay results released thus far have been outstanding,” he wrote last November.
Analyst Michael Gray of Agentis Capital recently initiated coverage on the company, saying Wicheeda was well-located with access to key infrastructure and “could become a globally significant producer” of REEs. He set a 12-month valuation of CA$3.50 for the stock.
“DEFN is a best-of-breed North American REE developer that is well-positioned to its leverage growing global REE demand and government support to become part of a North American REE critical metals supply chain,” Gray wrote.
The U.S. government in February announced a US$35 million grant to MP Materials Corp. to process REEs at its California facility. The company has agreed to invest US$700 million to create more than 350 jobs in the permanent magnet sector by 2024.
Gray said industries that use REEs are set to expand.
“The fundamentals for REE demand growth (are) very positive,” he wrote. “Demand is high, and forecasts suggest it will continue to grow, vis a vis the markets for EVs, wind turbines, and defense technologies.”
Reichman also noted the recent appointment of Len Clough, president and chief executive officer of Toro Pacific Management, to the board of directors to replace the departing Max Sali. Clough founded Toro, a capital markets advisory firm, in 2013, he said.
About 5% of the company’s stock is owned by institutional entities, and about 5% is owned by insiders. The rest, 90%, is retail.
Currently, the analysts covering Defense Metals Corp. include Reichman and Gray. Newsletter writers Clive Maund and Bob Moriarty also follow the stock. You can see all the analyst and newsletter coverage by clicking “See More Live Data” in the data box above.
Defense Metals has a market cap of CA$65.43 million with 207.7 million shares outstanding, 164.9 million of them free floating. It trades in a 52-week range of CA$0.365 and CA$0.16.
Disclosures:
1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None.
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The US reporting season continues to gain momentum, but indices are reacting sluggishly. As the stock market closed yesterday, the Dow Jones Index (US30) increased by 0.31%, and the S&P 500 Index (US500) decreased by 0.07%. Technology Index NASDAQ (US100) lost 0.27%.
In the technology sector, gains in Apple (AAPL) stocks were offset by declines in Alphabet (GOOGL) stock. The US Department of Justice filed a lawsuit against Google, claiming that the search engine giant violated the antitrust laws by abusing its monopoly in advertising technology. Microsoft Corporation (MSFT), which ended the day just below opening levels, rose by 4% on the release of its report. The company’s quarterly earnings beat Wall Street estimates.
Investors are betting that the Fed will stop raising rates soon, pause briefly, and then begin cutting rates closer to the end of the year. Why are investors waiting for a rate cut? For investors, lower rates make borrowing less expensive and tend to raise the price of everything from stocks to bonds and digital assets. Fed officials predict that their key short-term rate, now at 4.5%, will eventually reach 5-5.25%. Futures markets show that most investors expect the rate to peak at 4.75-5%. Fed officials point to a robust labor market as a factor that can keep inflation high. Now at 3.5%, the unemployment rate is the lowest in 50 years. Businesses continue to raise wages to retain and attract workers, which boosts consumer spending. Employers, in turn, tend to pass on their higher labor costs to their customers in the form of higher prices. Both trends, the Fed fears, will keep inflation well above the 2% target. But the latest news suggests that the labor market is already starting to fall, and the Fed will be forced to stop raising rates.
Equity markets in Europe traded without a single dynamic on Tuesday. German DAX (DE30) yesterday declined by 0.07%, French CAC 40 (FR40) gained 0.26%, Spanish IBEX 35 (ES35) jumped by 0.33%, British FTSE 100 (UK100) yesterday closed the day down by 0.35%.
Yesterday, GfK Consumer Confidence data for Germany showed signs of further improvement. The seasonally adjusted S&P Global Eurozone PMI Composite Output Index was above the 50 mark, indicating that business activity in the region is recovering and the risk of recession is declining.
Norway’s gas riches are causing a wave of optimistic forecasts for the Norwegian krone. Danske Bank A/S and Bank of America Corp. believe the NOK currency is a bargain since Norway is now receiving trillions of kroner from energy exports. Over the past decade, the króna has lost about a third of its value against the euro. According to Morgan Stanley, the Norwegian currency is likely to rise 15% against the dollar this year.
Natural gas is rising cautiously amid projected colder weather. Growing rumors of cold weather approaching the United States and the rest of the Northern Hemisphere are boosting natural gas prices.
Asian markets also traded flat yesterday. Japan’s Nikkei 225 (JP225) added 0.57%, and China’s FTSE China A50 (CHA50) did not trade and will not trade until the end of the week due to the holidays. Hong Kong’s Hang Seng (HK50) also did not trade, India’s NIFTY 50 (IND50) decreased by 1.1%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.06%.
The Australian dollar reached a 5-month high on inflation growth. Consumer prices jumped from 7.3% to 8.4% on an annualized basis. The core CPI quarterly reading was 1.9% in December, instead of the expected 1.6% and 1.8% previously. The preferred RBA average CPI was 6.9% annualized through the end of 2022. Interest rate futures markets raised the likelihood of a 25 basis point RBA hike at the February 7 monetary policy meeting.
In New Zealand, the Consumer Price Index rose to a 7.2% annualized rate in the fourth quarter, slightly above analysts’ expectations of 7.1% but below the RBNZ forecast of 7.5%. The data suggests that the RBNZ will raise interest rates by another 0.5% at its next meeting.
The key consumer price indicator in Singapore remained at 5.1% y/y, slightly higher than forecast. Overall inflation fell to 6.5% year-on-year from 6.7%. The central bank has previously stated that core inflation is likely to remain around 5% in early 2023. It also forecast a core inflation rate of between 3.5% and 4.5% in 2023, with the overall inflation rate ranging from 5.5% to 6.5%.
The Japanese prime minister said Sunday that he would appoint a new governor of the Bank of Japan next month, as Kuroda’s second five-year term expires on April 8.
S&P 500 (F) (US500) 4,016.95 −2.86 (−0.071%)
Dow Jones (US30) 33,733.96 +104.40 (+0.31%)
DAX (DE40) 15,093.11 −9.84 (−0.065%)
FTSE 100 (UK100) 7,757.36 −27.31 (−0.35%)
USD Index 101.94 -0.20 (-0.20%)
Important events for today:
– Australia Consumer Price Index (q/q) at 02:30 (GMT+2);
– Singapore Consumer Price Index (m/m) at 07:00 (GMT+2);
– German Ifo Business Climate (m/m) at 11:00 (GMT+2);
– Canada BoC Interest Rate Decision at 17:00 (GMT+2);
– Canada BoC Monetary Policy Report at 17:00 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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