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January 3, 2025

New Year starts with sell-offs, while retail and manufacturing indicators suggest mixed global economic activity

Global markets ended lower this week weighed down by profit seeking selloffs by investors. American equities registered negative returns for the week, whereas European equities gained. Retail and production data reflects a mixed picture for global economic activity. Increased factory activity in China raised oil futures. Tesla annual sales dropped in the fourth quarter due to fierce competition from China

Global Updates
  • The MSCI All Country World Index significantly underperformed this week due to profit seeking selloffs at the year-end. On the other hand, European equities index STOXX 600, gained over the week.
  • France’s factory activity contracted in December as reflected by the fall in its HCOB final purchasing manager index (PMI) from 43.1 in November to 41.9 in December. The Caixin manufacturing PMI registered at 50.5 in December indicating expansion in factory activity. 
  • The Bank of England allocated a record $57.49 billion to its first short term repo in 2025.
  • U.K.-based British Retail Consortium reported a 2.2% drop in annual footfall and 2.5% drop in quarterly footfall for British retailers, indicating a country-wide economic slowdown. China also reported a 29.3% drop in duty-free spending at Hainan in 2024.  
  • House prices in the U.K. rose by a higher-than-expected 0.7% month-over-month in December.
  • South Korean officials have ordered the inspection of Boeing’s 737-800 aircraft after a Jeju Air Boeing 737 crashed in South Korea, killing 179 people. Jeju Air stock fell after the crash. The plane engine manufacturer, GE, will also join the investigation. 
  • Hyundai Motor and Kia Motor missed their global sales targets and plan to raise the sales by 2% in 2025.
  • China has included 28 U.S. based entities to its export control list in the interest of national security.
  • Brent Crude futures rose by 1.7% to $75.93 spurred by the expansion in the manufacturing sector in China and the Chinese President Xi Jinping’s promise of proactive actions to promote growth.
U.S. Equity
  • The S&P 500, Dow Jones index & Nasdaq indices dipped this week as the year-end profit seeking persisted through the week. All three indices registered large gains over the year but also recorded poor monthly performance for December.
  • Tesla’s stock dropped after the company reported a decline in the year-on-year delivery numbers in the fourth quarter of 2024, weighed down by strong competition from China, low demand and an economic slowdown.
  • Shares of Boeing fell after a 737-800 crashed on landing in South Korea, killing 179 people. 
  • Apple stock lagged following reports of the company settling a privacy violation case for $95 million. The company also discounted its iPhone models to compete with domestic brands in China. 
  • President Joe Biden has decided to officially block the proposed $14.9 billion sale of U.S Steel to Nippon Steel.
  • Neumora Therapeutics stock lagged after the failure of its depression drug in Phase 3 trials.
  • Palladyne AI stock gained following reported a successful demonstration of its technology in tracking a moving target. 
  • Nuclear energy stocks trended upwards following the announcement of a $480 million 10-year electricity supply contract between U.S. General Services Administration and Constellation Energy (CEG)
  • Stocks of solar equipment providers First Solar and Enphase Energy gained due to a Tesla report of record installation of energy storage equipment in the past quarter.
  •  BeyondTrust stock dropped after Chinese hackers accessed the company’s software in the U.S. Treasury Department. 
  • Synaptics stock gained following the announcement of its artificial intelligence collaboration with Alphabet.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose marginally this week.
  • The U.S. 10-year Treasury yield fell to 4.547% and the yield on the 2-year note fell to 4.235% over the week. 
  • The U.S. dollar Index jumped to 109.11 this week.

HCM-030624-063.GWS

December 30, 2024

Holiday cheer drives recovery in Global Markets despite light trading volumes

Global Markets recovered from last week’s slump due to the dovish stance of the Federal Reserve (Fed) indicating a shallow rate cut trajectory in 2025. Market optimism resurfaced with a soft inflation report and lesser-than-expected jobless claims indicating a strong and resilient U.S. economy. The Fed is now expected to implement only two 25 bps rate cuts in 2025. U.S. dollar and treasury yields appreciated due to uncertainty in global economy.

The United States House and Senate averted a government shutdown by passing a stopgap spending legislation over the weekend. South Korea’s legislature voted to impeach acting President Han Duck-soo due to his refusal to appoint a judiciary to continue to impeachment proceedings of his predecessor President Yoon. Finland called on NATO to defend critical European infrastructure against suspected Russian sabotage after undersea power and data cables were found to be sabotaged. An additional international flashpoint possibility emerged due to the suspicion of the role of Russian sabotage in the Azerbaijan Airlines crash.

Global Updates
  • The MSCI All Country World Index recovered this week from last week’s selloff due to the dovish comments by the Federal Reserve Chair Jerome Powell. U.S. equities received significant inflows in a ‘Santa Claus’ rally driven by the positive inflation report and the passing of a stopgap funding bill averting a government shutdown in the U.S.A.
  • Canadian economy recorded 0.3% GDP growth in October driven by increased productivity in manufacturing and oil and gas extraction. A contraction in Canadian GDP is indicated for November.
  • French Prime Minister François Bayrou pledged to reduce the budgetary deficit in France to 5%.
  • Danish pharmaceutical company Novo Nordisk recovered from last week’s selloff caused by the disappointing outcomes from the drug trials for its obesity drug CagriSema.
  • The Japanese Nikkei and Topix indices were elevated by investor optimism regarding its auto industry and corporate growth.
  • The world’s leading manufacturer of mini motors Nidec Corp. has initiated a $1.6 billion takeover of the machine tool builder Makino Milling Machine Co.
  • China’s industrial sector recorded a 7.3% drop in profits in November for the fourth straight month. Business confidence remains subdued in China due to its troubled property sector.
  • German food delivery company Delivery Hero’s stock lagged weighed after the Taiwan Fair Trade Commission vetoed the sale of its Taiwanese subsidiary Foodpanda to Uber.
U.S. Equity
  • The S&P 500, Dow Jones index & Nasdaq indices recovered this week from the dip in markets last week, following the dovish comments by the Federal Open Market Committee (FOMC). The Fed’s preferred inflation gauge, the Personal Consumption Expenditure (PCE) Price Index, came in at 2.4% for November. The 0.1% inflation in November was lower than expected. Core inflation excluding food and energy was also 0.1% for November.
  • The U.S. Labor Department reported a fall of 1,000 claims to a less than expected 219,000 jobless claims for the previous week. The fewer claims are consistent with analysts’ expectations of a healthy U.S. labour market. Sales of new single-family homes was rose by 5.9% in November, at a higher-than-expected t 664,000 homes
  • S. retail holiday spending rose by 3.8% rose by 3.8% year-on-year from November 1 to December 24 and, online retail sales rose by 6.7% as per Mastercard SpendingPulse data. The new orders for durable goods fell by 1.1% in November to $285.1 billion.
  • Apple stock gained following the ‘outperform’ rating assigned to the security by Wedbush analysts due to expectations of multi-year AI development, upgradation and product demand.
  • United States Steel stock dipped following the news that Nippon Steel has postponed its $14.9 billion acquisition plans for the company to the first quarter of 2025.
  • Energy storage company KULR Technology Group’s stock gained following the company’s $21 million investment in bitcoin.
  • Toyota Motor’s U.S. traded stock gained driven by news of the company’s plans to double its Return on Equity (ROE) to 20%
  • Video platform Rumble’s stock gained after the company received a $775 million investment from the cryptocurrency company Tether.
  • Office products supplier Xerox acquired printer maker Lexmark in a $1.5 billion deal.
  • Major banks and business groups have filed a lawsuit against the Fed for the regulatory requirements imposed on them including stress test procedures and transparency norms.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was in line this week.
  • The U.S. 10-year Treasury yield rose to a six-month high at 4.599% and the yield on the 2-year note remained in line at 328% over the week. Treasury Yields remained high even as markets continued to digest the outcome of the FOMC meeting and incorporated lower rate cut trajectory for 2025.
  • The U.S. Dollar Index rose mildly to 108.16 this week.

HCM-030624-063.GWS

December 20, 2024

Markets plunge amid high borrowing costs anticipated for 2025, while political uncertainties in Canada, France and Germany continue

Global markets ended significantly lower this week as global markets digested the hawkish statement by Federal Reserve Chair Jerome Powell as officials indicated the end of the low interest rate driven growth strategy. Markets now anticipate the Fed to implement only a 25 bps rate cut, due to favorable inflation and unemployment numbers. Canada’s Prime Minister Justin Trudeau downplayed the discontent and calls of resignation from his party this week, following the high-profile resignations of his housing and finance ministers. Capitol Hill continued to negotiate on a new stopgap budget and extension of the farm bill, even as a government shutdown looms on Friday. The U.S. congress is unlikely to allocate further aid to Ukraine in its new budget. Newly appointed French Prime Minister François Bayrou faces an uphill task to uplift the French economy. In Asia, South Korea’s constitutional court began the review of President Yoon’s impeachment. Germany announced plans to hold federal elections on February 23, 2025 following the dismissal of German chancellor Olaf Scholz’s government.

Global Updates
  • The MSCI All Country World Index dropped significantly this week due to global headwinds driving stock markets to profit taking. Uncertainties in the global economy and polity, as well as the U.S. monetary policy declarations played into the performance of the global markets. Central banks around the world will tread cautiously in light of unanticipated consequences of the international moves by the new government under Donald Trump.
  • The Eurozone reported a drop in its year-on-year trade surplus, recorded at €6.8 billion in October, compared to €9.4 billion in the same month in 2023. 
  • The Bank of England held policy rates steady at 4.75% due to a higher-than anticipated inflation in November. Inflation in the U.K. came in at an eight-month high of 2.6% in November, in line with expectations.
  • Retail sales growth in November in the United Kingdom came in at 0.2% falling short of the anticipated growth of 0.5%.
  • The Bank of Japan kept interest rates the same amid geopolitical uncertainties in the region. The People’s Bank of China also chose to keep its key lending rates unchanged.
  • Chinese retail sales grew by 3% in November, weaker than the expected 4.6%. 
  • Canada will be removing the 30% stake limit for pension funds to invest in Canadian businesses. The government will also be lending $15 billion to AI data centers.
  • The Canadian Dollar depreciated to its lowest level since the COVID pandemic due to the possibility of tariffs and political instability. November Inflation in Canada came in at 1.9% in November which was lower than expected.
  • Japanese automakers Nissan and Honda’s stocks gained during the week, following the news of the two companies holding merger talks was made public.
U.S. Equity
  • The S&P 500, Dow Jones index & Nasdaq indices dipped sharply this week. The Fed announced a 25bps easing in policy rates and has pencilled in only two further rate cuts in 2025.
  • Existing home sales rose to 4.15 million units in November, the highest in eight months.
  • Bitcoin company MicroStrategy’s stock initially gained and later dipped, following the announcement of the company’s inclusion in the Nasdaq 100. Palantir Technologies, MicroStrategy and Axon Enterprise will be replacing Moderna, Super Micro Computer and Illumina in the Nasdaq 100 index on December 23rd.
  • SoftBank CEO Masayoshi Son announced a $100 billion investment over a period of five years, during his visit to meet President-elect Donald Trump. He plans to invest in artificial intelligence adjacent industries in the U.S.
  • Nvidia stock initially gained this week driven by the news of progress in its Blackwell chip. The company’s stock later cooled following Microsoft CEO Satya Nadella’s comments concerning the cooling demand for Nvidia’s chips.
  • Micron Technology shares lagged due to a lackluster short-term revenue outlook despite strong first-quarter earnings. The company is bullish on the long-term prospects of capturing 20% of the $100 billion High Bandwidth Memory market by 2030.
  • Palantir’s stock gained after the company signed a continuing army contract of $619 million.
  • UnitedHealth stocks stabilized after steadily declining, since the killing of its CEO.
  • FedEx stock gained with the announcement of the company’s plans of a freight business spinoff as a separate public company.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dragged this week.
  • The U.S. 10-year Treasury yield rose to 4.554% and the yield on the 2-year note rose up to 4.306% over the week. Treasury yields and U.S. Dollar rose as markets digested the Federal Reserve’s comments on the trajectory of future rate cuts in 2025.
  • The U.S. Dollar Index (DXY) rose to 108.4 this week.

HCM-030624-063.GWS

December 13, 2024

Global Markets dip as investors adopt caution to manage global changes expected in 2025

Global markets ended lower this week weighed down by flagging demand from China, shrinking British GDP and contraction of German exports. The U.S. Dollar gained due to rate cuts by multiple central banks during the week and depreciation of currencies within the Emerging Nations’ bloc. Google announced a revolutionary quantum-computing chip and Apple introduced Siri’s integration with OpenAI. In geopolitical developments, the South Korean parliament prepared to vote on President Yoon Suk Yeol’s impeachment, after the current president declared martial law to crackdown on the rising number of ‘anti-nationalist’ incidents in the country. Syrian president Bashar Al-Assad fled to Russia after rebels took over Damascus, the capital of the country.

Global Updates
  • The MSCI All Country World Index dipped this week in the absence of tangible action from China following the stimulus pledges in the politburo meeting. The Swiss National Bank and Bank of Canada eased rates by 50 bps, while the European Central Bank eased by 25 bps. These rate cuts and the reluctance of Bank of Japan to raise rates strengthened the U.S. Dollar over the week. 
  • German exports dropped more than expected by 2.8% month-over-month to a 3-year low of €124.6 billion in October. The United Kingdom’s GDP also contracted by 0.1% in October weighed down by decline in manufacturing of pharmaceuticals, machinery and chemicals. 
  • The Chinese Yuan depreciated amid reports of Chinese authorities considering the strategic devaluation of the currency to counter the trade risks from increased tariffs projected by president elect Donald Trump.
  • Oil prices rose during the week driven by supply bottlenecks due to prospects of tighter sanctions on Russia and Iran.
  • The Brazilian senate approved an energy bill regulating offshore wind energy infrastructure and incentives for fossil fuels.
U.S. Equity
  • The S&P 500 & Dow Jones indices dipped this week while the markets digested a higher than anticipated wholesale price inflation in November and a rise in jobless claims. 
  • U.S. unemployment claims also rose to 242,000 in the previous week, the highest in two months. Wholesale prices rose by 0.4% month-on-month in November, double the anticipated inflation of 0.2%. Consumer price inflation came in at 2.7% for November, in line with expectations.
  • The AI rally following Alphabet’s announcement of a breakthrough in its quantum-computing chip, Willow, drove the NASDAQ index across the 20,000 benchmark for the first time. 
  • Adobe’s stock dragged after the company released a downbeat full-year revenue projection between $23.30 and $23.55 billion, due to delayed returns from investments in the development of AI driven software tools.
  • Broadcom stock surged due to a higher than anticipated net profits of $4.32 billion for the fourth fiscal quarter. The company raised the projected revenue for the first quarter to $14.6 billion and the fiscal 2027 revenue to the $60 billion to $90 billion range. Investors were also enthused by reports of a Broadcom-Apple project to develop the first server chip for artificial intelligence. 
  • Michael Hartnett, a Bank of America strategist, warned investors of froth building up in U.S. cryptocurrency and stock markets from the significant rallies over the year. Meanwhile, Oppenheimer Asset Management also projected the S&P 500 index to reach the 7,100 mark by the year ending 2025.
  • Advertising firm Omnicom Group arrived at a $13.25 billion agreement to acquire Interpublic Group in a stock-for-stock deal.
  • Apple launched the new OpenAI-integrated version of Siri. Apple Intelligence integration with other apps will be launched in the coming year. Apple also announced a collaboration with Broadcom to develop an AI chip called Baltra. 
  • Nippon Steel’s acquisition of U.S. Steel is in jeopardy as US President Joe Biden plans to block the sale, citing national security reasons. The Committee on Foreign Investment in the United States will table its findings by the end of the month. 
  • Elon Musk’s company SpaceX achieved a valuation of $350 billion during an insider share deal.
  • General Motors is planning to defund its Cruise robotaxi project, due to losses and higher than expected costs.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dragged this week.
  • The U.S. 10-year Treasury yield rose to 4.32% and the yield on the 2-year note rose up to 4.19% over the week driven by concerns of rising inflation.
  • The U.S. Dollar Index jumped to 107.1 this week.

HCM-030624-063.GWS

December 6, 2024

Markets continue to rise unaffected by the ripples from global geopolitical changes

Global markets continued to rise driven by higher-than-expected corporate earnings in the technology sector and the easing U.S. labor market. Salesforce and Marvell Technologies reported earnings growth driven by AI demand. Federal Reserve chairperson Jerome Powell expressed his optimism regarding the state of the U.S. economy. French Prime Minister Michel Barnier resigned after his government lost the parliamentary no-confidence motion. South Korean President Yoon Suk Yeol faces impeachment due to the brief imposition of martial law in the country. The Middle East continues to simmer with Syrian rebels gaining control of Aleppo and Hama. U.S. President-elect Donald Trump threatened BRICS countries with a 100% tariff if they pursue de-dollarization.

Global Updates
  • The MSCI All Country World Index rose this week. European markets were higher despite political uncertainty in France.  Germany recorded a drop in October’s industrial production due to declines in the energy and automotive sectors.
  • Bank of England Governor Andrew Bailey has signaled four interest rate cuts in 2025 conditional on easing inflation.
  • Volkswagen workers in Germany have gone on strike to protest the planned cuts in jobs and wages. 
  • Seven & i Holdings Co. is considering an IPO for its U.S. assets as part of the $60 billion management buyout of the company.
  • Royal Bank of Canada raised dividends and reported a 7% growth in fourth-quarter profits beating analyst expectations.
  • Household spending in Japan fell by only 1.3% in October, which was better than expected. 
  • Weak global demand for oil drove the OPEC+ countries to postpone planned supply increases and continue the current supply cuts to the end of 2026.
  • China has banned the export of critical minerals to the U.S in response to the restrictions placed on its Chip industry. 
  • The Indian central bank, Reserve Bank of India, pumped liquidity into the economy but held interest rates unchanged due to inflation and slowing growth.
U.S. Equity
  • The S&P 500 & Nasdaq indices rose this week driven by better than expected corporate earnings. Markets digested Fed chair Jerome Powell’s optimism regarding the state of the American economy and slowdown in private sector hiring in November. 
  • U.S. weekly jobless claims rose to 224,000. The trade deficit in October narrowed by 11.9% due to a 4% drop in imports. The decline was driven by lower imports of computers, semiconductors, industrial and capital goods, petroleum and automobile parts. 
  • Bank of America analysts raised the price target for Marvel Technology stock due to strong third-quarter revenue and higher than expected fourth quarter projected earnings driven by ‘custom AI’.
  • General Motors declared a $5 billion non-cash impairment for the company’s struggling China operations.
  • Salesforce reported higher than expected 8% growth in third quarter revenues to $9.44 billion. The company also raised the lower end of its annual revenue forecast.
  • Okta’s third quarter revenue beat due to 14% growth in revenues to $569 million. The company raised its fourth quarter revenue estimates to the $667 million to $669 million range. 
  • Southwest Airlines and American Airlines raised their fourth-quarter forecasts due to strong indicators for higher demand for holiday travels.
  • Super Micro Computer stock gained after the company reported no accounting discrepancies were found by an independent review committee.
  • BlackRock is close to finalizing a deal to acquire private credit manager HPS for $12 billion.
  • Commodities trader Cargill plans to cut 8,000 jobs weighed down by falling revenues. 
  • Stellantis CEO, Carlos Tavares, abruptly resigned from his position citing differences with the board of directors.
  • The optimism regarding crypto-friendly policies expected from the Trump regime drove Bitcoin across the $100,000 benchmark. Paul Atkins’ appointment to head the Securities and Exchange Commission drove the surge in optimism.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was in line this week.
  • The U.S. 10-year Treasury yield dipped slightly to 4.174% and the yield on the 2-year note fell to 4.156% over the week. 
  • The U.S. Dollar Index marginally declined to 105.78 this week.

HCM-030624-063.GWS

November 29, 2024

New record highs on Wall Street, improving output in China and a new ceasefire agreement

Global markets rose driven by stronger growth hopes in the New Year under Donald Trump’s second presidency. During the week, the U.S. Dollar eased as possible rate hikes in Japan and rate cuts in Europe affected the Greenback’s performance. China’s macro indicators showed mixed results for November, but strong manufacturing gave relief to investors with new orders in the country reaching a record high during the month. Finally, in geopolitics, Israel agreed to a U.S.-brokered ceasefire deal with Lebanon’s Hezbollah.

Global Updates
  • The MSCI All Country World Index rose this week. Wall Street ended November with its biggest monthly gain in a year on post-election growth hopes, while the Dollar eased amid prospects for firmer rates in Japan and easing in Europe.
  • Manufacturing activity fell sharply across Europe last month and a further decline in demand dashed hopes for an imminent turnaround. HCOB’s final euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, sank to 45.2 in November, matching a preliminary estimate and further below the 50 mark separating growth from contraction.
  • China’s factory activity expanded at the fastest pace in five months in November as new orders, including those from abroad, led to a solid rise in production, pushing manufacturers’ optimism to an eight-month high.
  • Saudi Arabia clawed back market share of Asia’s crude oil imports in November. Asia’s imports from Saudi Arabia, the world’s biggest crude exporter, rose to 5.83 million barrels per day (bpd) in November, up from 5.28 million bpd in October.
  • China’s industrial profits continued to lag in October, down 10% year-on-year. Corporate earnings continued their downward spiral as well.
  • Canadian mutual fund manager CI Financial has announced plans to go private for about C$4.7 billion in a deal backed by Abu Dhabi’s Mubadala Capital.
  • The Ito family, the owners of Seven and i holdings, is looking to raise money for its bid for the company’s privatization and plans to do so by the end of December.
U.S. Equity
  • The S&P 500 and Dow Jones Industrial Average notched record closing highs in a shortened week, lifted by technology stocks such as Nvidia, while retail was in focus as the holiday shopping season kicked off.
  • The minutes for the Fed’s November meeting were released yesterday. Officials believe inflation is easing and the labour market is strong, allowing for further interest rate cuts, albeit at a gradual pace.
  • U.S. President-elect Donald Trump has named billionaire hedge fund manager Scott Bessant as Treasury Secretary, which eased investor fears over the new President’s trade tariff plans.
  • The U.S. government plans to reduce Intel Corp’s preliminary $8.5 billion federal chips grant to less than $8 billion. The change took into account a $3 billion contract Intel had been offered to make chips for the Pentagon, the people told the Times.
  • Nordstrom and Dell announced their third-quarter earnings. While Nordstrom’s quarterly sales were up and year-end guidance improved, Dell missed expectations for third-quarter revenues.
  • Deutsche Bank set 7,000 points as the target for the S&P 500 index by the end of 2025, saying it expects robust earnings growth to continue into the next year among other factors.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index ended higher this week.
  • The U.S. 10-year Treasury yield dipped to 4.178% and the yield on the 2-year note fell to 4.163% over the week. 
  • The U.S. Dollar Index fell to 105.80 this week.

HCM-030624-063.GWS

November 22, 2024

Nvidia’s strong third quarter and a decline in pharmaceutical stocks

Global markets rose driven by Nvidia’s strong third quarter earnings. However, the gain was rather limited as U.S. investors were not enthused by Nvidia’s projected slowdown in the fourth quarter. During the week, European and Japanese technology stocks were positive, while the U.S. Department of Justice proposed the breakup of Alphabet’s various businesses in a Federal court. Gold and oil prices have surged driven by rising geopolitical tensions in Europe and the Middle East. Greece will repay loans worth €5 billion ahead of schedule in 2025, driven by its positive economic performance.

Global Updates
  • The MSCI All Country World Index rose this week. European equities were driven higher by the performance of the energy and technology sectors. 
  • The United Kingdom reported a higher-than-expected 2.3% year-on-year CPI inflation in October. Retail Sales contracted by 0.7% in October more than the forecasted 0.3% fall in sales. 
  • Germany reported an 8.8% growth in wages for the third quarter, the highest growth in wages in the country since 1993. The wage growth for Euro Area rose to 5.42% in the same period. 
  • Shares of Seven & i Holdings gained following the news of the $58 billion buyout plans by the Ito family.
  • British manufacturer of health and safety devices Halma posted a higher-than-expected revenue of £1.07 billion and adjusted EBIT of £223 million, which exceeded expectations. 
  • U.S. prosecutors have charged Indian billionaire Gautam Adani with bribery charges. J.P. Morgan reported the credit risk to Indian banks from loan exposure to the Adani Group to be limited.
  • Higher than expected third quarter earnings of Nvidia have positively affected the markets in Taiwan, South Korea and Japan.
U.S. Equity
  • The S&P 500, Dow Jones index & NASDAQ registered slight gains this week. Investors rotated out of big tech towards Utilities, Industrials and Financials due to the possible breakup of Alphabet and projected slowdown in Nvidia earnings.
  • Morgan Stanley strategist Mike Wilson has projected the S&P 500 to touch 6,500 by the end of 2025 driven by lowering of interest rates, strong corporate earnings and resilience of the U.S. economy.
  • U.S. jobless claims fell to a seven-month low of 213,000 claims.
  • Nvidia stock dipped following news of an overheating snag in its new Blackwell chip. Nvidia’s third quarter earnings beat on 81 cents per share. The company’s projected revenue growth of 69.5% for the fourth quarter is the slowest revenue growth expectation over seven quarters, primarily due to supply chain bottlenecks.
  • Snowflake’s revenue rose by 28% to $942 million in the third quarter. The company’s stock gained after raising forecasted revenue to $3.43 billion in 2025 driven by growing opportunities in the public sector.
  • Walmart’s third quarter earnings beat with an adjusted earnings of 58 cents per share and revenue of $169.59 billion. The company raised its projected full year net sales growth to 4.8% to 5.1%.
  • Target stock plunged after the company missed its third-quarter earnings and revenue estimates and lowered the annual earnings guidance to $8.30 to $8.90 adjusted earnings per share.
  • Comcast stock gained since the announced $7 billion spinoff of all its cable networks.
  • The U.S. Department of Justice has proposed the sale of Google’s chrome browser and the divestment of the Android mobile operating system in court to prevent further violations of antitrust laws by the company.
  • Pharmaceutical stocks in the U.S. declined following Robert F. Kennedy Jr.’s nomination for the post of Health Secretary.
  • The perception of a pro-cryptocurrency Trump regime has driven up Bitcoin to a record $97,000, to a consolidated gain of $900 billion.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was in line this week.
  • The U.S. 10-year Treasury yield dipped slightly to 4.412% and the yield on the 2-year note fell to 4.341% over the week. Yields were weighed down by investors chasing safer havens due to the escalating geopolitical conflicts. 
  • The U.S. Dollar Index rose to a two year high of 107.06 this week.
Sources

HCM-030624-063.GWS

November 15, 2024

Nvidia Sparks Market Rally, While Geopolitical Concerns Linger

The world’s equity markets continued to rally after chipmaker Nvidia posted unprecedented daily gains during the week. The effect of this surge had a global impact as equity markets rallied even though geopolitical tensions dominated headlines. The yields on fixed income securities advanced and the expectation of a rate cut in the U.S. by the Federal Reserve changed. It is now anticipated that even though there will be multiple rate cuts during the year, it may only happen during the second half of 2024. Geopolitical tensions continued in the Middle East, while the seemingly mysterious death of Alexei Navalny in captivity has raised alarm bells around the world about Russia’s autocracy and further sanctions have been announced by the U.S. against the Kremlin.

Global Updates
  • The MSCI All Country World Index rose during the week, primarily driven by the rally in the U.S. equity market.
  • The United States has announced more than 500 new sanctions against Russia over its invasion of Ukraine and the death in custody of the opposition figure Alexei Navalny.
  • Israeli Prime Minister Benjamin Netanyahu unveiled a plan for Gaza’s future post-Hamas, which includes the “complete demilitarization” of the enclave, closing off the territory’s southern border with Egypt, as well as the overhaul of Gaza’s civil administration and education systems.
  • The German and Dutch central banks posted multi-billion euro losses for 2023 and predicted more financial pain ahead. The banks are unlikely to pay dividends for years to come.
  • China’s central bank, the People’s Bank of China, has cut its key mortgage reference rate by a record amount. Its five-year loan prime rate has been cut from 4.2% to 3.95%, while keeping the one-year loan prime rate unchanged at 3.45%, as it ramps up efforts to stem a prolonged property crisis.
  • Argentina markets double down on Libertarian leader Javier Milei as investors believe that the new President can pull the country out of the present economic crisis.
U.S. Equity
  • The S&P 500 advanced during the week, reaching a new all-time high, driven by Nvidia’s impressive rally.
  • Nvidia posted revenues which were up by 265% on the booming Artificial Intelligence business, beating earnings and sales estimates.
  • Amazon has been added to the Dow Jones Industrial Average, replacing Walgreens Boots Alliance.
  • Goldman Sachs’ analysts no longer expect a U.S. interest rate cut in May and see four 25 basis point cuts this year.
  • Reddit paved the way for it to be the first major social media company to debut on the stock market in years after filing to go public.
  • U.S. money-market fund assets dropped for the second straight week on expectations that short-term rates will remain elevated for longer.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index declined over the week as bond yields increased.
  • The U.S. 10-year Treasury yield rose from 4.27% to 4.33% over the week, while the yield on the 2-year bond moved up from 4.59% to 4.69%.
  • Credit spreads tightened for both investment-grade and high-yield bonds.
  • The U.S. Dollar Index weakened over the week.

HCM-030624-063.GWS

November 11, 2024

Global Markets rise following president elect Donald Trump’s election victory and rate cuts by central banks

Global Markets gained this week driven by outcomes of the U.S. presidential elections and rate cuts by the Federal Reserve (Fed), Riksbank and Bank of England (BoE). The European markets lagged as markets digested potential foreign policy changes which could be implemented by the Trump presidency, continued contraction in manufacturing and poor corporate earnings. Asian markets also rose this week.

Donald Trump won the U.S. presidential elections this week. He will be appointed as the 47th U.S. president in January, 2025. China introduced a $1.4 trillion package to raise the debt ceiling for local governments but refrained from direct injection of liquidity into the economy.

Global Updates
  • The MSCI All Country World Index rose sharply this week as global markets reacted optimistically to the U.S. presidential election and the rate cuts by the Fed, Riksbank and BoE. European markets were subdued due to disappointing earnings in the oil and gas sector and luxury firms, possibility of Trump tariffs, and the continued contraction in European manufacturing.
  • European manufacturing continued to contract for the 28th consecutive month, albeit at a slower pace. Italy’s private sector expanded in October driven by the expansion in the services sector with a PMI of 52.4, even as the manufacturing sector contracted with a PMI of 46.9. German industrial orders rose by 4.2% in September, even as exports and industrial output declined.
  • FTSE 250 marginally gained and FTSE 100 lagged this week due to underperformance by Richemont, Vistry, Rolls-Royce, John Wood Group, etc. Moreover, the BoE cut policy rates by 25 bps to 4.75% and projected a slowdown in its rate cutting cycle considering the inflationary effects of the new budget.
  • Associated British Foods reported $2.6 billion in pre-tax annual profits driven by strong grocery sales and lower costs.
  • Novo Nordisk reported third quarter sales beat driven by 79% growth in sales of its weight loss drug Wegovy and earnings in line with expectations. The company’s profits rose to $3.92 billion.
  • Sports accessories company Puma maintained its full year guidance range of $677.8 million and $732.4 million, enthused by growing sales in the third quarter and a strong orderbook for rest of the year.
  • Ferrari reported a 7% increase in sales and earnings to $1.78 billion, bucking the downward trend in the auto sector. Ferrari reiterated the full year guidance, despite falling sales in China, due to a superior product mix and personalization options.
  • BMW’s quarterly net profit plunged 84% and 16% drop in sales, weighed down by the higher costs of a recall and a drop in demand from China.
  • Energy prices gained over the week due to uncertainty in the future U.S. foreign policy and the estimated impact of Hurricane Rafael on U.S. oil production. Saudi Arabia’s national oil company Aramco reported 15.4% drop in third quarter profits due to lower oil prices and weak margins during the quarter.
  • Vestas Wind Systems shares dipped due to annual profit margins of the company coming in at the lower end of its guidance range due to higher costs, logistical disruptions, increasing competition and warranty provisions.
  • Marks & Spencer reported higher profits of $511.1 million for the first half of fiscal year 2025. The company tempered expectations for the rest of the year owing to uncertainty in consumer spending.
  • China’s trade surplus rose to $95.27 billion due to a larger than expected 12.7% year-on-year growth in exports and 2.3% fall in imports.
U.S. Equity
  • The S&P 500, Dow Jones index & Nasdaq indices surged this week following Donald Trump’s victory in the U.S. presidential election and the 25 bps rate cut by the Fed. Fed Chair Jerome Powell reiterated that the U.S. monetary policy will be data driven to support economic and employment growth even as inflation steadily contracts.
  • The Fed cut policy rate to 4.5%-4.75% range by 25 bps, driven by the Feds target of improving employment and growth to achieve a soft landing for the American economy. Weekly jobless claims marginally increased by 3,000 claims in the last week. Labour markets are expected to recover in November due to the waning effects of hurricanes and worker strikes.
  • The Boeing strike ended after machinists ratified the 38% wage hike agreement between the workers’ union and Boeing.
  • Super Micro Computer lagged owing to lower-than-expected sales and delay in filing the annual report for the latest fiscal year. Last week Ernst and Young had resigned as the company’s auditor citing mistrust of management, demoralizing investors.
  • Trump Media & Technology has reported a loss for the third consecutive quarter due to high costs.
  • Blackstone is in talks to acquire a minority stake in the hedge fund Millenium Asset Management. Blackstone’s real estate division is also seeking to acquire the retail store operator Retail Opportunity Investments in a $4 billion deal.
  • Nvidia stock rallied to become the first company to cross a stock market valuation of $3.6 trillion driven by investor optimism on lower taxes and regulations in a Trump regime.
  • Nvidia and Sherwin-Williams will replace Intel and Dow Inc. in the Dow Jones Industrial Average index for blue-chip stocks from today, reflecting their ascendancy in the global stock markets.
  • Gold prices dipped to their lowest in five months weighed down by the potential impact of Trump government on interest rates and inflation.
  • Exxon reported higher than expected profits of $8.6 billion in the third quarter driven high production volumes which offset the low prices during the quarter. The company raised its dividend to 99 cents per share for the fourth quarter.
  • Arm Holdings (ARM) stock gained after the company reported higher than expected revenue and net income of $844 million and $107 million respectively.
  • Qualcomm stock gained owing to quarterly revenue of $10.24 billion beating expectations and raising revenue guidance to $10.5 billion to $11.3 billion for the current quarter. The company also announced a $15 billion share buyback.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index lagged this week.
  • The U.S. 10-year Treasury yield rose to 4.30% and the yield on the 2-year note remained in line at 17% over the week as markets digested The U.S. presidential election results and the Fed’s rate cut.
  • The U.S. Dollar Index rose to 104.49 this week.
Fixed Income

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