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Norwegian Cruise has a rocky journey in Q2

 

Wednesday, August 10, 2022

The news shaping the markets today

Blasts rocked a Russian military base in Crimea, killing one person. Despite the ongoing war, the safe-haven US dollar traded slightly lower this morning.


China’s producer price inflation eased to a 17-month low of 4.2% year-over-year in July, from 6.1% in the previous month. However, the CNY/USD forex pair remained after pressure.


Japan’s producer prices accelerated by 8.6% year-over-year in July, following a 9.4% increase in the previous month. Despite this, the JPY/USD pair rose in forex trading this morning.


South Korea’s unemployment rate came in unchanged at 2.9% in July. However, the KRW/USD forex pair remained under pressure.


US crude oil stockpiles increased by 2.156 million barrels in the week ended August 5, versus a rise of 2.165 million barrels in the prior week. The news sent WTI crude oil futures lower this morning.

 

What’s happening: Shares of Norwegian Cruise Line Holdings fell on Tuesday, after the company reported weaker-than-expected results for its second quarter.

What happened: Investors were concerned about Norwegian Cruise Line’s wider loss in the second quarter and projection of a loss for the third quarter.

Although the Miami, Florida-based company cited lower occupancy rates, some of its major rivals have projected a significant improvement in occupancy levels ahead.

How were the results: Norwegian Cruise Line reported a loss for the second quarter, with both top-and bottom-line figures missing market views.

  • Revenues came in at $1.2 billion, short of the consensus estimate of $1.26 billion.
  • The company reported an adjusted net loss of $478.3 million, or $1.14 per share, missing market expectations of a loss of 86 cents per share.

Why it matters: The cruise industry is still trying to achieve full occupancy after the covid-19 pandemic. However, several factors, including shortage of labour, higher fuel costs and onboard coronavirus cases, have limited the rebound potential.

To boost occupancy levels, Norwegian Cruise Line said on Monday that it will no longer require vaccinated guests aged 12 years and above to follow any covid-19-related protocols.

The company’s occupancy was 65% during the second quarter, versus over 107% in 2019, a level that it is not expecting to reach before next year. However, rival Royal Caribbean Group is projected to reach triple-digit occupancy levels by the end of the current year, while Carnival Cruise Line guided to 110% occupancy in the current quarter.

Norwegian Cruise Line’s CEO Frank Del Rio said during the earnings call that the company is witnessing strong demand, reflected in its record pricing, accelerating booking volumes and the “highest ever onboard revenue generation” for 2023 and beyond.

For the third quarter, management guided to revenues of $1.5-$1.6 billion, below the consensus estimate of $1.88 billion. Occupancy is seen in the low 80% range. The company also projected a net loss for the third quarter, citing the pandemic, ongoing war between Russia and Ukraine and a challenging macroeconomic environment.

How shares responded: Norwegian Cruise Line’s shares fell 10.6% to close at $12.10 on Tuesday, following the release of quarterly results. The stock has lost around 47% over the past six months.

What to watch: Investors will keep an eye on the spread of covid-19 subvariants. Markets will also monitor energy prices and labour shortages.

The markets today

US stocks will be in focus today ahead of inflation data

Context: Wall Street recorded losses on Tuesday, as investors assessed the latest earnings reports.

Details: Although the S&P 500 index recorded gains for three consecutive weeks, the latest earnings reports sent investors to the sidelines.

Nvidia issued downbeat revenue guidance for the second quarter, while Micron Technology warned that its sales in the fourth quarter may fall short of the earlier guidance due to the current macroeconomic conditions and supply chain issues.

Shares of Novavax lost around 30% on Tuesday after the company reported a decline in quarterly earnings and sales and cut its full-year revenue forecast.

Investor sentiment was supported to some extent by economic data. The NFIB Small Business Optimism Index climbed to 89.9 in July, from June’s reading of 89.5. However, US non-farm unit labour costs surged by 10.8% in the second quarter.

The Dow Jones index shed 58 points to close at 32,774.41, while the S&P 500 declined 0.42% to 4,122.47 on Tuesday. The Nasdaq 100 recording losses for the third straight session, down 1.15% to settle at 13,008.16.

What to watch: Traders await the release of data on inflation and wholesale inventories from the US today. The Consumer Price Index, which rose 1.3% in June, is expected to accelerate 0.2% in July. The core inflation rate is projected to increase by 0.5% in July. Analysts expect wholesale inventories to grow 1.9% to $896.0 billion in June.

Other Markets: European trading indices closed mostly lower on Tuesday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 1.12%, 0.53% and 0.67%, respectively, and the FTSE 100 traded up by 0.08%.

Support & resistances for today

Technical Levels News Sentiment
USD/CAD – 1.2887 and 1.2891 Positive
AUD/USD – 0.6957 and 0.6964 Positive
Gold – 1808.09 and 1809.89 Positive
CAC 40 – 6481.18 and 6500.86 Positive
S&P 500 – 4119.26 and 4128.71 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0216, 0.02%) Dow ($32,738, 0.01%) Brent ($96.08, -0.2%)
GBP/USD (1.2084, 0.07%) S&P500 ($4,123, -0.03%) WTI ($90.21, -0.3%)
USD/JPY (134.93, -0.16%) Nasdaq ($13,020, -0.09%) Gold ($1,807, -0.3%)

What else to watch today

Germany’s inflation rate, Saudi Arabia’s industrial production, Turkey’s unemployment rate and labour force participation rate, Italy’s inflation rate, South Africa’s SACCI business confidence index, US MBA mortgage applications, crude oil stocks, gasoline stocks, distillate stockpiles, and government budget, India’s money supply M3, Brazil’s retail sales, as well as Russia’s consumer prices.


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