NAGA Weekly Recap | August 28 – September 1 — 2023

This week brought significant movements in the financial world: Air France KLM shares saw a notable adjustment, surprising inflation rates drove EUR/GBP dynamics, and energy stocks reacted to oil price shifts. What's driving these changes, and what can we anticipate next?

Stay tuned for our weekly recap to get the full picture ⬇️

S&P 500, Nasdaq post August losses, breaking 5-month winning streak

Wall Street concluded August with mixed results as all three major averages ended the month in negative territory. The Dow Jones fell by 0.5%, affected by a boost in Salesforce shares due to their AI-driven earnings outperformance, while the S&P 500 dropped 0.16%.

The S&P 500 experienced its poorest performance since February, the Dow since May, and the Nasdaq since last November. Both the S&P and the Nasdaq broke their five-month winning streak. Meanwhile, the latest PCE Index revealed that the Federal Reserve's preferred inflation measure for July met expectations.

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Air France shares skyrocketed by 1,000% due to technical adjustments

Air France KLM's ($AF) shares surged 1,000% in opening trade, not due to operational performance, but as a result of a technical adjustment to the stock's nominal value. Amidst the pandemic's challenges, the airline's shares took a hit, like many in the industry. To conform with market tendencies that have a perceived "right price" for shares, Air France KLM executed a one-for-ten reverse stock split. In essence, 10 old shares with a par value of 1 euro each became one new share valued at 10 euros.

Though this adjustment increased the individual share price by 10 times, it did not alter the company's overall market capitalization. Such stock alterations, while altering share prices, do not inherently reflect changes in a company's actual value or performance.

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US energy stocks surge as oil prices maintain $80 barrel

In 2023, energy stocks, including major players like Schlumberger, Halliburton, Tidewater, Diamond Offshore Drilling, and ExxonMobil, are experiencing growth due to U.S. oil prices consistently maintaining above the $80 per barrel mark. This surge is largely attributed to mounting supply concerns, China's economic indicators, and global market dynamics. West Texas Intermediate (WTI) oil prices recently jumped 2% to $83.38, while Brent Crude prices exceeded $86.88.

Notably, signs of recovery in China's economy after its slow post-Covid trajectory suggest a potential boost in oil demand, which could further fuel the energy market's upward trend.

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EUR/GBP holds ground above 0.8550 after Eurozone strong inflation

The EUR/GBP pair trades upwards around 0.8560, halting a two-day decline, bolstered by unexpectedly strong inflation numbers from the Eurozone. Contrary to investor expectations of a 0.1% deflation, Eurozone's headline inflation surged by 0.6% in August. As the European Central Bank considers its monetary policy response to the ongoing inflation, traders remain watchful of the Bank of England's potential move, especially amidst the UK's economic challenges.

Speculations grow about a 25 bps interest rate hike in the upcoming BoE meeting, with BoE Chief Economist Huw Pill emphasizing the necessity for a prolonged restrictive policy.

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This concludes our weekly recap. Have a great weekend and see you next week! 👋