Growth in semiconductor stocks, Nvidia and Meta in the top, Bank of England, Fed and Bank of Japan rates, yen, won, oil are rising
Stock reviews
• Yesterday we saw a day of rushed buying of semiconductor and AI stocks - the classic "swoop in low." Bulls are betting on a resumption of the rally. I will note that many investors take profits in growing stocks. A soft Powell helped the growth of both stocks and government bonds yesterday. Investors are waiting for tomorrow's labor market report. The Fed-Recession race has begun.
• Yesterday's movements in all markets were associated with the adjustment of positions on the last trading day of the month. The Nasdaq had its best day since February last year, with geopolitical tensions pushing WTI crude oil prices up 5% for its best day this year and palladium the top performer among the buoyant precious metals complex, up 4%. .
• Nvidia jumped 13% and Meta's earnings beat expectations, lifting its shares 7% in after-hours trading. Results from Apple and Amazon will be ones to watch later in the day. Look at Nvidia stock - it fell 7% on Tuesday and soared 13% on Wednesday, bringing its market cap back above $3 trillion. This represents a one-day increase in market value of more than $350 billion.
• US bond yields fell to their lowest levels since February or March (depending on where on the curve) while the dollar's decline against a runaway yen dragged down its overall value against a number of G10 currencies and developing countries.
• Most economists expect the UK central bank to cut rates from a 16-year high. Markets are pricing the probability at a more muted 58%, and the doubts are not surprising given politicians have not spoken publicly for more than two months due to rules ahead of the UK's July 4 election.
The uncertainty weighed little on European assets, while Asian shares were mostly higher, following a tech-led rebound on Wall Street.
• The Fed, as expected, kept the discount rate. But Powell was dovish at the press conference and de facto confirmed that the rate would begin to decline in September.
/ Investors will soon be faced with the question of whether the Fed will have time to stop the economic slowdown before the threat of recession. For now, investors and analysts are hoping for a soft landing for the economy and avoidance of a recession.
• The Bank of Japan yesterday raised the discount rate from 0.1% to 0.25%. Billionaire investor Bill Ackman's Pershing Square USA fund is abandoning its IPO plans.
• Nancy Pelosi bought 10 thousand shares of NVDA. And sold 5 thousand shares of MSFT.
• Bitcoin fell to $64 thousand. As traders reacted to information that the US government may sell some of its significant cryptocurrency holdings. Since the beginning of the year, the loss of cryptocurrency companies due to hackers and scammers has exceeded $1.19 billion
due to 149 cases of hacking and fraud - Immunefi report.
• Intel will lay off thousands of employees. She wants to cut costs in a bid to regain market share and profits - Bloomberg.
• Tiktok bought models from OpenAI through MicroSoft for ~$20 million per month - The Information.
• Microsoft Azure's growth has slowed, testing investors' patience. Although Azure's growth will continue to slow in the current quarter, investments in data centers and servers will allow the company to capitalize on demand and accelerate Azure's growth in Q2 2025.
• There is currently insufficient capacity to meet customer demand for cloud and AI services.
• Copilot, which doubles the cost of a monthly subscription to $60, will eventually generate a stable revenue stream.
• The United States received one of the largest deposits of rare metals from Kazakhstan. The Kazakh company Kazgeology and the American Company Capital have created a joint venture (JV) that will search for rare earth elements (REEs) in Kazakhstan.
• AMD's AI surge led to its biggest rally since February. Advanced Micro Devices Inc. shares rose initially 11% (though ended the day a modest +4%) after the chipmaker gave an upbeat earnings forecast, highlighting how its new artificial intelligence processors are driving growth.
• Investors trust Nvidia. Nvidia shares soared 13% following strong results from AMD and a bullish outlook from Morgan Stanley.
• Fitch Ratings forecasts two US interest rate cuts in 2024. “A soft landing is likely with moderate inflation and low unemployment, and we forecast annual economic growth of 2.1%, up from 2.5% in 2023,” the ratings agency said.
• Oil surges as Hamas leader's killing reignites geopolitical risk - Bloomberg. Oil jumped the most since April after Hamas said Israel had killed its political leader, fueling tensions in a region that produces about a third of the world's oil.
• The yen soared to its highest since March. After the Bank of Japan raised interest rates and announced plans to reduce bond purchases.
• Starbucks' in-line profits ease fears of a larger downturn. Starbucks delivered results that were in line with expectations, reassuring investors who were bracing for another crash after being stunned by the previous quarter's decline.
• Uber will team up with BYD to put 100,000 electric vehicles on the company's platform.
• Meta-investors focused on capital investments after Microsoft's failure. Meta Platforms investors will be hoping it can do a better job than Microsoft and Alphabet in convincing Wall Street that the high costs of artificial intelligence will be worth it.
• Shares of Dutch chipmaker ASML rose 9%. It comes after Reuters reported the US would exempt some foreign allies from new Chinese restrictions.
• The yen has already strengthened below 150 yen per dollar after the Bank of Japan's unexpected decision to raise rates. This puts downward pressure on stocks in Japan - the Nikkei falls by almost 3%.
• The South Korean won posted its biggest gain this year, helped by strong Samsung earnings and a stock market rally driven by rising chip prices, while the Thai baht hit a four-month high.
• European shares are set for a modest opening, with FTSE futures up 0.3% and EUROSTOXX 50 futures unchanged. Also on Thursday, reviews of manufacturing activity in the UK, Germany and France will be published, as well as data on unemployment in the eurozone. Any easing there will help prepare the case for another rate cut in Europe. In Asia, the yen rose to 4-1/2-month highs but soon ran into resistance. However, the uptrend continued on expectations of further rate hikes by central banks, sending the Nikkei down 2.6%. Chinese shares also fell after a private survey showed the manufacturing sector contracted in July, raising doubts about the country's growth momentum.
• Investors are confident of one thing: the Fed's rate cut in September - be it 25 basis points or even 50 - will support risk appetite.
• Shares yesterday after the
ANET report +11%
MA+4%
AMD +4%
TMUS +4%
SBUX +3%
KKR +3%
BA +2%
ADP +2%
MDLZ +2%
MSFT -1% (High capex of MSFT had pressure on its shares, but helped semiconductor stocks rise)
SYK -1%
PINS -14%
• Shares premarket
META +7% (Zuckerberg: “Over the past few quarters, we've seen healthy growth in app usage among young people in the U.S. and Canada, and we've seen products like Groups and Marketplace be particularly popular with young people.”)
QCOM -1% (The company beat everything and gave a good forecast. It just went up in price by 8% during the stock exchange session.)
ARM -11% (The company beat everything and confirmed the forecast. But it is very expensive)
LRCX -2%
Key events that could impact markets on Thursday:
- Bank of England decision on interest rates.
- France, Germany HCOB manufacturing PMI, UK S&P Global Manufacturing PMI.
- Unemployment rate in the eurozone for June
- Income reports for Apple, Amazon, Air Products & Chemicals, Aptiv, Ball Corp.., Becton Dickinson, Biogen, Booking Holdings, Cigna Group, Clorox, ConocoPhillips, Cummins, Dominion Energy, Eaton, Entergy, Eversource Energy, Exelon, Hershey , Intel, Intercontinental Exchange, Iron Mountain, Kellanova, Kimco Realty, Labcorp Holdings, Microchip Technology, Moderna, Monolithic Power Systems, Motorola Solutions, Quanta Services, Regeneron Pharmaceuticals, ResMed, Targa Resources, Southern Co, Vertex Pharmaceuticals, WW Grainger and Xcel Energy.
International reviews
• Employment according to ADP did not meet expectations. The US economy added fewer private sector jobs in July than expected. The latest ADP data showed 122,000 jobs were added in July versus expectations of 150,000.
• Wage growth for workers who changed jobs is declining as the labor market cools. In July, the gap between the wage growth of workers who changed jobs and those who remained in the same place narrowed even further.
• Expected US home sales rose for the first time in three months - Bloomberg. A gauge of expected existing home sales in the United States rose in June for the first time in three months as buyers looking to move or upgrade their homes braved higher prices and borrowing costs.
• Focus on tax discussions. Executives and financial directors discuss the tax prospects for their profits at the end of the year. Taxes play an integral role in whether companies take on a project, an agreement, or hire more workers. Management teams and boards are likely weighing scenarios if Trump's tax cuts are not extended in 2025.
• South Korea's exports rose for the 10th month in a row. Buoyed by strong demand for semiconductors and other products overseas, posting its fastest growth rate in six months.
Continued export growth bodes well for Asia's fourth-largest economy, offsetting sluggish domestic demand and private consumption in the country.
Exports grew by 13.9% y/y. Imports increased by 10.5% y/y.
• Iran's Supreme Leader ordered a direct attack on Israel in response to the killing of Hamas leader Haniyeh, - NYT. By the way, it is reported that Israeli intelligence tracked Hamas leader Ismail Haniyeh through WhatsApp. The Russian Federation, China and Türkiye condemned the murder of one of the Hamas leaders.
Representatives of all three countries said this could lead to an escalation of conflict in the region. The Russian Foreign Ministry believes that the murder of Ismail Haniya will have an “extremely negative” impact on the progress of negotiations on a possible ceasefire in the Gaza Strip.
• The US carried out airstrikes on Iraq for the first time since February, calling it “self-defense” - Reuters. The attack came amid rising tensions in the region following an Israeli airstrike on Beirut.
• President Xi Jinping's government faces growing pressure to address China's slowdown in consumer spending - Bloomberg
M&A deals in China fell 45% in the first half due to the economic slowdown - Asia.nikkei.
The value of transactions involving Chinese companies amounted to about $96 billion in January-June.
• Cooperation with China and the Russian Federation is more important for the Hungarian Prime Minister than maintaining his own position in the EU - FT. If earlier he demonstrated this by blocking aid to Ukraine, then after an unauthorized visit to Putin everything became even more transparent.
• Orban is already being hinted at doors with the EU and NATO. But Brussels will not dare to expel Budapest, since this would mean creating a Russian-Chinese enclave in the EU. Therefore, European politicians will continue to complain and shrug their shoulders, either seeking a compromise with Orban or punishing him by limiting funding and reducing his powers in the European Community.
• The United States suspended the provision of aid to Georgia in the amount of $95 million due to the government's anti-democratic actions, incompatible with the country's aspirations to become a member of the EU and NATO. Secretary of State Blinken said
• Maduro: The Venezuelan authorities have created a censorship committee of social networks with the support of the Russian Federation and China, “to prevent attacks, poisoning and hatred on the Internet”
/ The Russian Federation and China consider Venezuela their outpost in America. How will the US respond?
• Maduro called Elon Musk his sworn enemy. He accused him of helping the protests and wanting to invade Venezuela.
• Eurozone inflation unexpectedly accelerated to 2.6%. In July, the highest annual inflation rate was recorded in the services sector, followed by food, alcohol and tobacco, energy and non-energy industrial goods.
The report is one of the important monthly indicators that will be provided by the ECB ahead of its meeting on September 11-12 regarding a possible rate cut. Bloomberg analysts now forecast a slowdown to 2.2% in August.
• The US imposed sanctions against seven companies from China and Iran. Companies from Iran, China and Hong Kong were subject to restrictive measures for their participation in the Iranian missile and drone production program. According to the US Treasury Department, these companies purchase or produce various components for the Iranian Ministry of Defense.
• US Senate committee rejects attempt to ban AI disclosure rules in political advertising - Reuters. The U.S. Senate Commerce Committee on Wednesday rejected an attempt to block the Federal Communications Commission from requiring political ads on radio and television to disclose whether the content was generated by artificial intelligence.