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How icy winds of the Baltic Sea blew the remains of Russian gas across the planet, how furious hurricane in the US blew off US stock market, how Turkish lira is blown far, far away–all this in the new episode of «traditional markets» news digest by LH-Crypto.
One by one, several consecutive weeks began with tough news, and last one was no exception. On early Tuesday, September 27, 2022, some were shocked, some were glad, some were full of thoughts - but whatever, no one in the world was left untouched by the news that almost simultaneously and, of course, totally by coincidence,breakthroughs happened in each of three lines of the odious ‘Nord Stream’ and ‘NordStream-2’ pipelines. The catastrophe, called nothing less than ‘unprecedented’, was reported by the operator company itself - Nord Stream, a subsidiary of the Russian Gazprom, the company from which all the ‘streams’gas originates.
Although no supplies were happening through any of the lines, the technology implies that each must be completely filled with gas. And that very gas came up the surface of the Baltic Sea for several days in a row then, creating loads of spectacular bubbles, while the pipeline itself gradually turned into... water pipe.
Of course, the Russian side immediately made the version of sabotage as the main, and, it seems, it was firmly confirmed by judgements of Danish and Swedish seismologists: they noticed explosions in the area around pipelines (later, another, fourth leak happened). In two days, NATO itself published an official statement that told us - it was a 100% sabotage. Tricky thing, though: no exact executor was spoken up, which is kinda a hint...
Whatever, what about the prices? Soared? It is even more surprising that… no. The disaster had little or even no impact on the price of this crucial source of energy. It is a week now that gas prices are going in a stable ‘flat’, as traders name it (meaning, ‘developing to the right within a narrow channel’), which is ±1900-2000 in our case. Still, this is far from the records of past August. Why so?
Firstly, as mentioned above, there were no supplies. Secondly, not without hardships, but Europe manages with satisfying its energy consumption through diversification from the USA, the Middle East, North Africa and from its own production in some part. Fatih Birol, Executive Director of the International Energy Agency (IEA), comments: ‘If no major negative surprise occurs, Europe can survive this winter in terms of natural gas supplies.’ Finally, the leaksare not that significant and the repair of this highly complicated infrastructural project maylast for c. six months. Until then, however, we won’t advise any bullish activity in gas futures and in related derivatives.
It turned to be a tough week for much warmer waters of the Central Atlantics too:there, a furious hurricane under somewhat seemingly peaceful name Ian had raged for several days, causing massive destructions on its way from Brazil coast to the depths of US South. Although the damages for Caribbean micro-states were left relatively unnoticed on the global scale, the whole world could not but feel the hit to the key tourist region of the world’s top economy (meaning, first and foremost, Florida).
155 MPH wind, 16 ft. waves, rivers and lakes surface up by 6 ft., world-famous beaches are washed away or damaged, two million citizens and enterprises are left without electricity and modern conveniences – this is only the beginning of the woes’ list. Like usual, stock markets could not but stay aside of such catastrophe. Much-suffering NASDAQ index, which had just begun to climb up from many-months bottoms, fell deep again with most ‘contribution’ to the drop coming from airlines, first and foremost: dozens of cancelled flights mean blown cash inflows both for small and major companies. Thus, American Airlines was down by 3,6%, United Airlines— by 3%, Southwest Airlines Company— by 1,9%.
However, if we take into consideration, that the Hurricane Season wraps up soon, Florida is still the top-choice destination, COVID-19 was proclaimed defeated, and traditional Christmas high-season is ahead, we may rest assured that airlines will do better and better. So, this is the right moment to buy some of the stocks to your investment portfolio.
And a piece of advice for the conclusion: if you have not decided where to spend your nearest holiday yet (for choices other than Florida…), we would advise you to go to… Turkey.
On September 22, 2022, the Central Bank of Turkey reduced the key exchange rate. And not just reduced – it cut it by the whole 100 basis points, from 13% to 12 %. The writing is astonished indeed because the situation in the Turkish economy in general sort of screams: rise, rise! But they decided it the other way in the Central Bank of Turkey.
As you remember from our previous market news posts, literally all world’s major central banks nowadays are rising rates, as it is the strongest monetary policy weapon against inflation. And, while US Federal Reserve, for example, declares the rate higher and higher each time in its fight against inflation, Turkey remains calm in its peculiar way. So, lower rate pours even more liras into the circulation, while the country is experiencing the overwhelming inflation for many years already (compared to the US inflation). Recent measurements recorded the 80,2% yearly inflation in August.
It is no surprise, that the exchange rate of the Turkish lira went lower and lower, and easily beat the historic bottom against USD of December 2021: in time of writing, it is 18,5 liras per one US dollar, which means it is c. 30% cheaper than in the beginning of the 2022 and almost two times cheaper than five years ago… To the great encouragement of those tourists earning in USD and EUR and attracted by fine sightseeing, perfect climate and delicious fruits.