Stock Markets

Analysis-Euro’s stellar run in doubt as ECB muddies rate outlook

Published

1 year ago

July 28, 2023

Analysis-Euro's stellar run in doubt as ECB muddies rate outlook

By Naomi Rovnick and Dhara Ranasinghe

LONDON (Reuters) – Euro bulls are set for an anxious summer ahead as doubts creep in over how far the ostensibly still-hawkish European Central Bank will go with interest rate rises.

The euro has been on a stellar run, up roughly 3.5% against the dollar so far this year to just under $1.11. Measured against the currencies of the euro zone’s main trading partners, it is not far off this month’s record highs.

Investors are strongly positioned for the euro – which languished at two-decade lows against the greenback this time last year – to keep rising.

That view is primarily based on the belief that the U.S. Federal Reserve will end its most energetic rate rise cycle in 40 years before the ECB turns dovish.

Under the surface, investors and economists say, even the most hawkish ECB members will be looking for the end of tightening as inflation softens and economic activity weakens.

“I don’t have a high conviction on the euro,” said Gabriele Foa, co-portfolio manager at Algebris Investments, who said he had been bullish on the single currency at the start of 2023 while now maintaining a mild “long bias”.

The ECB, he added, would “keep the inflation-fighting mask on” for a few more months, while at the same time weak data would be “feeding into (ECB) communication and eventually policy”.

On Thursday, the ECB delivered a widely anticipated 25 basis points rate increase to a 23-year high of 3.75% and said inflation remained too high.

ECB President Christine Lagarde responded to most of the questions at a press conference by saying all options remained on the table to “break the back” of inflation, but sent the euro tumbling with a dovish flourish near the end.

“Do we have more ground to cover? At this point in time I wouldn’t say so,” Lagarde said, almost unprompted, stressing that the ECB’s decisions would depend on incoming data.

The euro fell 0.9% against the dollar, with stubborn inflation and a growing risk of a recession pulling policymakers in opposing directions.

The Federal Reserve on Wednesday also hiked interest rates but markets suspect that was its last tightening move. In contrast, money markets now price in a 40% chance of another quarter point ECB move in September.

BOUNCE BACK

A hawkish ECB, just as cooling U.S. inflation points to peak Fed rates, helps explain the euro’s recent rally. The currency is up roughly 10% from lows hit last year below the psychologically key $1-mark.

A trade-weighted index, that measures the euro’s value against a basket of other currencies and is followed closely by the ECB, is trading near record highs.

That is partly because of weakness in the yuan, which accounts for over 10% of the basket, and has been hurt by a lacklustre Chinese economy.

Speculators had the biggest net long position in the euro in nine weeks in the week ended July 18, CFTC data showed.

The path ahead was expected to be foggy over the summer as the market awaits new ECB inflation projections in September, fresh data, and assesses the Fed outlook. July euro zone inflation numbers are out next week.

“I’m a little sceptical of markets thinking that they (ECB policymakers) will twist at this point into a more dovish position,” said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe’s largest asset manager.

“This is going to happen but only when inflation peaks … we’ll probably embark on a reversal like we are seeing already underway in the U.S., but that’s not a moment yet.”

Sandrini said Amundi expected the euro to rise to $1.15- $1.20 in the coming quarters, implying a further gain of at least 4% from current levels.

Further euro gains were not expected to unsettle policymakers since this would help keep the costs of imports – and overall inflation – down.

“Currency strength is welcome to battle inflation, it’s why the SNB for example does not mind about the franc,” said Societe General currency strategist Kenneth Broux. He was referring to the Swiss National Bank and a Swiss franc up over 7% against the dollar so far in 2023.

But with the jury very much out on whether the ECB will move again in September, the currency could as easily head down as back up, analysts said.

Monex Europe head of FX analysis Simon Harvey reckons, “the data will push back against the idea they can hike again in September”.

Euro zone business showed shrank much more than expected in July as demand in the bloc’s dominant services industry declined, data this week showed.

A euro level of $1.10, Harvey said, seemed fair.

Some were bearish.

Robin Brooks, chief economist at the Institute for International Finance in Washington, said a war in Ukraine that had left energy prices highly elevated pointed to a big terms of shock trade that should pull the euro back down.

“I don’t think the rally back from parity should have happened,” Brooks said.

Stock Markets

Sterling Construction stock soars to all-time high of $137.93

Published

24 hours ago

September 19, 2024

Sterling Construction Company, Inc. (NASDAQ:) has reached an impressive milestone, with its stock price soaring to an all-time high of $137.93. This peak represents a significant achievement for the company, reflecting a robust performance and investor confidence. Over the past year, Sterling Construction has witnessed a remarkable 84.48% increase in its stock value, underscoring the company’s strong market presence and the positive reception of its strategic initiatives. Investors and market analysts alike are closely monitoring STRL’s progress, as it continues to build on its momentum in the construction sector.

In other recent news, Sterling Infrastructure, Inc. announced two key changes in its leadership. The company revealed the upcoming retirement of board member Charles R. Patton, effective from September 1, 2024. Patton, who has been a part of Sterling’s Board since 2013, will step down after over a decade of service, during which he contributed to the Corporate Governance & Nominating Committee and the Compensation Committee.

In parallel, Sterling Infrastructure named Dan Govin as its new Chief Operating Officer. Govin, who brings over three decades of experience in the energy infrastructure industry, is set to lead the company’s strategic and operational initiatives. His past roles include Regional President at Quanta Services (NYSE:) and Senior Vice President of Operations.

In related developments, Sterling Real Estate Trust, a North Dakota-based real estate investment trust, recently held its annual shareholders’ meeting. During the meeting, eight trustees were elected, including Gregory P. Hammes, Timothy L. Haugen, and Michelle L. Korsmo, among others. Additionally, the appointment of RSM US, LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, was ratified by the shareholders. These are among the latest developments at Sterling Infrastructure, Inc. and Sterling Real Estate Trust.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

CRH stock soars to all-time high, reaching $91.22

Published

24 hours ago

September 19, 2024

CRH (NYSE:) PLC, a global leader in building materials, has reached an all-time high, with its stock price soaring to $91.22. This significant milestone underscores the company’s robust performance and investor confidence in its growth trajectory. Over the past year, CRH has seen an impressive 66.73% increase in its stock value, reflecting strong market demand and the successful execution of its strategic initiatives. The company’s ability to achieve this record price level amidst a dynamic economic environment speaks volumes about its resilience and the positive outlook shared by its stakeholders.

In other recent news, CRH Plc has seen a series of positive developments. Stifel, a financial services firm, has increased its EBITDA projections for the company by 4% for the years 2024 and 2025, following a positive outlook on CRH’s earnings. This includes the expected contributions from the newly acquired Adbri, which is predicted to add an additional 1% and 2% to the EBITDA in 2024 and 2025, respectively.

In addition, Deutsche Bank has raised its price target for CRH, maintaining a Buy rating on the stock, following the company’s acquisition of a majority stake in Adbri. This move is anticipated to enhance CRH’s materials solutions offerings in Europe.

Furthermore, CRH has appointed Lauren Schulz as its new Chief Communications Officer, a move expected to enhance the company’s global communications strategy.

Additionally, CRH has filed a notification regarding transactions by persons discharging managerial responsibilities, providing transparency into the dealings of the company’s management.

Lastly, CRH has reported strong growth in adjusted EBITDA and margin for the second quarter of 2024, and has raised its full-year adjusted EBITDA guidance to a range of $6.82 billion to $7.02 billion. These recent developments demonstrate the company’s resilience and strategic approach in a competitive market.

InvestingPro Insights

The ascent of CRH PLC in the stock market is not just a reflection of past performance but also a beacon for future potential, as suggested by InvestingPro data and insights. With a market capitalization of $60.88 billion and a forward-looking P/E ratio of 17.69, CRH is positioned competitively within the Construction Materials industry. Its commitment to shareholder returns is evident through a consistent dividend growth, having raised its dividend for the last four years, and a dividend yield of 1.39% as of the last twelve months leading up to Q2 2024. These financial gestures indicate management’s confidence in the company’s profitability, which is further supported by a strong gross profit margin of 34.85%.

In addition to its financial health, CRH’s operational efficiency is highlighted by an EBITDA growth of 13.63% in the same period. Notably, analysts have revised their earnings upwards for the upcoming period, signaling potential for continued growth. For investors seeking more detailed analysis, there are additional InvestingPro Tips available, including insights into CRH’s share buyback strategy and its performance relative to industry peers. These tips, accessible through the InvestingPro platform, offer a comprehensive view of the company’s strengths and investment potential.

For those monitoring CRH’s trajectory, the stock is trading near its 52-week high, at 99.14% of its peak, with a previous close at $89.27. The company’s next earnings date is set for November 7, 2024, which will provide further clarity on its performance and outlook. With a fair value estimate of $101 by analysts and an InvestingPro fair value of $74.35, investors are presented with a nuanced picture of CRH’s valuation. As the market anticipates CRH’s next financial disclosures, the InvestingPro platform remains a valuable resource for real-time data and expert analysis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

Nelnet stock soars to all-time high of $115.64 amid robust growth

Published

24 hours ago

September 19, 2024

In a remarkable display of market confidence, Nelnet Inc (NYSE:) stock has achieved an all-time high, reaching a price level of $115.64. This milestone underscores a period of significant growth for the company, which has seen its stock value surge by 27.28% over the past year. Investors have rallied behind Nelnet’s strong performance, propelling the stock to new heights and reflecting optimism in the company’s future prospects. The all-time high represents not just a peak for the year but an unprecedented value in the company’s trading history, marking a momentous occasion for both Nelnet and its shareholders.

In other recent news, Nelnet Inc. has been under the spotlight following strong Q2 earnings and subsequent adjustments by TD Cowen. The firm increased Nelnet’s price target to $98.00, up from $96.00, while maintaining a Hold rating on the stock. This follows Nelnet’s Q2 2024 earnings report, which highlighted an EPS of $1.44, surpassing TD Cowen’s estimate of $1.33. The improved earnings were largely due to reduced operating expenses and a lower provision for losses. However, these gains were slightly offset by a decrease in fee income and a lower net interest income.

In recent developments, Nelnet disclosed its quarterly financial results to the Federal Deposit Insurance Corporation (FDIC). The report provides a snapshot of the financial health of Nelnet Bank, its wholly-owned subsidiary, and includes critical data such as assets, liabilities, and income. This commitment to transparency and regulatory compliance allows investors to gauge Nelnet’s financial stability and growth prospects.

Furthermore, Nelnet’s bank subsidiary, Nelnet Bank, also disclosed its quarterly financials. The report, known as the Call Report, is a significant indicator of the subsidiary’s contribution to Nelnet’s overall financial status. This routine disclosure aligns with the requirements of the Securities Exchange Act of 1934, providing a clear view of Nelnet Bank’s financial standing as of the last quarter.

InvestingPro Insights

In light of Nelnet Inc’s (NNI) recent achievement of an all-time high stock price, several InvestingPro Tips and real-time data points provide further context to the company’s financial health and market performance. Notably, Nelnet has demonstrated a robust track record by raising its dividend for 9 consecutive years and maintaining dividend payments for 18 consecutive years, which signals a strong commitment to shareholder returns. Additionally, analysts remain optimistic about the company’s profitability, expecting net income to grow this year.

From a data standpoint, Nelnet’s current market capitalization stands at $4.15 billion with a price-to-earnings (P/E) ratio of 26.88, which adjusts to a lower ratio of 22.02 when considering the last twelve months as of Q2 2024, reflecting a more favorable valuation for investors. The company’s revenue growth has been modest at 0.7% over the last twelve months, yet it experienced a more significant quarterly surge of 12.82% as of Q2 2024. Importantly, Nelnet’s stock is trading near its 52-week high, at 99.06% of this peak, and has seen a large price uptick of 31% over the last six months. These figures underscore the company’s strong market presence and potential for continued growth.

For those interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NNI, which can provide investors with more nuanced insights into Nelnet’s performance and future outlook.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.