Correction in Nvidia shares and the entire sector, dollar reserves, trade wars, company news
• European stocks could pull back on Tuesday after rising earlier this week. These are the technologies that will take a huge hit after Nvidia's slump led to a sell-off in the high-end chip sector on Wall Street. To recap, the S&P 500 lost 0.3% on Monday, compared with a more than 1% drop for the Nasdaq, and the SOX semiconductor index fell more than 3%.
But tech companies' losses have translated into gains in value, as exemplified by the Dow Jones Industrial Average's 0.7% rise. This rotation became a topic in Asia overnight. For example, AI darlings on Japan's Nikkei 225 such as SoftBank Group are pulling back from highs while money is flowing back into failed Toyota Motor.
• The positive news for equity investors is that overall stock indices in the Asia-Pacific region are rising. Among major benchmarks, only high-tech Taiwan is in decline. And while the Nikkei rose only half a percent, the Topix index rose almost 1.5%.
• Geopolitics also requires close attention. With the first round of early elections in France looming this weekend, sentiment could change quickly. So far, the far right's attempts to enter the markets have been effective and have allayed concerns about the lack of financial constraints. As a result, the euro rebounded sharply to return to $1.0740 after being as low as $1.0671 on Friday.
• Follow developments in the European Commission's relationship with Apple and China. Beijing wants the EU to scrap proposed tariffs on imports of Chinese electric vehicles before they take effect on July 4, and Chinese officials are trying to find a compromise at talks in Brussels this week. Apple needs to change the way its App Store operates or face huge fines for violating antitrust laws.
• The EU also flexed its muscles by introducing new sanctions against Russia, hitting gas exports for the first time. The new restrictions will ban ship-to-ship transfers outside EU ports, but will fall short of an EU ban on LNG imports that has intensified since the start of the war in Ukraine.
• The share of the US dollar in the foreign exchange reserves of central banks fell to 58.4%, or to $6.68 trillion, at the beginning of 2024.
This is stated in the report “Structure of Official Foreign Exchange Reserves” by the IMF.
According to the IMF, reserves in other major currencies (in dollar equivalent) increased slightly:
- in euros - by $36 billion to $2.28 trillion (share in reserves - 19.9%),
- pounds sterling - by $10 billion to $553 .9 billion (4.8%)
- Japanese yen - by $48 billion to $652.9 billion (5.7%).
The IMF notes an increase in the share of so-called non-traditional reserve currencies in reserves: the Australian dollar, Canadian dollar, Chinese yuan, South Korean won, Singapore dollar and Scandinavian currencies.
• Larry Summers says the Fed and investors are 'dead wrong' about the path of inflation
"I think [the Fed] is dead wrong in saying the neutral interest rate is 2.5%," he said. “I assume the neutral rate is 4.5%.” Earlier this month, Fed officials raised their neutral rate estimate to 2.8%.
The reason is the huge US budget deficit.
• Bitcoin, Ethereum, Solana, XRP and other tokens lost $200 billion in market capitalization in a week - Сoinmarketcap
Now traders are approaching a “critical level” of support, a breakthrough of which could lead to an even greater drop in the price of Bitcoin and other tokens.
Bitcoin funds have seen the largest outflows in two weeks since ETFs were approved. For
the second week in a row, Bitcoin investment products saw outflows of about $600 million, the largest two-week period since exchange-traded funds were approved in the United States.
• TikTok owner and US-based Broadcom are developing an AI chip amid the confrontation between the US and China. This could provide TikTok owner with high-quality chips.
The United States and China are competing fiercely for leadership in the development and production of advanced AI chips. This issue has significant implications for geopolitics, economics, and the future of technology.
• Is artificial intelligence making BigTech too “big”?. Previous fears have been exaggerated, but not this time - Economist.
• Hyundai and Kia are increasing sales in the American automobile market - WSJ. South Korean automakers are getting a boost from geopolitics.
• Paladin Energy has agreed to purchase Fission Uranium - WSJ. Australian uranium company Paladin Energy has agreed to buy Canada's Fission Uranium, with the aim of creating a globally significant supplier of nuclear fuel.
• The Texas GD plant becomes a key supplier of ammunition to the United States and Ukraine. The General Dynamics plant, designed to produce artillery shells, is part of the Pentagon's $6 billion Domestic Ammunition (WSJ) program.
• Major record labels Sony Music, Universal Music Group and Warner Records have sued artificial intelligence companies.
On Suno and Udio, accusing them of copyright infringement in the United States.
• Microsoft's agreement to invest $1.5 billion in the G42 is "an overall positive development." Because it forced the UAE company to sever ties with the Chinese company Huawei - a White House spokesman.
• Fever of weight loss drugs affects adjacent areas. Lilly Weight Loss Drug Data Spurs Selloff in Sleep Apnea Drug Shares - Bloomberg.
• Is Nvidia entering a correction zone? Latest downturn wipes out $400 billion in capitalization - Bloomberg.
• UBS Group agreed to sell most of its stake in Credit Suisse's China unit to a Beijing-backed fund.
It dealt a blow to the ambitions of Ken Griffin's Citadel Securities.
• Birkenstock (BIRK) shares are down 5% in post-market trading. The iconic sandal maker said its largest shareholder will sell off part of its investment in the company through a secondary share offering. L Catterton will continue to own 73.2% after the transaction.
• The correction in AI stocks led by semiconductors continued. We are watching when the “fly for cheap” moment begins. But the main thing will be whether NVDA can update the maximum. But Value shares received their share of liquidity and the American stock market remains in a bullish trend.