Video: Hermes, Tesla, Pilbara Minerals claim top spots so far in 2023; why their stocks could change course this week

What’s happening in markets?

The next three days could set the tone of markets for months, with the Fed Meeting starting Wednesday in the US, earnings from Meta on Thursday, followed by Apple, and Amazon and Google on Friday as well as US job report.

Where has the most momentum been in markets and can it continue?

It’s vital to reflect on the global equity markets rally in January - and where momentum has been. In the US the Nasdaq gained 10%, the S&P500 5.6%, with EV names, Lucid and Tesla up 40-70% off their lows. In Europe the biggest 50 stocks (Stoxx 50) gained 10% with designers such as Hermes and LVMH providing the most heat, up 18% on expectations of higher earnings as China reopens. Australia’s ASX200 lifted 6.2% with lithium miners Sayona Mining and Pilbara Minerals up the most, 37-27%. Ultimately the Fed's decision on interest rates and the outcome this week, along with the ECB's will put some of these gains to test. 
 

What to watch?

Australian full-year earnings season kicks off; will mining companies deliver triple digit growth  

February is an important time of year with full earnings season kicking off. ASX200 companies will report their 2022 profits and earnings, and guide for 2023, which could set the course for equites for the next few months. A company’s shares will generally do well if the company reports a better than expected outlook and results, and inversely their shares will typically sink if they disappoint. That said, the most earnings growth is expected to come from the Mining sector with well over 100% earnings growth (consensus); with gold and lithium companies are expected to outperform. BHP as an example, could report 17% dividend growth and it could give a rosy outlook after kicking off coal exports to China for the first time in two years. Energy companies are expected to report a 30% earnings jump and 300% revenue growth. For a list of stocks and inspiration refer to the Australia Resources basket.

Today, Credit Corp reports results, Pinnacle on Thursday, NewsCorp Friday. In the third week of February the season ramps up with CBA and Fortescue reporting Feb 15, on Feb 21, BHP reports, with Rio the next day, followed by Qantas.

Potential trading and investing ideas

Lithium companies are on fire, but what could be next? 

Consider watching Lithium companies like Pilbara Minerals and Allkem - trading around record high territory, but could see profit taking, with the technical indicators (MACD and RSI suggesting buying is slowing) in the short term ahead of the Fed’s decision on interest rates. Over perhaps the next half year we think lithium companies could head higher though, underpinned by the lithium market strength. But also because firstly there is a notion EV demand could pick up as the RBA could end rate hikes early this year. Secondly, Tesla opened its 50-supercharger stations around Australia to all EVs, with the stations previously locked to Tesla. And thirdly, EV companies are ramping up production; Tesla has a lofty target of making 2 million vehicles this year, Ford aims to product 600k EVs this year. meaning a lot more raw materials, such a lithium will be needed (as well as copper) for that matter.

Stay tuned to Saxo's inspiration page for trading and investing ideas.