EU CONSUMER CYCLICALS: LVMH; 4Q (to Dec) earnings (x3)
(MCFP; Aa3/AA-)
The equity fall (-5%) will be on the bottom-line weakness (EBIT -14%, margin -340bps). The fall was on a mix of 1) FX management (1/3 of the headwind), 2) gross margin falls (-180bps) - latter as it kept prices near constant while input costs increased and 3) small -60bp headwind under other costs mainly for Paris Olympics marketing/partnership. Only 2) is relevant for macro read-through. There is limited credit impact from all this - FCF was boosted on favourable WC/inventory leaving g/n debt at €41b/€27b and leverage at 1.5x/1.0x (it excludes €18b in leases when reporting). We see that comfortably placed in ratings.
The macro read-through is otherwise overwhelmingly positive, particularly for US and Europe that has shown a small bounce from Q3 woes. On China, Bernard was not keen to call it a recovery yet, particularly ahead of Chinese new year (holiday from Jan 28 - Feb 04). He expects it to be slower recovery there and stretched over the next 2 years. Still the January trading conditions seem very strong across the group as a whole; "Louis Vuitton, since you're here, or Tiffany, which both reported a double-digit growth since the beginning of the year." (reminder LV brand is significant component of group revenues). It leaves little excuses for Kering's Gucci when it reports on the 11th.
Finally seems O'Leary is not the only one that will be vocal on taxes. Bernard was asked about his front-row attendance at Trumps inauguration and responded with; "I saw the momentum of optimism in the country. After having spent a few days in the U.S., you come back to France, and it's a little bit of a shock. It looks like, in the U.S., people are welcoming you with open arms. Taxes are going to go down to 15%....the American President encourages this practice...you're back in France, and you see that taxes are going to go up to 40%...that's a good way to tame your enthusiasm...I do not know if that's the government's ambition, but this is what they are going to achieve if they stick to this plan."
Numbers from before here; https://mni.marketnews.com/4gmJwvY
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SILVER TECHS: Bearish Cycle Intact
- RES 4: $34.903 - High Oct 23 and the bull trigger
- RES 3: $33.125 - High Nov 1
- RES 2: $32.338 - High Dec 12 and a key resistance
- RES 1: $30.747 - 50-day EMA
- PRICE: $29.402 @ 08:26 GMT Dec 30
- SUP 1: $28.748 - Low Dec 19
- SUP 2: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
- SUP 3: $27.686 - Low Sep 6
- SUP 4: $26.451 - Low Aug 8
A bear cycle in Silver that started Oct 23 remains in play. The metal has recently breached support at $29.642, the Nov 28 low. The break lower opens $28.446, a Fibonacci retracement. Note that moving average studies are in a bear-mode position highlighting a dominant downtrend. Key resistance has been defined at $32.338, the Dec 12 high. A break of this level would signal a reversal.
US: Trump Escalates Calls For Congress To Raise Debt Limit
US President-elect Donald Trump has escalated calls for Congress to raise the federal debt limit ahead of his inauguration on January 20, describing a 2023 deal between President Joe Biden and former House Speaker Kevin McCarthy (R) as, "one of the dumbest political decisions made in years." Under the terms of the Biden-McCarthy deal, the debt ceiling was suspended until Jan 1, 2025, in exchange for a mechanism to limit some government spending, known as the Fiscal Responsibility Act.
- Trump said of the 2023 deal, in a Truth Social statement: "There was no reason to do it... The Democrats must be forced to take a vote on this treacherous issue NOW, during the Biden Administration, and not in June. They should be blamed for this potential disaster, not the Republicans!"
- Treasury Secretary Janet Yellen said in a letter to Congressional leaders on Friday that, due to a USD$54 billion decrease in outstanding debt, the Treasury "currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures." Those measures are likely to postpone hitting the debt limit until late Spring.
- Although suspending the debt limit has long been a Democrat priority, Democrats are unlikely to agree to a bipartisan measure without significant policy concessions. The most likely option for Congressional Republicans is to attach a debt limit hike to a partisan reconciliation package on energy and border security, adding another complication to Trump's legislative agenda.
USDCAD TECHS: Bullish Flag Formation
- RES 4: 1.4578 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4404 @ 08:19 GMT Dec 30
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4269/4093 20- and 50-day EMA values
- SUP 3: 1.4011 Low Dec 5
- SUP 4: 1.3928 Low Nov 25 and a key support
USDCAD bulls remain in the driver’s seat and the pair is holding on to the bulk of its recent gains. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4269, the 20-day EMA. A pullback would be considered corrective.
