High Maintenance

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What's going on?

Alcoa – America’s largest aluminum producer – reported worse-than-expected fourth-quarter earnings on Thursday, and its stock dropped 2%. That’s not what frustrated investors paid for.

What does this mean?

Aluminum’s used in everything from cans to car parts, which makes Alcoa a bellwether: its sprawling business covers all sorts of regions and industries, and as such its performance gives clues about global economic growth.

The company lost more money than investors expected last quarter, having made a loss in every quarter of 2019. All those blows added up to a $1 billion shortfall over the year. That was partly down to a drop in the price of alumina (the mineral aluminum comes from), which put Alcoa’s earnings under pressure. But maybe that shouldn’t have come as much of a surprise: global economic growth did slow in 2019, after all…

Why should I care?

For markets: Put it there, old palladium.
Alcoa’s 2% fall on Thursday was more of the same for its shareholders: its stock has fallen 30% in the last year. Taken together with the roughly 30% rise of the US stock market over the same period, some of its investors might’ve lost out on 60% gains. If only they’d looked at palladium, whose price rose by over $100 on Thursday. The metal’s biggest-ever move in a single day was probably in part because palladium’s so valuable to carmakers, which use it in catalytic converters to make car emissions less environmentally harmful.

Zooming out: Shifting gears.
Data out on Thursday showed European car sales hit a record high in 2019. That might’ve been unexpected: the slowdown in consumer spending meant car sales in both the US and China fell in 2019 compared to 2018. Still, French and Swedish buyers – conscious of incoming regulations that’ll push up vehicle prices – rushed to get themselves a new set of wheels in December. Just be aware that it might come at the expense of vehicle-buying activity in early 2020…

Originally posted as part of the Finimize daily email.

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