Live Markets: European carriers: who risks more if Israel-Hamas conflict widens?

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23/10/2023 16:18

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    EUROPEAN CARRIERS: WHO RISKS MORE IF ISRAEL-HAMAS CONFLICT
WIDENS? (1035 EDT/1435 GMT)
    As a result of the conflict in Israel and Palestinian
territories, several international airlines cancelled passenger
flights this month while Israeli ports operate with
restrictions. 
    UBS analysts had a closer look at the revenue exposure of
the European transport firms to the Middle East, discussing the
possible implications of a wider conflict.
    "A potential escalation could lead to a reduced cargo
capacity on Asia-Europe routes which represent around one-fifth
of the global trade", wrote in a note Cristian Nedelcu, Head of
European Transport Equity Research at UBS.
     The Maersk  MAERSKb.CO  Terminals business has around 14%
volume exposure in the Middle East, while the German container
shipping company Hapag Lloyd  HLAG.DE  generates almost 10% of
revenues there, the broker added.
    Moreover, investors fear that a wider conflict could hit oil
supply from the Middle East, with rising crude prices likely
leading to cost increases for the logistics and shipping names.
    Since Hamas' attack on Israel, Brent crude  LCOc1  surged
8%, standing above $91 a barrel on Monday.
    On the short term, German logistic group DHL's profitability
 DHLn.DE  could pay a temporary heavy price due to lagged pass
through of higher fuel surcharges in its Express division,
according to UBS.
    On the passenger front, an escalation of the conflict may
discourage travels in the region. 
    "Having in mind the higher than average spend per passenger
for travelers from Middle East, the potential headwinds to
retail revenues are likely to be higher", said the broker, which
calculated that Middle East may represent around 10% of the
retail revenues for the European hubs.
    Looking at the traffic exposure to the region based on 2019
data provided by UBS, Flughafen Zuerich  FHZN.S  is at the top
of the list in Europe (5.9%), followed by German Fraport
 FRAG.DE  (5.2%) and France's ADP  ADP.PA  (4.8%), while Spain's
Aena  AENA.MC  stays lower (1.8%). 
    
    (Matteo Allievi)
    *****
    
    
    U.S. STOCKS REBOUND AFTER STUMBLING OUT OF THE GATE (1018
EDT/1418 GMT)
        Major U.S. averages are slightly lower in the early
stages of trading on Monday, with investors eyeing several 
    key support levels
     on the S&P 500  .SPX  after the benchmark index fell
through its 200-day moving average on Friday. 
  
        After once again flirting with the 5% mark, the 10-year
U.S. Treasury yield  US10YT=RR  has backed off to 4.91% giving
some upside momentum to equities after a sharply lower open that
saw the Nasdaq  .IXIC  fall more than 1%. 
  
        With the Federal Reserve in its "blackout period" ahead
of next week's policy meeting, investors will eye corporate
earnings as the pace of results picks up this week, while more
Treasury supply will come to the market in the form of 2-year,
5-year and 7-year notes.
  
        Below is your market snapshot:
  
     
        
  
        (Chuck Mikolajczak)
  
         *****     
  
        
  
        
  
    S&P 500 INDEX: POISED FOR 4,200 SUPPORT TEST (0900 EDT/1300
GMT)
    The S&P 500 index  .SPX  suffered further technical damage
last week which has traders eyeing the next support levels
around the closely watched 4,200 area.
    The benchmark index ended below its rising 200-day moving
average (DMA) on Friday for the first time since March 17. The
200-DMA should ascend to about 4,235 on Monday. 
    On the weekly charts, the 40-week moving average (WMA) can
seen as a proxy for the 200-DMA, and that should be resistance
around 4,252 this week:
    
    
    On Monday, e-mini S&P 500 futures  EScv1  are suggesting the
SPX is poised to fall around 15 points at the open. If so, the
index should dip just below the early October low at 4,216.45 in
early trade.
    The next support is at the 23.6% Fibonacci retracement of
the March 2020-January 2022 advance at 4,198.70, and the early
February high was at 4,195.44.
    The 100-WMA should be around 4,180 this week, and the 50%
retracement of the 2022 decline is at 4,155.10. There is a
weekly Gann Line around 4,116.
    A decline to the 4,198-4,155 area would put the SPX down
8.5%-9.5% from its July 31 closing high of 4,588.96. A slide to
the weekly Gann Lien would put the SPX down just over 10%.
    Strength back over 4,252, confirmed by the weekly close,
would look constructive shorter-term.         
       
    (Terence Gabriel)
     *****

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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)