Awaiting Fed Rates, China Slowdown, Corporate and Fundamental News
Market reviews
• It’s finally time for the US Federal Reserve to make a decision, and the market is divided over whether it will cut its key interest rate by 25 or 50 basis points. However, stock index futures rose this morning and now point to a 59% chance of a significant change. Analysts are more cautious, with 92 of 101 experts polled by Reuters forecasting a 25 basis point cut. JPMorgan is an outlier in predicting a bigger cut, arguing that a full percentage point cut is more necessary given the current economic cycle. A decline in inflation would require a bigger cut to stop real interest rates from rising. Plus, the next meeting isn’t until early November, which is one reason why markets are expecting 114 basis points of easing by Christmas and another 142 basis points by 2025. The meeting also comes just two days after the presidential election, giving it a political edge. On the election front, Republican candidate Donald Trump is safe after the FBI thwarted another assassination attempt on his life. Bookmaker PredictIt is offering Trump at 47 cents, while Kamala Harris is a penny lower at 56 cents.
• All these factors, coupled with holidays in Japan and China, make Asian trading cautious as most stock markets are little changed. The dollar is holding steady at 140.50 yen as the Japanese currency continues to strengthen. It has fallen the most this year, giving it more room to rise. A break of 140.00 would open the door to its lowest since January last year at 127.215.
• Sentiment was not helped by data on Chinese retail sales, industrial production and house prices over the weekend, which only underscore the need for additional economic stimulus measures from Beijing. China’s economy is slowing. Retail sales rose 2.1% year-on-year, while 2.5% was expected, and the previous value was 2.7%. Industrial production fell from +5.1% to 4.5% (expected 4.7%). The unemployment rate increased from 5.2% to 5.3% (expected stable). Even the adjustments do not help to show an obvious trend. Despite a number of rescue measures, the real estate sector continues to drag down the world's second-largest economy.
• Among other central banks meeting this week, the Bank of England is expected to keep its interest rate on hold at 5.0% by all 65 analysts polled, although the market is pricing in a 31% chance of an unexpected cut. Inflation data due on Wednesday should help clarify the situation.
• The Bank of Japan is likely to keep its policy stance on Friday but could pave the way for tightening in October. South Africa's central bank is expected to begin its easing campaign this week, while Norway's policymakers are expected to hold off.
• JPMorgan Chase CEO Jamie Dimon said he is not ruling out the possibility of stagflation being a bigger problem than a recession, raising concerns about widening budget deficits and increasing infrastructure spending as Dimon prepares to leave the bank.
• The euro could fall to $1.02 by the end of the year and almost reach parity with the dollar, Bloomberg reports, citing a Morgan Stanley forecast. Analysts expect the ECB to begin cutting rates soon, which will lead to a fall in the European currency.
• Chinese auto giant BYD boosts its workforce to nearly a million. BYD has ramped up its hiring significantly, bringing its workforce to more than 900,000. The total workforce, up 5.8 percent since the end of August, makes BYD the largest employer among more than 5,300 companies on mainland China's stock markets.
• Elon Musk's newest employee faces impossible task. Angela Zepeda "loves a big challenge." Building relationships with advertisers on Elon Musk's social network X will be her biggest challenge yet.
• Intel Corp. is officially bidding for $3.5 billion to make chips for the U.S. military. Boeing's first strike in 16 years could worsen a global jet shortage that is driving up airfares and forcing airlines to keep flying older planes, industry executives and analysts say.
• Hedge funds turned net bearish on Brent crude for the first time since 2011, driven by concerns about oversupply in oil futures prices.
• Elon Musk and Oracle CEO begged Jensen Huang to sell them Nvidia accelerators for artificial intelligence. “I went to dinner with Elon Musk and Jensen Huang at Nobu Palo Alto, and the way I would describe it is that Elon and I were begging Jensen to sell us GPUs. Please take our money; no, take more. You’re not taking enough; we need you to take more of our money, please. It went well; it worked,” Oracle founder Larry Ellison said. Musk is interested in increasing the capacity of his xAI AI cluster, which already has 100,000 accelerators and will soon double that. Oracle plans to build a supercomputer with 130,000 accelerators.
• Sam Benkman-Fried is challenging his conviction, criticizing the judge's 'unbalanced' decisions. Lawyers representing Sam Benkman-Fried, the CEO and co-founder of FTX who was convicted of fraud and money laundering late last year, are seeking a new trial.
• Apple will hold another presentation in the fall, where it will introduce 7 new devices: MacBook, MacBook Pro, iMac, Mac Mini, iPad and iPad Mini.
Key events that could impact markets on Monday:
- Wholesale price inflation in Germany, EU trade balance,
- New York Federal Reserve Manufacturing Index
- Auctions of three- and six-month US Treasury bills.
International Reviews
• Second assassination attempt on Trump? The FBI allegedly alleges that Trump was the target of an alleged assassination attempt at his Florida golf club. U.S. Secret Service agents near where Trump was playing spotted the barrel of a Kalashnikov rifle sticking out of bushes near the course, about 400 yards (366 meters). The agent fired, and the shooter dropped the rifle and fled in an SUV, leaving behind the firearm and two backpacks, a scope and a GoPro camera, Palm Beach County Sheriff Rick Bradshaw said. The man was later apprehended by law enforcement in a neighboring county.
• The Israeli military has confirmed that a ballistic missile was fired from Yemen into the center of the country. Trump's answer to every question is either more oil drilling or tariffs. Few think that will work.
• Republicans who do not support Donald Trump have raised $35 million for Kamala Harris' campaign. A group called Republican Voters Against Trump began raising money in March to help Democrats retain the White House. The group has set a goal of raising $50 million for Kamala Harris' presidential campaign.
• Pope Francis has criticized US presidential candidates Donald Trump and Kamala Harris, calling them "anti-life" and urging American voters to choose the "lesser evil." He criticized Trump for his plan to deport millions of immigrants and Harris for her support of abortion rights.
• The United States has approved the sale of 32 of the latest F-35 Stealth fighter jets to Romania. The aircraft are scheduled to be delivered in 2031. The US State Department said the contract is worth $7.2 billion, while the US Embassy in Bucharest put the figure at $6.4 billion. In any case, this is the most expensive purchase in the history of the Romanian army.
• The Turkic-speaking countries of the former USSR in Central Asia have agreed to switch to a single alphabet based on the Latin alphabet. The draft of a common alphabet of 34 letters was approved at a meeting of the commission created by the Organization of Turkic States, which includes, in particular, Azerbaijan, Kazakhstan, Kyrgyzstan, Turkey and Uzbekistan.
• US changes tank strategy because of drones. The war in Ukraine has shown that heavy tanks, which used to be the “kings of the battlefield,” can be easily detected and attacked by inexpensive drones, forcing a rethink of their strategy.
• G20 leaders have agreed to join forces to combat disinformation and develop guidelines on artificial intelligence as their governments face the rapid spread of misinformation and hate speech.
• The number of pets in China is quickly approaching the number of children. In 2017, the country had 90 million children under 4 and 40 million cats, but the priorities of young people are clearly changing. The pet food sector is one of the fastest growing, and the blame is on zoomers choosing furry friends over starting a family.
• One of Bavaria's oldest breweries, Schlössle-Bier, is closing. It opened in 1690 and operated for 334 years, but has been unprofitable for the last 10 years. "Beer consumption is falling, and raw material and energy prices are rising." Bureaucratic hurdles are also putting pressure.
• A shortage of young engineers is threatening the resurgence of nuclear power in the United States. Despite growing demand for clean energy, the industry is experiencing a shortage of new professionals. Between 2012 and 2022, the number of students graduating with a bachelor’s degree in nuclear engineering fell by 25%, and only 454 students will successfully complete their degrees in the field in 2022, according to the Oak Ridge Institute for Science and Education.
• TikTok Day: In court, lawyers for the U.S. Justice Department, TikTok and a group of the platform's users will argue Monday over a U.S. law that bars Chinese ownership of the app.