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Transcript:
BFM
BFM 89.9, good morning at 7:07 AM on Thursday, the 12th of October. You are listening to The Morning Run. I’m Shazana Mokhtar with Wong Shou Ning and Keith Kam. We’re going to kickstart the morning with a look at how global markets closed overnight.
BFM
Wall Street ended higher with investors looking at the minutes of the latest Fed meeting. The Dow Jones was up 0.2%. The close to 0.4% higher, while the Nasdaq rose 0.7%. Earlier in the day, the Nikkei in Japan was up 0.6%. Hong Kong’s Hang Seng was up 1.3%. Shanghai’s Composite was up 0.1%. STI in Singapore was down 0.2%. Back home, the FBMKLCI closed 0.1% higher.
BFM
For some insights on what’s moving international markets, we have on the line with us, Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Thanks for joining us. Let’s take a look at oil prices. Tensions in the Middle East have caused a surge in oil prices, although there has been some pullback. I think currently Brent crude is hovering at around $85 per barrel. How do you think OPEC is going to react to these events over the next few weeks and how is that going to impact the trajectory of oil prices?
Tony Nash
Yeah, it was interesting seeing crude spike early this week. Unless things change materially on the ground and we see a much broader conflict, I’m not really sure it’ll impact prices much. We’ve said for months that we expect prices to peak out in late September, October, and then fall into the end of the year. Will we see OPEC, say, shut off supply or constrict supply in some way because of the conflict? Not necessarily something we’re seeing yet. Although if let’s say US embargo on Iran is, say, intensified or something, that could really change the narrative.
BFM
Tony, some analysts are betting that the share prices of defense companies will so in the coming months. We’re looking at the share prices of Lockheed and Northrop Grumman, which have shot up nearly 9% over the last few days. What are your thoughts on this?
Tony Nash
Yeah, we saw the Fed stocks, as you said, 9%, 10% up early in the week, and they’ve settled a bit. I think if you’re looking at specific companies and have specific reasons for investing in those companies, I think it’s different. But whether or not they continue to rally as a group or not really depends on the breadth of the conflict. So at this point, if you’re investing them in them as a group, probably pretty speculative bet, a gruesome speculative bet, but probably speculative. I’m not sure I’d take that group bet, but of course, individual companies have different tactics and strategies. So I’d look harder at those individual companies before betting as a group.
BFM
Tony, JPMorgan, City Group, and Wells Fargo will kick off earning seasons on Friday. What are your expectations in terms of how the big banks will do? And what picture will they paint about the health of the US economy and consumer?
Tony Nash
There’s a lot there. I think first, in terms of their, say, the interest they can charge, that thing, I think their interest margins are widening out as interest rates rise, which is obviously good for them. Now, those are the big banks for the, say, regional banks are still, I think, although they’re relatively stable, I think they’re still facing some pretty choppy waters. And I think there’s a given or I guess, depending on what happens in commercial real estate, you could see some difficulties in regional banks. But the bigger banks, I think, the consumer slowed down a bit in September, and I think they’re taking a breather before they go into the holidays at the end of the year. So there are a number of things to think about in terms of their net interest margins, in terms of their lending and the consumer spending. So credit card debt, for example, in the US, I believe, is at all time highs. And so the interest that they’ll make off of that will grow as well.
BFM
But generally, do you expect this time round, the results season to come in within expectations or even exceed analysts’ expectations because they’ve been cutting their numbers rather aggressively?
Tony Nash
Yeah, I don’t think so. I think they’ll be okay. I don’t think they’ll be great. I think a lot of companies right now are dealing with tighter workforce still, higher wages still, higher prices still for things on the services side. So these guys are very dependent on services expenses. So I think they’ll be okay. I don’t think they’ll exceed or disappoint dramatically either way.
BFM
And we are expecting the release of the latest CPI and PPI numbers sometime tomorrow, your time, I believe. Do you have any thoughts on what that figure could stand at and how this is going to impact what the Fed does in its remaining two meetings for the year?
Tony Nash
Yeah, PPI came in a little bit high, actually quite a lot higher than expected. So I guess Wednesday’s CPI or the next CPI, sorry, will likely also run hot. I think this puts additional pressure on the Fed to hike. Even though there’s heightened geopolitical risk, there may be continued pressure to squeeze out one more hike. Whether they’ll do it or not is a real question. They’ll continue to talk about lags between Fed policy and the market. So the Fed will try to push back on additional rate hikes. They may have to do it, say, in November. Part of the reason they’ll push back on it is because people are already feeling it in the housing space. And nobody wants another housing crisis in the fast. So they’ll try to push back on rate hikes. They’ll try to tighten money in different ways by doing things like selling off its balance sheet.
BFM
All right, Tony, thanks very much for speaking with us. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead, talking a little bit about expectations for CPI, also how oil prices are going to trend. I think we’re still not certain how everything’s playing out, right? It’s a very touch and go situation. All right, it’s 7:18 AM. We are going to head into some messages, but we’ll come back with more of the top stories in the newspapers and portals this morning. Stay tuned to BFM 89.9.