Troubling week in financial markets, latest stock news and corporate events

Fundamental Reviews

• It's been a turbulent week for investors, with technology stocks selling off amid escalating trade tensions between China and the United States, uncertainty over U.S. President Joe Biden's fate in the presidential race and disappointing results from the third plenum of the Chinese Central Committee. And as the global outlook becomes increasingly volatile, even interest rate expectations have taken a backseat for now.

• In hindsight, the assassination attempt on Republican presidential candidate Donald Trump last week may have been a sign of future market turmoil, which was subsequently reflected in a sharp rise in the VIX index, Wall Street's fear gauge. Asian shares struggled to find a footing on Friday as the sell-off in technology stocks spread across all sectors and Europe also opened lower. Even stellar reports and forecasts from Taiwan's TSMC failed to assuage investor fears of further tightening of US sanctions on China, as shares of the world's largest contract chipmaker continued to fall on Friday. Coupled with Trump's comments this week that Taiwan should pay the US for its defense, TSMC was on track for its worst weekly decline since late May, with its peak market value down more than NT$2 trillion (T$61.06 billion). US dollars).

• Fed policymakers have paved the way in recent days for an interest rate cut in September, while the European Central Bank on Thursday left open the possibility of a similar move. As for the Bank of England, the conditions for easing rates are not yet ripe, and traders are reducing the likelihood of a rate cut in August. UK retail sales data will be published later on Friday, but wet and cold weather is expected to mean fewer shoppers in June.

• Trump promises “massive tax cuts” and an end to inflation by increasing US fossil fuel production. “I will immediately put an end to the devastating inflation crisis, lower interest rates and reduce energy costs. We'll drill, baby, drill."
We'll drill, baby, drill." If Trump wins the election in November, his economic policies are expected to focus heavily on extending the 2017 tax cuts, boosting oil and gas production, raising tariffs, easing regulations and cracking down on illegal immigration at the U.S. southern border.

• The EU and South Korea are joining forces in chip development. The countries will begin joint research projects in semiconductor technology this month.

• Ursula von der Leyen was re-elected President of the European Commission. This will be her second five-year term in office.
Von der Leyen's plans for the second term of the head of the EC:
- Strengthening the defense capability of the EU and pan-European air defense.
- Further support for Ukraine. This is the best investment in European security, von der Leyen emphasizes.
- Strengthening migration policy.

• Parts produced in Poland were found in Iranian Shaheds, which the Russian Federation is using in the war against Ukraine. Warsaw said they were “shocked” and launched an investigation.

• Reuters reports that Chinese President Xi Jinping appeared on television today to cover a Communist Party meeting. The message came largely in response to unsubstantiated rumors circulating yesterday that he had suffered a stroke.

• Democrats have postponed the confirmation of Biden's candidacy for the presidency of the United States. Democrats say US President Joe Biden has shown no signs that he plans to change his mind about the nomination, but he has become more open to arguments about the possibility of withdrawal. Therefore, Democrats decided to delay the official nomination of Biden for a week.

• Chinese officials acknowledged Friday that the expansive list of economic goals re-emphasized at the end of a key Communist Party meeting this week contains “many complex contradictions” that point to a rocky road to policy implementation.

• Chinese workers are asked to take pregnancy tests during interviews. This is how local companies want to protect themselves from high maternity payments. - CNN
Moreover, such tests have been banned in China since 2019, but in fact this is still practiced. The scandal involved 16 companies that have already been sued.

• A cooling US labor market has further fueled hopes for rate cuts. The number of continuous claims for unemployment benefits again reached the highest level since November 2021 - 243 thousand.
According to other data, the US economy is not so bad:
- The manufacturing activity index from the Philadelphia Fed increased from 1.3 to 13.9 (2.7 was expected).
- The LEI index of leading economic indicators fell by 0.2% in June (-0.3% expected).

Stock reviews

• The ECB, as expected, left the policy rate unchanged at 4.25%. While some core inflation measures rose in May due to one-off factors, most measures were either stable or fell slightly in June. In line with expectations, the inflationary impact of high wage growth was mitigated by earnings.

• The Italian competition authority has brought charges against Armani and Dior for exploiting workers. The agency suspects that for the manufacture of certain products and accessories, companies allegedly used materials from workshops and factories where workers worked who received inadequate wages.
Car sales in the EU increased by 4.3% for the month.

• According to ACEA, car registrations in the EU grew by 4.3% in June 2024, driven by growth in three of the region's four largest markets: Italy (+15.1%), Germany (+6.1%) and Spain ( +2.2%). In contrast, France saw a decline of 4.8% last month.

• Ford is investing $3 billion to expand truck production at a plant previously dedicated to electric vehicles. Ford said the Canadian plant, expected to become operational in 2026, will add about 100,000 units of capacity annually.

• Allianz grows in Asia with Singapore acquisition - WSJ. Allianz is buying a 51% stake in Singapore-based insurer Income Insurance for $1.6 billion as it expands its presence in the region.

• Daimler Truck admits impairment losses in China and faces lower profits - WSJ. Daimler Truck said it suffered a 120 million euro loss from the write-down of a joint venture in China due to persistent weak markets, and that its full-year forecast for this year was under review.

• EssilorLuxottica buys streetwear brand Supreme. Its owner is Vans VF for $1.5 billion, which aims to help the Ray-Ban maker expand beyond eyewear.

• Nokia lowered its annual sales forecast. But it said it was approaching the midpoint or just below the midpoint of its operating profit forecast, warning that telecoms operators continued to hold back on investing in new network equipment. NOK shares fell 7%.

• Novartis raises forecasts as key drugs increase sales - WSJ.

• Goldman Sachs is opening up an investment strategy that was previously reserved for the wealthy - WSJ. The bank plans to offer ordinary clients of its robo-advisor Betterment investment portfolios designed to help them save on taxes.

• New hobby for Chinese investors: Saudi Arabian shares. WSJ: Chinese investors are pouring into new funds tracking Saudi stocks, signaling significant appetite for overseas investment at a time when domestic markets are weakening.

• Alphabet Google will introduce artificial intelligence into the American broadcast of the Paris Olympics - Reuters. It will allow sports commentators to use AI to explain competitions, the tech company said. We are waiting for new meme jokes from Google AI.

• Blackstone (BX) President John Gray says the world's largest alternative asset manager is poised for a rebound in real estate markets - Bloomberg
BX shares rose 1% in wild trading.

• OpenAI releases GPT-4o Mini, a cheaper version of its flagship AI model - Bloomberg. A more affordable, smaller version of the company's flagship AI model is needed to appeal to a wider range of developers and business clients. If they already need to interest customers with cheaper versions, then the market has entered the saturation stage and they need to turn on marketing.

• The average 30-year mortgage rate in the US fell to 6.77%, falling to its lowest level since March. This is a welcome reduction in borrowing costs for potential home buyers who are faced with the problem of lack of funds for the purchase.

• Brazilian chicken suppliers fall after detection of Newcastle virus - Bloomberg. A virulent poultry disease has been discovered at a commercial farm, sparking fears of a trade embargo against the world's largest exporter.

• Goolsby says the Fed risks taking the "golden path" if it doesn't cut rates soon - Bloomberg. Chicago Federal Reserve President Goolsbee suggested the central bank may have to cut borrowing costs soon to avoid a sharper deterioration in the labor market, which has cooled in recent months.

• SolarWinds wins most of US Securities and Exchange Commission lawsuit over Russia-linked cyberattack - Reuters. A US judge has thrown out most of a lawsuit by the US Securities and Exchange Commission, which accused software company SolarWinds of defrauding investors by hiding its financial performance.

• TSMC raised its revenue forecast to reflect growing demand for AI. The quarterly results beat estimates, reflecting its confidence in the long-term outlook.

• TSLA to grow 1000% thanks to Robotaxi - Cathie Wood. Do we believe?

• Darden Restaurants (DRI) fell 3%. The company will buy the Tex-Mex restaurant chain for approximately $605 million.

• DPZ shares fell 13% after the report. Revenue grew 7% YoY, missing forecasts.

• DHI shares rose 10% after the report. The largest U.S. home developer beat quarterly profit expectations and said it would launch a new $4 billion buyback. The number of closed homes rose to 24,155 from 22,985 a year earlier.

• UAL shares fell 1% after the report. The company beat earnings expectations but gave a weak outlook for the third quarter, citing industry-wide challenges.

• LLY shares fell 6% yesterday. Swiss drugmaker Roche has released promising trial data for its weight-loss drug.

• PLTR shares rose 1.5% yesterday as the market fell. The Wedbush analyst maintained an Overweight rating and $35 price target.

• TSM shares rose 0.4% yesterday after the report. The company raised its forecasts for the current year. This news supported demand for NVDA shares.

• PLUG shares are down 9% in premarket trading. The company is placing an additional $200 million in shares.

Stocks after post-market reports
- NFLX 0%
- ISRG +7%

• NVDA, AVGO and META held up well yesterday. Otherwise, the market continued its correction. Value shares have also joined in.
Today, the expiration of monthly options and given the market situation may be volatile.
In Hong Kong, the stock index falls by more than 2%. Apparently the CPC Plenum did not give hope for an improvement in the situation in China.

Key events that could impact markets on Friday:

• Producer prices in Germany (June).
• UK retail sales (June).
•  Speech by Williams and Bostic from the Fed.
• The Fed and OCC will hold a joint hearing on the Discover Financial (DFS) - Capital One (COF) deal.
• New York Federal Reserve Bank President John Williams and Atlanta Federal Reserve Bank President Raphael Bostic are scheduled to make public appearances.

Premarket Reports
AXP - American Express Company
HAL - Halliburton Company
TRV - The Travelers Companies Inc