Notable market news this past week (05-Nov-23)
Here is the Skeptivest roundup of the latest market headlines for the week
📈 A good week for the markets - Key events in the US impacting markets this week:
Good week for markets due to US payroll report: This comes as a cooling US job market (US added just 150,000 jobs last month, falling short of expectations and were almost half of the 297,000 jobs created in September) gives the Fed room to keep interest rate on hold and reinforces the idea that the Fed is done hiking (see below).
- Stocks experienced a slight rally while bond yields decreased on Friday. The S&P 500 rose approximately 1% and achieving its most successful week in 2023.
- The market's "fear gauge" witnessed its most substantial five-day drop in 21 months.
- Treasuries made gains at various maturities, with 2 year yields decreasing by 16bps to reach 4.83%.
- The dollar exhibited its most significant slide since July, and the price of oil dipped below $81 per barrel.
The Fed holds for now. Is the Fed done hiking?: Fed Chair Jerome Powell suggested that the US central bank might have completed one of its most aggressive tightening cycles in 40 years. He mentioned during a press briefing after the FOMC's policy-setting meeting that the question is whether they should raise rates further. The committee chose to keep the benchmark rate within a range of 5.25%-5.5%, and in their statement, they indicated that the recent increase in longer-term Treasury yields lessens the urgency for additional hikes, while still considering the possibility of future increases.
US borrowing plan: Despite concerns about the US issuing new debt in a high-interest-rate market with weakened bond demand, the market responded positively to Treasury Secretary Janet Yellen's statement. The US Treasury slightly undershot dealer expectations in its quarterly debt-issuance plan, contributing to a bond market rally. The Treasury announced it would sell $112b in longer-term securities, including 3-, 10-, and 30-year Treasuries, during the upcoming quarterly refunding auctions next week. This eased concerns of a forthcoming surge in larger supply.
💎 Widening US-China Rivalry in Africa for critical minerals
Race for minerals: The battle for influence between Washington and Beijing has extended to Africa's copper belt, a valuable mining region that extends from Zambia into the Democratic Republic of Congo and plays a central role in the world's shift towards a greener future. The region is loaded with minerals critical to the production of batteries and other renewable energy components
China's head start: China has been heavily investing into Africa for decades, including via the landmark Belt and Road initiative (US$1t invested on infrastructure projects in emerging markets over the past decade).
The US to challenge China's influence: The US is now looking to invest hundreds of millions into a project called the Lobito corridor. It is an attempt to rejuvenate a century-old railway connecting crucial African mines to an Atlantic Ocean port. Should it prove successful, this initiative would provide a speedy pathway to the US and the EU for essential components crucial to green energy production.
☕️ Quick fire happenings to note
🌏 Global macro
- Update on Israel-Hamas War: Israel has reported that its forces have surrounded Gaza City (Gaza Strip's main city) and are currently involved in "close combat" with Hamas militants. Intensive Israeli airstrikes in the Jabaliya refugee camp in northern Gaza have prompted calls from allies, including the US, for Israel to minimize Palestinian casualties, with Gaza health authorities reporting a toll of over 9,000 individuals. Despite calls from the US for a humanitarian puase, Israeli PM Benjamin Netanyahu dismissed the idea of a cease-fire that excludes the release of hostages held in Gaza. US House approves nearly US$14.5b in military aid for Israel.
- SBF found guilty: The jury deliberated for <5 hours before delivering a verdict of guilty on all 7 charges against Sam Bankman-Fried, which encompassed fraud and conspiracy. This was notably faster than the time taken for other high-profile white-collar crime convictions, such as that of Elizabeth Holmes from Theranos. Sentencing is scheduled to be 28-Mar-24, where SBF faces a max 115 years in prison.
- Major stimulus announced in Japan: Japanese PM Fumio Kishida unveiled a larger-than-expected economic stimulus package to spur growth and alleviate the impact of inflation on households, aiming to bolster his declining support. Valued at over ¥17t ($113b), including the effects of tax cuts and associated expenses, this move is his latest effort to address voter concerns regarding his management of inflation, which has been outpacing wage increases and is the swiftest in decades.
- Doubt over former Chinese Premier Li Keqiang's death: This week, several mourners in eastern Anhui province raised skepticism about the cause of death of the former second-ranking official, questioning whether it was indeed a heart attack. Li was sidelined by President Xi Jinping and left the Politburo Standing Committee a year ago, despite being young enough to continue. His death adds to the mystery surrounding the Communist Party, as there have been unexplained exits from China's leadership, including the abrupt removal of top ministers, senior generals responsible for the nation's nuclear arsenal. Former leader Hu Jintao was also abruptly escorted off-stage during last year's leadership congress.
🏦 Individual stocks/companies
- Apple reported 4th straight revenue decline, its worst stretch in 22 years: The sluggish computer market and a deceleration in China have been the driving factors. Furthermore, the company anticipates that the revenue for the current quarter will remain on par with the previous year, indicating a lack of immediate growth recovery.
- Neopets comeback?: On 17-Jul-23, it was disclosed that Neopets had been acquired from NetDragon in a management buyout led by Dominic Law, who serves as the Chief Metaverse Officer of Neopets. This transaction led to the formation of an independent entity called World of Neopia Inc. Dominic Law, who is now CEO, aims to revive the once (in the 2000s) wildly popular game (with 35m active player count) by leveraging the game's IP to create merchandise and create more new games using Neopets brand.
- X's value more than halves: The social media platform, formerly Twitter and now called X, is currently valued at less than half of Elon Musk's purchase price from a year ago. Restricted stock units granted to employees value the company at $19b, a significant drop from the $44b Musk paid for it a year ago.
- Sluggish covid vaccine uptake causes significant losses: On Thursday, Moderna reported a quarterly loss of $3.63b, with half of that attributed to Covid-19 vaccine doses that went unused and expired.
- WeWork to file for bankruptcy: Reports of an imminent bankruptcy filing, as soon as next week, caused WeWork's shares to plummet to a historic low.
🇸🇬 Singapore related
- Popular bookstore bought by ZQ Capital: A Hong Kong-based investment company, ZQ Capital, has acquired Singapore-based Popular bookstore chain for an undisclosed amount. Delisted from the Singapore Exchange in 2015, Popular has maintained a significant presence in Singapore since its inaugural bookstore launched in 1936. In recent years, Popular has shut down multiple retail stores in Singapore. This year, its Marine Parade outlet closed in June. Additionally, SCMP reported in 2020 that Popular closed all 16 of its branches in Hong Kong due to a downturn in the retail market.
- Analysts suggest that penalties imposed by MAS on DBS will not have adverse impact on the bank: Following a slew of disruptions, MAS announced on Wednesday that DBS would face a 6 month restriction on implementing non-essential IT changes and pursuing any new business ventures or acquisitions. Analysts from RHB suggested that the direct impact on DBS in higher opex and capex will unlikely represent significant setback to the bank. Dr Patrick Thng, former Chief Information Officer for finance and treasury at the World Bank opined that “It’s not a bad idea in the sense that instead of fining DBS and taking the money, they asked DBS to use that money to fix their infrastructure problems,”. Markets did not react too much - DBS stock price fell 1.12% on Thursday, the first trading day after the penatlties were announced.
- PM Lee to hand over leadership to DPM Wong by next General Elections
