Live Markets: Could superconductors drive next AI-level hype?

Sumitomo Electric Industries

03/08/2023 17:00

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      S&P 500, DJI slip, Nasdaq now ~flat
    

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      Real estate weakest S&P 500 sector; energy leads gainers
    

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      Euro STOXX 600 index down ~0.7%
    

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      Dollar, gold edge red; crude up >2%; bitcoin up slightly
    

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      U.S. 10-Year Treasury yield jumps to ~4.20%
    

  
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    COULD SUPERCONDUCTORS DRIVE NEXT AI-LEVEL HYPE? (1200
EDT/1600 GMT)
    Social media is abuzz with a claim of a successful
room-temperature superconductor development, which is being
disputed by a scholarly group.
    A superconductor is a material that lets electricity pass
through it without resistance, avoiding waste of energy. 
    "This discovery has the potential to revolutionize many
industries from power grids to medical imaging to high-speed
trains to quantum computers and nuclear fusion," said Charu
Chanana, market strategist at Saxo Markets.
    Chanana added that superconductors can make zero-carbon
targets a reality.
    A South Korean research team at Quantum Energy Lab claimed
it had developed a room-temperature superconductor, LK99.
    However, the production of superconductors is a complex and
costly process, Chanana notes and the technology is still in its
nascent stages with technical hurdles such as maintaining
superconductivity at room temperature.
    "While development and commercialization can still see many
bumps, the potential far-reaching impacts have got everyone
excited," Chanana said.
    Shares of a few companies based in Korea, China and the
United States have rallied on the news, but Channa warned
investors to weigh the risk and reward before gaining exposure.
    In Korea, shares of Duksung  004830.KS  and SuNam
 294630.KQ , superconductor equipment and materials makers, hit
the daily limit of 30% for a third straight session on Thursday,
prompting Korean stock exchange to prompt a warning due to a
sudden increase in volatility.
    Meanwhile, in China Jiangsu Etern  600105.SS , Jiangsu
Fasten  000890.SZ , Henan Zhongfu  600595.SS  and Jinhui Mining
 603132.SS  jumped on the news, Channa said.
    In New York, American Superconductor  AMSC.O  surged 62% in
the first two days of this week and drew retail traders'
attention.
    LK-99 may or may not be the room-temperature superconductor
the world is waiting for, it will perhaps be a push towards
research and advances taking place to focus on energy efficiency
and battery technologies, she added.
    Saxo Bank lists some of the broader themes that can benefit
from this technological advancement:
    - Green metals such as copper or lead futures or ETFs
    - Energy storage battery metals such as lithium, cobalt,
nickel, manganese
    - Copper miners such as Southern Copper, Japan's Sumitomo
Metal Mining
    - Zinc (lead is a byproduct of zinc) miners such as Teck
Resources
    - Electrical wire manufacturers like Japan's Sumitomo
Electric Industries
    - Energy storage (battery) manufacturers such as China's
CATL, BYD, Korea's LG Energy   
    
    (Medha Singh)
     *****

    
    EL NINO WEATHER MAY DENT SOME EMERGING MARKETS APPEAL (1118
EDT/1518 GMT)
    The weather pattern El Nino is due to impact several regions
in the second half of the year, leading to drier weather across
West Africa, South-East Asia and northern South America, and
wetter weather in southern South America.
    That could impact agriculture and result in higher inflation
and slowing economic activity, adversely impacting some areas of
emerging markets, according to Capital Economics.
    Emerging markets face higher risks from the weather event as
"in most EMs, agriculture accounts for a larger share of GDP and
employment, food accounts for more of the CPI basket, and
production could also be damaged," Diana Iovanel, markets
economist at Capital Economics wrote in a report.
    If stagflation risks materialize, emerging market central
banks would need to keep rates higher for longer to combat the
persistent inflation, which would send sovereign bond yields
higher. Weaker economic activity would also weigh on corporate
earnings in the affected economies, denting risk sentiment and
potentially causing riskier assets such as stocks and
dollar-denominated bonds to weaken.
    That said, Iovanel noted that the impact on stocks may vary
and that "absent wide-spread economic disruption, the sectors of
the stock market directly affected by El Niño are actually
fairly small."
    Materials and consumer staples are most affected by
disruptions to industrial metals mining and agricultural
production. In Latin America, the utilities sector is also
vulnerable "due to the heavy reliance on hydropower for
electricity production."
    El Niño might also benefit other parts of the market,
Iovanel said, giving an example of mines that avoid the worst of
the weather benefiting from their competitors' production being
affected.
    Iovanel concludes that while "El Niño may ultimately have a
limited effect on EM equities in aggregate, it could nonetheless
create deeper divergence between EMs than would otherwise be the
case."

    (Karen Brettell)
     *****
   
    
    U.S. PROXY SEASON LACKED "BLOCKBUSTER CAMPAIGNS" IN 2023 -
REPORT (1035 EDT/1435 GMT)
    Proxy fights at U.S. companies had "a season short of
blockbuster campaigns" in the first half of 2023 as economic
uncertainty loomed, according to a report from shareholder
activism data provider Diligent Market Intelligence.
    The underwhelming proxy season came even after the
introduction of universal proxy rules by the Securities and
Exchange Commission (SEC), which some analysts had expected
could boost investors' support for dissident shareholder
campaigns.
    "Budding proxy fights at Salesforce  CRM.N  and Walt Disney
 DIS.N  suggested that the 2023 proxy season would be one for
the ages before Elliott Management and Trian Partners,
respectively, chose uncharacteristically to back down," the
report said.
    Trian Fund's Nelson Peltz in January started a proxy fight
against Walt Disney Co  DIS.N , but withdrew his bid for a board
seat a month later after the media giant announced a
restructuring program that addressed most of the fund's
criticisms.
    In March, Elliott also ended its board room challenge at
Salesforce after the software firm promised more cost cuts.
    In the U.S., activist nominees gained 97 board seats as of
June 30, compared to 113 at the same time last year, the
Diligent Market report added.
    Under the SEC's universal proxy rules, companies and
dissident shareholders are required to list on their proxy cards
names of all nominated board member candidates, instead of just
their own slate of nominees.
    This allows shareholders voting by proxy to select nominees
across both slates.
    
    (Niket Nishant)
    *****
    
    
    WALL STREET SEES RED AS U.S. YIELDS SURGE (1010 EDT/1410
GMT)
    Shares on Wall Street are modestly in the red, still reeling
in part from the aftermath of the Fitch ratings downgrade late
Tuesday that pushed the benchmark U.S. 10-year note and 30-year
bond yields to nearly nine-month highs.
    The surge in yields pressured rate-sensitive stocks. Megacap
stocks including Apple  AAPL.O , Alphabet  GOOGL.O  and
Microsoft  MSFT.O  are all trading lower.
    Data showing the number of Americans filing new claims for
unemployment benefits rising slightly last week and layoffs
dropping to an 11-month low had little market impact.
    U.S. earnings though remain robust. Fundstrat notes that of
the 367 companies that have reported so far, or 73% of the S&P
500, about 81% are beating estimates. And those that "beat" are
beating by a median of 7%. 
    Investors though are looking to Amazon.com  AMZN.O  and
Apple earnings later on Thursday, so volatility remains a
watchword.
    "It has now been 112 days since the S&P 500 last logged a
-2% daily setback — which is the longest stretch since February
2020. We are long overdue for a shakedown in market
complacency," writes David Rosenberg, chief market strategist
and founder of Rosenberg & Associates.
    Here is the morning snapshot of financial assets across
markets:
    
    
    (Gertrude Chavez-Dreyfuss)
     *****

    
    S&P 500 INDEX: TRADERS BRACE FOR BIG DATA (0900 EDT/1300
GMT) 
    It's been a rough week so far for the S&P 500 index  .SPX .
And with Wednesday's decline, the benchmark index is back down
to flirt with some important support levels, just ahead of some
coming big data points:
    
    
    After hitting an intraday high of 4,607.07 on Thursday, July
27, the SPX formed an outside day, warning of a potential buying
climax. The index finished at 4,513.39 on Wednesday, and has now
fallen more than 2% from that recent high.
    The SPX now finds itself essentially sitting on a weekly
Gann Line around 4,513. Gann Lines are trend lines running at
certain angles off significant highs and lows. Intersections of
these lines can be especially important in signaling the
potential for trend change. 
    The index has also fallen back into the 76.4%-78.6%
Fibonacci retracement zone of its January 2022-October 2022
decline in the 4,534.63-4,505.44 area.
    With the ISM non-manufacturing PMI on Thursday, and July
non-farm payrolls on Friday, bulls want to see the SPX quickly
reverse back over 4,535 to suggest it is stabilizing.
    Resistance is at last week's high (4,607.07) followed by the
March 2022 high at 4,637.30. There is another weekly Gann Line
now around 4,640. Of note, there is a looming Gann intersection
slated to occur the week ending August 11, around 4,665.
    Breaking below 4,505, however, can suggest risk for further
losses. 
    In that event, the next magnets include the July 3 high at
4,458.48, and the July 12 gap, which requires a fall to 4,443.64
for a fill. 
    The rising 10-week moving average is now around 4,430. Since
reclaiming this intermediate-term moving average in late March,
the SPX has yet to end a week back below it.
    There is the 23.6% Fibonacci retracement of the March-July
advance at 4,418.69, and another weekly Gann Line, which now
offers support, around 4,410. 
     
    (Terence Gabriel)
     *****
 
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)