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MTN Starts $727 Million Empowerment Plan to Boost Internet Bid

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MTN Group Ltd. started a 9.9 billion rand ($727 million) economic empowerment plan that will boost black ownership of the South African unit to more than 30 percent and enable Africa’s biggest mobile operator to bid for high-speed internet spectrum.

Stock will be issued through empowerment vehicle MTN Zakhele Futhi to qualifying black employees at 102.80 rand each, a 20 percent discount to the 10-day volume weighted average price, the Johannesburg-based company said in a statement on Monday. The fund replaces MTN Zakhele, which will close on Nov. 24. Black economic empowerment programs are set up to compensate those discriminated against during apartheid.

“This new transaction, together with the continuing contribution of the MTN Zakhele transaction, will translate to an effective indirect see-through black ownership in excess of 30 percent of MTN’s South African operations,” Chairman Phuthuma Nhleko said in the statement.

The transaction makes MTN the only South African company that’s qualified to bid for high-speed internet spectrum in a proposed auction early next year. Companies need 30 percent black ownership to make an offer, according to the rules published by the Independent Communications Association of South Africa, the industry regulator. The proposed auction of five blocks of spectrum is expected to raise more than $1 billion and extend broadband access to rural parts of the country.

The proposed auction is being contested by the country’s Telecommunications Minister Siyabonga Cwele in court.

MTN shares fell 0.2 percent to 125.15 rand as of 10:46 a.m. in Johannesburg, the sixth consecutive day of declines. The stock is down 5.8 percent this year, valuing the company at 231 billion rand.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Markets Today – Russia/Ukraine, Fed, Earnings, PMIs, Oil, Gold, Bitcoin

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U.S Dollar - Investors King

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Another woeful start to trading on Monday, as heightened geopolitical risk compounds investor anxiety and drags on risk assets.

It could be a make or break week for the markets, with the Fed meeting on Wednesday, big tech earnings, and ongoing tensions on the Ukraine/Russia border. That may sound a bit over the top given how deep a correction we’ve already seen, particularly in the Nasdaq, but it could get much worse before it gets better.

Wednesday is going to be massive. The Fed needs to strike the right balance between taking inflation seriously and not wanting to cause further unnecessary turmoil in the markets. Not an easy balancing act when four hikes are already priced in, alongside balance sheet reduction, and some are arguing it’s not enough.

That’s a lot of pressure for a meeting that’s not really live but investors will be hanging on every single word. It won’t take much for the Fed to add to the anxiety but if they manage to strike the right chord, it could help settle the markets and draw investors back in.

And then there’s earnings. Netflix got things off to a rotten start for big tech but there’ll be plenty of opportunities to turn that around this week. The Nasdaq has fallen more than 16% from its highs and sits very close to bear market territory. Will investors be tempted back in at these levels if the other big tech names deliver?

Whatever happens, it promises to be a really interesting week in the markets and one that could go terribly wrong or be the turning point. Perhaps that’s oversimplifying things but when fear is in control as it seems to be now, it creates these kinds of extremes.

Weak PMIs as omicron weighs

The PMIs we’ve seen today won’t exactly be helping the mood but we should take them with a pinch of salt given the impact that omicron will have had. The services sector was hit particularly hard, especially in the US, but again that’s to be expected under the circumstance. While the data won’t have helped to lift the mood, it won’t change the outlook for interest rates either. There was cause for optimism in some of the UK service’s forward-looking components which bodes well for the coming months, even as households and businesses are hampered by higher energy costs and taxes.

Oil lower but fundamentals remain bullish

Oil prices are lower at the start of the week as we continue to see some profit-taking alongside another hit to risk appetite. It’s been a remarkable rally and there’s nothing to suggest that prices are peaking. It’s just come a long way in a short period of time but the fundamentals continue to look bullish.

Despite it already trading at very elevated levels, I wouldn’t be surprised if any corrective moves are relatively shallow. There’s still a big issue on the supply side, with OPEC+ unable to even come close to monthly addition targets and it’s happening at a time of strong demand.

Not to mention the fact that tensions are seriously heightened between Russia and the West and an invasion of Ukraine is becoming an increasing possibility. When energy markets are already so tight, the additional risk premium should continue to support prices.

Gold pares earlier gains

Gold got off to a decent start this week as it continued to do well in risk-averse trade, but it has since given those back to trade marginally lower on the day. Whether its performance recently is a safe haven move, inflation hedge, or a combination of the two, it’s certainly been supportive for the yellow metal. And now it’s found strong support around $1,830 where it had been seeing plenty of resistance in recent weeks before breaking higher.

That could be a bullish confirmation signal and there still appears to be a healthy amount of momentum, even as the dollar is performing well. The next big test for gold is $1,850, where it struggled on Thursday before profit-taking kicked in.

A major test of support coming for bitcoin

Another miserable day for bitcoin which is continuing to slide after surpassing the 50% mark a little over two months after hitting record highs. It’s in freefall once more and really suffering in these risk-averse markets.

We’ve seen this before though, extreme moves work both ways and while the market has matured over the years, it is still a highly speculative, high-risk asset class. And high-risk assets are being pummelled.

But bitcoin now has a real test on its hands. The psychological blow of losing $40,000 is nothing compared to what happens if $30,000 falls. This is a major level of technical support that held throughout 2021, despite numerous tests early in the year and then throughout the summer. If this falls, it could get very messy.

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Concerns Over Interest Rates Hike and Stronger US Dollar Weighed on Oil Prices

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Oil prices dropped on the back of growing concerns over the possibility of the US Federal Reserve raising interest rates and the surge in dollar value against global counterparts.

Brent crude oil, against which Nigerian crude oil is measured, fell by $3.69 from $88.86 a barrel it peaked earlier today to $85.17 per barrel when the New York market opened. The US West Texas Intermediate crude oil shed $3.91 to $81.9 per barrel, down from $85.81 it opened during the Asian trading session.

The decline in oil prices was after the US dollar jumped to a two-week high on Monday against its global counterparts, largely due to the tension between Russia and the West over Ukraine and the likelihood of the Fed raising interest rates this week.

Francesco Pesole, a strategist at ING Bank, said the increase in dollar value could stall if the Fed signalled a preference for balance sheet reduction against the widely expected interest rate as means to tighten policy.

“If markets see the Fed willing to let balance sheet reduction do the heavy lifting, that may force a scaleback in forecasts for the number of rate hikes,” he said.

“The dollar will find more support from actual rate hike expectations than expectations of draining liquidity out of the market.”

Carsten Fritsch, an analyst at Commerzbank, explained that the crisis in both Ukraine and the Middle East “justify a risk premium on the oil price because the countries involved – Russia and the UAE – are important members of OPEC+”.

Tension in the United Arab Emirates rose on Monday following an interception of two Houthi ballistic missiles targeting the Gulf country after a deadly attack a week earlier.

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Markets Mixed Ahead of Key Policy Decisions and Corporate Updates

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Global stock markets will be mixed this week as investors brace for the crucial Fed’s meeting and rotate towards value stocks, says the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.

The assessment from deVere Group’s Nigel Green comes ahead of the U.S. central bank’s policy makers’ meeting this week at which they could signal the first lift-off in U.S. interest rates since 2018 as they try to combat red-hot inflation.

He says: “After the dramatic recent volatility during which global stock markets recorded their worst week in more than a year, markets will be more settled again this week.

“They will be in a holding pattern for much of the week as investors wait and see the outcome of the Fed’s meeting on Wednesday.

“Many will be preparing to commit new capital to build portfolios as history teaches us that U.S. equities perform well when the Fed raises rates, as a growing economy typically supports corporate earnings growth and the stock market.

“Sentiment will also be muted as investors await earnings updates over the next few days from titans including Apple, Boeing and Deutsche Bank, amongst others.

He continues: “The next weeks will continue to be defined by a rotation towards value stocks.

“After years of growth stock outperformance, many investors are changing their mind and move towards cheaper stocks which are based on earnings and cash flows.”

Value stocks, explains Nigel Green, are valued more based on near term cash flows meaning they are not as “vulnerable to rate hikes for their intrinsic value”; whereas growth stocks are “much more valued on cash flows way into the future.”

He goes on to add: “Expectations for tech stocks have been too high of late, so a slight miss could crush some investors.  Of course, tech will continue to be a megatrend, but some companies are now oversold.”

His comments echo the sentiment that last week left the tech-heavy Nasdaq index in correction territory.

Nigel Green concludes: “Major policy announcements and big corporate updates will mean that global stock markets will be mixed this week, but more settled than in the first few weeks of 2022.”

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