News

07.07.2023 – Do you believe in the energy transition? Then you should take a closer look at silver. At least, if it’s up to the bulls: Because according to them, the white metal will be increasingly needed in solar modules in the future. And with that, the price would sooner or later move north.

Recently, the price of silver has moved rather sluggishly sideways-downward, here the daily chart. This is due to the worldwide recessionary tendencies – silver is primarily an industrial metal. In addition, the fight of the central banks with higher interest rates presses the inflation. But perhaps the current level is a good entry opportunity.

Source: Bernstein Bank GmbH

Silver is used for this purpose: In coins and bars as a store of value and in jewelry. Furthermore in photography, the electrical industry, chemistry or in the pharmaceutical production – because silver kills bacteria. But silver is also used in batteries and in glass coatings, i.e. in mirrors – which brings us to photovoltaics.

Solar needs silver
Six months ago, the University of New South Wales in Australia pointed out that solar producers will probably need about one fifth of the annual silver production by 2027. By 2050, they say, as much as 85 to 98 percent of current silver reserves will be used in solar panels.
The advocacy group Silver Institute also reported that nearly 114 million ounces of silver were installed in photovoltaics in 2021, up from only about 51 million ounces in 2013. According to the report, the trend has continued: Estimates for last year are 127 million ounces. Of course, the word of a lobby group should be taken with a grain of salt – but it may still be true.

New solar modules
Especially since new types of solar panels are likely to be increasingly used, which consume more silver. The current standard is PERC: “Passivated Emitter and Rear Cell” reflect sunlight with a special coating on the back. A new, more effective type is TOPCon, which stands for “Tunnel Oxide Passivated Contacts”. In layman’s terms, the thin passivation layer is followed by a thicker layer of crystalline silicon, which is placed between the silicon wafer and the metal contacts. And then there are the new heterojunction modules, which consist of multiple layers of semiconductor materials with different energy levels. According to Bloomberg, PERC needs about 10 milligrams of silver per watt, but TOPcon needs 13 miligrams. And for heterojunction, it’s 22 milligrams.

The Silver Institute sees demand from industry rising by 4 percent this year, while production is expected to increase by only 2 percent. Silver supply is also running in the slipstream of the global economy: Four-fifths of the precious metal is extracted as a byproduct in the mining of lead, zinc, copper or gold. However, mining companies are reluctant to develop new projects, partly because of ever more stringent environmental regulations. And if they do, the new output can take a decade.

We are curious how the situation with the white precious and industrial metal will develop further – Bernstein Bank keeps you up to date!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

06.07.2023 – Finally news: In a quiet week, the Fed Minutes have provided a little movement. And namely to the south. But the matter was not really surprising: Presumably there will be further interest rate hikes.

So after the national holiday on the 4th of July yesterday, the minutes of the June meeting. The market was somewhat irritated after the Fed Minutes. Here is the four-hour chart of the Dow Jones.

Source: Bernstein Bank GmbH

And these are the details. Almost all members on the Federal Open Market Committee were in favor of more rate hikes. But at a slower pace than before.

Fear of recession
The reason for the June pause after rate hikes: The FOMC worried about economic growth. Specifically, it said, “The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effects remained uncertain.” So the Fed is well aware that it could choke off economic growth.
The factory orders that just came in confirmed this concern. Core orders in May slipped for the fourth straight month, marking the weakest reading since September 2020 at minus 4.24 percent year-over-year.
In addition, some monetary watchdogs wanted more time to assess the steps taken so far. Literally, the minutes said, “leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress toward the Committee’s goals of maximum employment and price stability.” After all, the 5 percentage point increase was the most aggressive tightening since the early 1980s.

There’s probably more to come
So what’s next for the Fed? Presumably, there will be more rate hikes. At the June 13-14 meeting, 16 of 18 members thought at least one more rate step would be needed. Twelve even wanted two or more.
The upshot of all this is that the hawks on the FOMC actually wanted to raise again in June, but they agreed to a pause. On the condition that there will be more rate hikes at the end of the year. So if incoming data do not bring any surprises, another hike in July is a foregone conclusion. All in all: higher for longer. And this despite the fact that the Fed is well aware of the risks of an economic downturn. For corporations, this means: Higher borrowing costs with declining consumption. A rather unpleasant situation. We are curious to see what happens next – whether long or short: Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

03.07.2023 – Today, Monday, marks the 35th birthday of the German Share Index. Quite a success story. We take a brief look back – and also look at how it might continue.

The index naturally reflects the changes in Germany as an industrial location. Who still knows Bayerische Hypotheken- und Wechselbank, Bayerische Vereinsbank, Degussa, Deutsche Babcock, Feldmühle Nobel, Karstadt or Kaufhof? It was only in September 2021 that the number of companies included in the index was increased from 30 to 40. The DAX ended the first half of 2023 bullish: The return was a nice 15 percent. Around two weeks ago, the index also marked a new all-time high of 16,427 points. Here is the daily chart.

Source: Bernstein Bank GmbH

The derivatives department at DZ Bank sees support at 15,975 points and has this opinion: “After the DAX fell 719 points, or the equivalent of about 4.4%, from the local maximum of June 16 in a first wave of selling to the local minimum of June 26, a recovery movement set in last week. This enabled the index to trigger a buy signal in the slow stochastic as well as to recapture the moving averages of the last 50 and 20 trading days. On top of that, the GD 200 buy signal has held since November 08, 2022.” We add: The 20 line is at the top of our picture, the 200 line at the bottom – there is still a lot of air to this support.
But: if the DAX should mark a lower course high this week, this could be seen as preparation for a second sell wave, DZ Bank further judged. Then a price decline to 16,050 points would be conceivable, before the daily low of Friday at 15,975 points should be targeted. After that, subsequent losses to 15,892 points could threaten.
The DAX and the Tightening
The main topic recently was, of course, monetary policy. The topic of interest rate hikes is not yet completely ticked off, this applies to Europe and also to the U.S. – which is why we have observed a setback.
The dominant topic this week is therefore the minutes of the Federal Reserve on Wednesday. And the U.S. labor market report for the month of June on Friday. The situation in America is that: Low unemployment, employment is growing solidly and wages are rising significantly. Which, in turn, could provide the Federal Reserve with arguments for continuing to turn the interest rate screw. After all, a robust economy can tolerate money being sucked out of the market – and the wage-price spiral must be stopped.
Incidentally, July is always a rather volatile month for the DAX, as “Manager Magazin” noted in its online edition – everything from minus 4 percent to plus 7 percent has been there before. The average gain was 1.6 percent. We are curious to see what will happen next. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

26.06.2023 – After the bizarre one-day coup by Wagner leader Yevgeny Prigozhin, the first thing to do is relax in politics and on the stock market. But the march could have been only a small foreshock.

The stock market players are still cool. But if the nuclear power Russia drifts into a civil war, this will also concern the financial world. Traders should consider putting some of their money into the VIX as a hedge – it will jump up if the situation escalates. Here is the daily chart.

Source: Bernstein Bank GmbH

Back in September last year, we wrote that Russia’s President Vladimir Putin must respond with an escalation in the face of the successful Ukrainian offensive around Kharkiv and Kherson – he needs successes, otherwise there is a threat of implosion of the Russian Federation. The successes have failed to materialize, and now the Wagner coup marks a turning point.

Patriot or traitor?
Yevgeny Prigozhin acted as a patriot and front-line fighter against a corrupt state apparatus. Even if he apparently lacked the support of the army during his march on Moscow and even if many see him as a traitor who shot down his own helicopters, the matter could develop explosive power.
For the mercenary chief has raised some interesting things in recent weeks, which have been circulated thousands of times on his Telegram channel: There are no Nazis in Ukraine, he said; the war was instigated by vain Russian generals; the army leadership is completely incompetent; the rich have taken their children to safety while the poor die on the front lines.

The cheering in Rostov-on-Don shows that many Russians think alike. They love Russia – but hate the elites who bunker billions abroad and treat themselves to ostentatious palaces. In the army, for example, it is a bad custom for generals to have their recruits build them nice houses. Feudalism at its finest.

Under pressure to move
The question is how Putin will act now. He has allowed Prigozhin to criticize him for a long time and has miscalculated. Now the Kremlin leader must demonstrate strength; he needs successes – perhaps the talk of a nuclear strike will be followed by action. Or perhaps the Russians will scale back by blowing up the mined Zaporizhia nuclear power plant to stop a Ukrainian advance across contaminated land in the south.
In addition, the tsar must show toughness or the internal decomposition will continue. But if Putin breaks his exile deal with Prigozhin and has him eliminated, the Wagner mercenaries in Russia could revolt. Putin can feel secure only if he wins a convincing victory in Ukraine. And if he keeps a better leash on all dangerous factions in the country in the future. So keep an eye on the real-time news!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

23.06.2023 – Looking at monetary policy helps enormously in trading. The Bank of England (BOE) has just confirmed this truism once again: It has raised interest rates surprisingly sharply because of the harsh inflation. Thus, the gap to zero-interest currencies such as the yen continues to grow.

Last week, we had already pointed out the Bank of Japan’s departure from monetary policy. And now this special path has slipped back into consciousness. For the Bank of England raised its key interest rate yesterday, which increases the attractiveness of sterling against the yen. An end to the uptrend does not seem to be in sight at the moment, here is the daily chart of GBPJPY.

Source: Bernstein Bank GmbH

On the details, the BOE raised the interest rate by 0.5 percentage points to 5.0 percent. The market had expected the 13th consecutive hike, although not by this amount. The Monetary Policy Committee voted 7-2, citing inflationary pressures in the UK.

Inflation four times as high as desired
And there may be more to come: In his letter to Chancellor of the Exchequer Jeremy Hunt, BOE Governor Andrew Bailey wrote: “Bringing inflation down is our absolute priority. (…) If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.” The market is now assuming a key interest rate of 6 percent, which would be the highest in more than two decades.
This is because the central bank’s inflation target is 2 percent, but consumer price inflation had been 8.7 percent in May. The core inflation rate marked a 31-year high of 7.1. Sterling should therefore continue to strengthen against the yen. At least until the Nippon raises interest rates. Or until Britain lowers interest rates again. So far, however, the mark sees an easing in September 2024 at the earliest.

Home builders under pressure
For a turnaround in GBYJPY, watch for signals from London of stagflation. This is because the British have a problem in the real estate market: Unlike in Germany, most mortgages have variable interest rates that are based on the prime rate. As a result, many homeowners are currently running out of money in their household coffers, which is likely to choke off domestic consumption.
The high level of government debt could also cause a U-turn in monetary policy: at the end of May, the United Kingdom marked a debt ratio of more than 100 percent of gross domestic product (GDP) for the first time in 62 years, the statistics office announced. The debt level amounted to 2.6 trillion pounds, or about 3 trillion euros. We are curious to see what happens next and will keep you posted!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

20.06.2023 – The price of corn has been running upwards again recently. The biggest drought in 30 years is jeopardizing the hitherto good harvest prospects in the USA. The U.S. Department of Agriculture (USDA) had actually forecast a record harvest of 15.3 billion bushels for this year. In recent years, many farmers have switched to varieties that tolerate drought better. Whether they will survive the current heat, however, is questionable. Now the market is looking hard at Brazil.

You can see the recent turnaround in the corn market well on the daily chart. You see corn from the U.S., specifically the July contract this year, which is traded on the Chicago Mercantile Exchange. The price is cents per bushel. A bushel of corn weighs 25.4 kilograms.

Source: Bernstein Bank GmbH

Newsweek magazine two weeks ago judged that an unusually dry May in the Midwest would likely drive up prices. The entire region from Texas to North Dakota and Ohio will be affected, it said.

Water shortages and declining quality
The blog “No Bull” just noted an unchanged situation, with about 57 percent of U.S. corn and 51 percent of U.S. soybean acreage in regions suffering from drought – up 12 percent week-over-week. The lack of water also affected grain quality, he said. For example, volume in the good/excellent category slipped 3 percentage points to 61 percent of volume versus 72 percent in the same period a year ago and to 69 percent of the long-term average. Only in 2019 had there been a worse figure of 59 percent.

Waiting for Safrinha
Now the news for the bears: however, “No Bull” questioned the extent to which the current harvest from Brazil could affect U.S. prices. In less than two weeks, the unofficial Brazilian export season for corn begins in July, he said. While U.S. shipments traditionally dominate the first half of the year, the second half belongs to the South American country, he said. The Safrinha variety is planted after soybeans, so it comes to market later in the year. According to “No Bull,” a record harvest is in the offing in Brazil. Indirectly, “No Bull” thus doubts the continuation of the small bull market.

Another price factor: The question of how much corn flows into the bio-diesel production will also be important. Traders should keep an eye on corresponding statements of the U.S. Environmental Protection Agency in the real-time news. And of course the weather forecast for the growing areas in the U.S. – as soon as heavy rain falls, prices are likely to fall. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

15.06.2023 – The Federal Reserve again provided momentum in the market: it reported both the position of the monetary policy hawks and the doves. The stock market swung wildly back and forth, ultimately opting for the long side. Which gave traders with the right instinct and a quick change of positions good profits. We shed some light on the background.

We always advise to stay out of the ring on such days – don’t trade around the Fed. However, those who can interpret the usual one-sidedness on the other side well in the real-time news will make a killing. We hope you had positioned yourself correctly. This is how the Nasdaq 100 looked recently, here the 15-minute chart. Recently, the long-orientated optimists kept the upper hand.

Source: Bernstein Bank GmbH

As expected by the market, the Fed paused after 15 months of rate hikes. The central bank kept the key interest rate in its corridor of 5.0 to 5.25 percent. A joy for the bulls, then. But: The “Wall Street Journal” identified a new, unusual uncertainty among investors: “Investors Face Unexpected New Reality With Fed”. This is because the U.S. Federal Reserve has signaled further interest rate steps – but if inflation cools down, these are anything but certain.

Further rate hikes possible
Yesterday, there was surprising fodder for the bears: The masters of money signaled that they are likely to resume monetary tightening to curb inflation. The Fed has not yet reached its inflation target. True, inflation recently fell to 4.0 percent. But the Fed wants 2.0 percent.
In the words of Fed Chairman Jerome Powell: “There’s just not a lot of progress in core inflation. (…) We want to see it moving down decisively.” And furthermore: “It will be appropriate to cut rates at such time as inflation is coming down really significantly. And we’re talking about a couple of years out.” So higher interest rates for the coming years after all?
In addition, the projected median interest rate – the average of the fed funds rate – climbed to 5.6 percent by the end of the year. Three months ago, only 5.1 had been announced. Powell expressed that almost all members of the Federal Open Market Committee believe it will be appropriate to raise rates “a little further” in 2023 to bring inflation down.

The Fed is watching the situation
Immediately, Powell pivoted and fed the bulls again when he struck more dovish tones in the press conference. He said the current pause in interest rates gives the Fed an opportunity to watch upcoming data before deciding again on a rate hike at the next meeting – he gave no hints for July. And he also reiterated earlier warnings: He did not give any indications for July. And, moreover, he repeated earlier warnings: The projections for the key interest rate – the “dot plots” published by the Fed – are not plans or decisions, but simply projections about possible interest rates.
Our conclusion: the Fed acted as oracular as ever and ultimately ended the day with more news for the bulls. Big theater in Washington D.C. thus. And in Frankfurt, it’s the European Central Bank’s turn today. We are curious and keep you up to date. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

13.06.2023 – The current bull market on the stock exchanges is primarily a product of monetary policy. By keeping interest rates low for a long time and buying up assets – especially government bonds – the central banks have pumped huge amounts of money into the market. Soon we will know whether this will continue: Tomorrow, Wednesday, the Federal Reserve in the U.S. will have its say, on Thursday the European Central Bank (ECB). And on Friday, it will be the turn of the Bank of Japan.

Let’s look at the U.S. first. The stock market expects a pause in interest rate hikes: Analysts at CME Fedwatch last saw the probability of the Fed holding its feet still this time at 70 percent. Because the latest unemployment figures in the U.S. surprised to the upside: Initial claims as of 03 June climbed by 28,000 to the 261,000 and thus to the highest level since October 2021, cooling fears of a new rate hike by the Fed.
The market also expects today’s U.S. inflation figures to ease. The consensus among analysts is that: The Consumer Price Index for May will only rise by 4.1 percent after plus 4.9 percent year-on-year in April. And that, too, should give the Fed fewer arguments for a new rate hike.

Source: Bernstein Bank GmbH

As a result, the S&P 500 is trading at its highest level in more than 13 months, while the Dow Jones Industrial managed to reach a six-week high. And the Nasdaq 100 is holding higher than it has in 14 months, shown here in the weekly chart.

Time lag

The question remains why prices have risen in recent weeks even though interest rates had already been raised sharply. This should have hurt the interest rate-sensitive high-techs in particular. It did – statisticians registered many new entrants in the unemployment figures from industries that rely on fresh loans and now find it difficult to pay for them.

However, the market is being pulled by a few established mega caps with large cash holdings that do not rely on fresh bank loans. Second, prices climbed because the stock market is trading the future and just sees an end to tightening. Further, it takes time for high interest rates to hit the market and sap liquidity. Because low-interest loans and government bonds are only gradually being phased out and replaced by new, more expensive ones. Only when new business comes in do companies, banks and funds have less money available for equities. It is unclear when this effect will take hold in the market.

Liquidity for the stock market

Another exciting question this week will be how asset purchases will continue. The central banks have bought up trillions of euros, dollars, pounds and yen worth of securities, especially government bonds. As of the end of May 2023, according to the OECD, the value of all assets on the ECB’s books was a staggering 56 percent of the eurozone’s gross domestic product. In the U.S., this figure is 32 percent, in the U.K. 40 percent and in Japan as much as 132 percent. The buy-up gave banks and funds liquidity to invest.

The conclusion to be drawn from all this is that if the central banks pause in their tightening and continue to buy up assets, the rally is likely to gather even more momentum. However, if they unexpectedly and sharply raise interest rates and curb the purchase of securities, then it could become uncomfortable for the bulls. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

12.06.2023 – Robusta coffee has just set a new price record. Now it could be that Arabica will soon follow suit.

We recently pointed out the possibility of a new coffee boom in the wake of El Niño. With Robusta it was just so far. As Bloomberg news agency reported over the weekend, fears are spreading in the market because of El Niño that the two major Robusta exporters, Vietnam and Indonesia, are facing supply problems – pushing the price of the variety to an all-time high. Specifically, $2,790 per ton, meanwhile ran into a short reset. In Vietnam, increased heat is expected, Indonesia reported an expected minus in the harvest of 18 percent due to unusually heavy rainfall.
Arabica has still not been affected. But we ask ourselves: How long will this situation last? Here is the weekly chart in cents per pound.

Source: Bernstein Bank GmbH

So to the background. The German Weather Service clarifies, “El Niño is understood to be a circulation anomaly that was originally considered to be only a regional climate phenomenon that occurred along the tropical west coast of South America.” But, he said, El Niño also has global impacts, with the phenomenon occurring about every three to four years.

Erratic weather patterns
The National Oceanic and Atmospheric Administration’s Climate Prediction Center had issued a warning in April that the phenomenon could form in the Pacific Ocean this summer. It could cause drought in some regions and increased rainfall in others. The Climate Prediction Center raised the probability of the formation forming between August and October from 61 to 74 percent.
The question now is how much the uptick in prices for the Robusta variety will affect its big brother, Arabica. Robusta represents about 30 percent of the world market; the bean is more bitter, woodier and contains less sugar. Arabica represents about 70 percent of the supply. Robusta tends to be grown in the lowlands in large plantations, while Arabica tends to be grown above 600 meters in farms that are more difficult to manage.

Possible price surge
Due to inflation with higher energy costs and increased prices for fertilizers, many roasters had increasingly switched to the normally 40 to 50 percent cheaper Robusta variety in their coffee blends in recent months. The price gap has now narrowed to around one third.
Our conclusion: Traders in Arabica should keep an eye on the real-time news on El Niño. It is quite possible that there will be catch-up effects in Arabica. After all, a declining supply of Robusta is likely to cause many wholesalers to switch, at least if the price gap between the two varieties continues to shrink. Especially since Arabica is more appreciated by connoisseurs anyway because it contains less caffeine and chlorogenic acid, which makes for an upset stomach. In addition, the weather phenomenon could also affect the major Arabica producer Brazil, which would also push up prices for Arabica.
And another important factor: the capricious weather could also lead to tighter supplies of other soft commodities. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

06.06.2023 – Chocolate lovers must now be very strong: The prospects of rising prices have once again strengthened. We provide a brief update on this interesting traders market.

You rarely see such a stable chart tunnel: Cocoa is working its way inexorably upwards, here is the weekly view. There has been a lot of news in the past weeks – most of them bullish.

Last Wednesday, for example, the International Cocoa Organization (ICCO) released its Quarterly Bulletin of Cocoa Statistics. According to the report, output in the current 2021/22 season will fall 6 percent to about 4.9 billion metric tons. At the same time, the volume processed at mills will increase by 2 percent to 5.05 billion metric tons, it said. The gap would be filled by inventories, which are expected to fall by about 9 percent, he said.

Bullish news from the ICCO
The organization cited bad weather and disease as reasons for the falling crop. We add: Farmers are plagued by what is known as Cocoa Swollen Shoot Virus Disease (CSSVD). In addition, a fertilizer shortage in the wake of sanctions against Russia will reduce supply, according to the ICCO. Demand is picking up in part because airports have reopened after Corona, he said – where a lot of chocolate is sold. The ICCO includes 22 exporting countries and 21 importers.
Nigeria and Ivory Coast supply less
According to the Barchart.com website, the Cocoa Association of Nigeria reported in late April that exports were down 42 percent month-over-month and 34 percent year-over-year in April. Nigeria is the world’s number five producer.

Also, Côte d’Ivoire reported a decline of minus 4.6 percent year-on-year in the commodity sent to ports by farmers, “Barchart.com” explained. Most notably, Ivory Coast’s Ministry of Agriculture said that the mid-crop, which is the smaller crop that began in April, will likely fall 25 percent year over year to 450,000 tons.
Bearishe news was rather scarce. In mid-May, news hit the market that inventories in U.S. commodity warehouses, as counted by ICE, had risen to a seven-and-a-half-month high. In Europe, too, warehouses were fuller than they had been in nearly eight months.

Rising demand
Meanwhile, demand continues to pick up: At the end of April, the National Confectioners Association had reported a 2.4 percent month-over-month increase in processing for the first quarter in North America – with the year-over-year figure showing a 4.4 percent drop. However, the Cocoa Association of Asia reported a 4.1 percent year-over-year increase in processing. By mid-April, the European Cocoa Association had already reported a 0.5 percent year-over-year increase in mills for the first quarter. That doesn’t sound like much, but Europe reported the strongest first quarter consumption since 1999.
The conclusion from all this is that there is currently a lot to be said for the continuation of a bull market. Whether long or short – Bernstein Bank wishes successful trades and investments!

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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7