BofA: Brent crude back at US$100/barrel in 2023 (and 2 healthcare stocks)

Charts and Caffeine

Livewire Markets

MARKETS WRAP

Source: Investing.com

S&P 500 TECHNICALS

Source: Yahoo Finance

THE CALENDAR

Source: Forex Factory

Today is all about central banks. The RBNZ meets at midday today, and the big question is whether they will hike by 50 basis points (the small bazooka) or by 75 basis points (a much larger bazooka). We'll also be watching out for commentary from Governor Adrian Orr in the press conference. 

Speaking of central banks, we also should get a whole lot of Fedspeak from Loretta Mester, Esther George, and James Bullard. Finally, a suite of PMIs in Europe round out a noisy day in macro.

THE CHART

How much further can the US dollar rise against its major counterparts? Despite the early losses in November, the greenback is still up 19% since May 2021. Boris Kovacevic at Western Union has been following all the data and argues it's now clear that a large part of the dollar's dominance is already behind us. 

Of course, the catch to this thesis is if the Fed hikes rates higher than where the market is expecting, or if the European recession is worse than first thought.

Buckle up, folks. The trade of the year may be done now, but there's no reason to suggest why it can't rage on next year if certain events occur.

CRUDE CALL

And while the US dollar could arguably take out the title of "trade of the year", number two would have to be crude oil. Brent crude prices spiked during the invasion of Ukraine, peaking at nearly US$125/barrel. But arguably, the bigger story is that the crude oil price has not dipped below US$75/barrel since Christmas last year. 

Brent Crude, year-to-date (Source: Trading View)

But the commodities czar at Bank of America argues global oil supply could remain limited next year. Couple this with the dwindling spare capacity of oil reserves in the US and a potential reopening in China, and you've got more pain at the pump. Lastly, OPEC+ have been shutting down recent media reports which suggest the cartel could be weighing up an increase in output because of an oil embargo implemented by the Russians.

Francisco Blanch and his team now think Brent crude could average US$100/barrel through 2023, with WTI (the New York contract) not far behind. 

STOCKS TO WATCH

In today's stocks to watch, we thought we'd look at a couple of moves in a space we haven't talked about for a while - healthcare. In particular, there was one broker move that caught my eye given the company is so widely lauded.

Morgans has downgraded Pro Medicus (ASX: PMEto hold from add, following its AGM. The broker says it's time to trim after a recent share price rally. The company provided no guidance at its AGM, as expected by the analyst, though noted the business was running ahead of internal budgets. But there is one crucial overhanging risk - the assumption that all major contracts will renew. Let's see if that comes true.

In other healthcare-related news, Macquarie has kept Ramsay Health Care (ASX: RHC) on hold. But it does note that the sale of Ramsay Sante could improve the group's balance sheet - and therefore, its investment case. 

Last week, the conglomerate reported its Q1 results - with Ord Minnett upgrading the company to a buy from accumulate while Citi downgraded the company to neutral from buy.

Hans Lee wrote today's report.

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Charts and Caffeine
Markets Wrap
Livewire Markets

Charts and Caffeine is Livewire's daily pre-market wrap. We get you across the overnight markets and share the best in global finance so you can start your day on the front foot. Written by Hans Lee (Mondays - Thursdays) and Chris Conway (Fridays).

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