Strong US and UK Fundamentals, China Gains and Company Reviews
Stock market news
• Strong MU report sends semiconductor and AI stocks higher. China stocks rise again this morning. Chinese ETFs have their best week ever. Oil falls on Saudi Arabia's threat to pump more.
• China’s leaders finally seem to be waking up to the reality of a shaky economy and doing what the markets want. Battered Chinese stocks are now poised for their best week since 2008, with blue chips up 3.6% on Friday and forecast to rise 15% for the week. Hong Kong’s Hang Seng Index is poised for a nearly 13% weekly gain, its biggest since 1998. It’s been a good week for just about every market with a stake in China. The mainland China property index is up 20% on the week. Iron ore is back above $100 a tonne, copper has broken the key $10,000 a tonne mark, gold has set a new record and silver has hit a 12-year high. It remains to be seen whether the rally can last. After all, China's A-share market has repeatedly disappointed investors: the benchmark CSI300 index has not risen higher than it did in 2007, while the S&P 500 has risen nearly 300%.
• Japan's ruling party is facing a leadership battle that looks set to be one of the most unpredictable in decades, with the yen nervous after hitting a three-week low of 145.56 per dollar on Friday.
• Strong economic data from the US again
- US Q2 2024 GDP up 3% y/y as expected
- Initial Jobless Claims: 218K (exp. 224K)
- Durable Goods Orders (Aug): 0% (exp. -2.8%)
US Treasury Secretary Janet Yellen: Labor market and inflation data suggest the US economy is on track for a soft landing. But the last mile to tame inflation is not yet complete.
• The Swiss National Bank (SNB) cut its key rate by 25 basis points to 1%, the third cut in a row. The SNB said inflation had "fallen significantly," partly due to the strengthening of the Swiss franc. Inflation fell to 1.1%, below expectations.
• Oil prices fell sharply by more than 2% on news that Saudi Arabia may increase production.
OPEC's monthly oil market report:
- OPEC+ countries cut oil production by 61,000 barrels per day in August.
OPEC cut its forecast for oil demand growth:
- for 2024: a decrease of 80,000 barrels per day, to 2 million barrels per day.
- for 2025: a decrease of 40,000 barrels per day, to 1.74 million barrels per day.
• Grammarly has appointed new top managers with experience in taking companies public. Navam Velikhindu, who worked at HashiCorp, a cloud infrastructure management platform developer, has been appointed CFO. The company entered the Nasdaq in December 2021. Mark Schaaf, who held a similar position at the American grocery delivery service Instacart for four years, has been appointed CTO.
• Google and Volkswagen are collaborating on an AI assistant for smartphones. Google is providing an AI assistant for Volkswagen drivers that will make driving easier.
Consumers can ask the Volkswagen assistant questions like “How do I change a flat tire?” or point their phone’s camera at the car’s dashboard to get relevant information.
• Changpeng Zhao (CZ), the founder of Binance, will be released from federal prison on September 29, 2024. Binance is preparing a series of new market moves for his return.
• Elon Musk posted an invitation to a Tesla presentation on social media X, which will take place on October 10, 2024, in Los Angeles. According to leaks, the electric car company is going to present a specially built robotaxi. The slogan of the event was the phrase "We, Robot". Musk added that this announcement "will go down in the history books."
• Most wealthy investors are considering changes to their portfolios ahead of the US presidential election on November 5, according to a UBS survey released on Thursday.
• The global oil market is undergoing changes: palm oil has lost its status as the cheapest. Palm oil is becoming more expensive due to production problems, while soybean oil prices are falling.
• McDonald's Raises Quarterly Dividend by 6%. The company announced a dividend of $1.77 per share.
• Ubisoft shares fall to 10-year low as investors demand the company be sold. The company's shares have lost 20% of their value.
• Electric vehicle production in the EU is falling sharply due to falling demand, the FT reports, citing EU Commissioner for Internal Market Thierry Breton. According to Mr. Breton, fewer EVs will be produced in EU factories in 2024 than in 2023, when 1.8 million were produced.
• Microsoft on Thursday pledged to invest 14.7 billion reais ($2.70 billion) in Brazil over three years as the company looks to improve its cloud infrastructure and artificial intelligence (AI) in Latin America’s largest economy. The amount is the largest investment ever announced by Microsoft in Brazil.
• Barr to Fed: Discount window can be a source of normal funding for banks. Banks should use the central bank's discount window when they need it, not just when they face funding problems.
• Swedish fashion retailer H&M is betting on lower prices and a wider range of fashion clothing than basics to boost sales among cautious consumers during crucial shopping months.
• The U.S. Justice Department is investigating Super Micro Computer (SMCI) - WSJ. It suspects "accounting manipulation" at the company, citing, among other things, evidence of undisclosed related-party transactions and failure to comply with export controls. Shares plunged on the news.
• Healthcare company Guardian Pharmacy is valued at about $880 million after a lackluster debut on the New York Stock Exchange.
Shares of the Atlanta, Georgia-based company debuted at $14.46 a share, down from an IPO price of $14. The company raised $112 million Wednesday by selling 8 million shares of Class A common stock at the low end of its target range of $14 to $16 a share.
• Shareholders pull cash out of Chinese stocks after stimulus plan - Bloomberg. Shareholders in some Chinese companies have cashed out more than $1 billion in their holdings over the past week, taking advantage of the improved market conditions caused by the adrenaline rush into the country's economy. Investors are skeptical about China's economic recovery and are rushing to take advantage of the rally to sell Chinese stocks.
• New York Federal Reserve Bank President John Williams on Thursday announced the creation of a body of private market participants
to monitor the use of interest rates, or benchmark rates, in all financial markets.
• BASF SE will cut its dividend and split assets as part of a major overhaul that could involve further plant closures in Germany to counter high energy prices and a secular slowdown in China.
• Visa has agreed to buy Featurespace, a company that develops enterprise technologies that prevent fraud and financial crime. The amount of the deal was not disclosed.
• Apple supplier Jabil announced a restructuring, beating fourth-quarter forecasts. The Florida-based company, which counts Apple as a customer, makes electronic components such as circuit boards and systems serving the automotive, cloud and commercial markets for self-driving cars, trucks and buses. Jabil said it would cut headcount in some units as part of its restructuring plan.
• Costco (COST) shares fall 1.4% after earnings. The company beat earnings estimates but missed sales estimates.
• The US core consumer expenditures (PCE) price index, the Fed's preferred measure of inflation. Forecasts are centered around a modest monthly gain of 0.2%, and risks appear to be tilted to the downside.
The favorable data would open the door to another significant Fed rate cut of half a point in November, although much will ultimately depend on next week's payrolls report.
Key events that could impact markets on Friday:
- Japanese leadership contes
- French CPI for September, German unemployment rate
- US PCE data
Fundamental news
• India's manufacturing stimulus is progressing amid efforts to curb Chinese imports. India's cash incentives to boost domestic manufacturing have attracted over $17 billion in investment since the incentive scheme was launched in 2020.
The programme, which offers manufacturers 4-6% cash incentives on incremental sales, has been rolled out in 14 sectors including electronics, pharmaceuticals, textiles and home appliances. It is noted that India has emerged as a global hub for electronics manufacturing, particularly smartphones, and is now the second-largest mobile phone maker.
• The OECD's UK GDP growth forecast for 2024 has been raised from 0.4% to 1.1%, the biggest increase among the G7 countries.
The OECD also published its forecasts for changes in the key interest rates of the world's two main central banks until the end of 2025:
- The Fed will cut its key rate to 3.5%.
- The ECB will cut its rate to 2.25%.
• China's newest nuclear attack submarine sank at a shipyard near Wuhan in late May or early June - WSJ
• The United States is the biggest threat to world peace, the source of wars and conflicts, said a representative of the Chinese Ministry of Defense.
• The EU, US and 10 other countries have called for a three-week ceasefire between Israel and Lebanon. "We call on all parties, including the governments of Israel and Lebanon, to immediately endorse a temporary ceasefire," the countries said in a joint statement released by the White House after intense discussions at the UN. Israel has refused to cease fire in Lebanon and the Gaza Strip.
The Acting President of the Central Bank of Georgia and the Ambassador of China discussed the intensification of further cooperation in the development of payment systems and financial services.