Notable market news this past week (09-June-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇮🇳 Indian shares experienced their steepest decline since 2020 following the Bharatiya Janata Party's loss of its parliamentary majority
Modi won India’s election, but with a much smaller majority than expected: Tuesday's election results mean Modi will need smaller parties to secure a majority in the 543-member Lok Sabha, casting doubt on his pro-business agenda. Indian voters are evidently frustrated by an economic boom that has produced a billionaire elite while leaving 600m people living on less than $4 a day.
Stocks tank...: The NSE Nifty 50 and BSE Sensex indexes closed at 5.93% and 5.74% lower, respectively, on Tuesday, after falling by as much as 8.5% earlier in the day. Before Tuesday’s unexpected election results, Indian stocks surged to record highs as exit polls indicated a landslide victory for the BJP-led National Democratic Alliance (NDA).
... as investors have been overwhelmingly favorable towards Modi's economic agenda: On Modi's watch, the Nifty 50 index almost tripled in value. Modi has pledged to transform India into a developed nation by 2047 by directing massive infrastructure investments, promoting domestic manufacturing, attracting foreign investment, reducing red tape, and committing to eliminate corruption.
Year of elections for the world: By the end of 2024, voters in countries accounting for approximately 40% of the world's population and GDP will have elected new leaders. All eyes on the UK elections next month.
🇺🇸 Rate cut looking less likely with US job growth data much above market expectations
Nonfarm payroll increased way beyond analysts expectation: In May, the US economy added approximately 272k jobs, significantly exceeding the analysts' expectations of 190k jobs. The biggest job gains were in healthcare (68k jobs), government (43k), and hospitality (42k).
Wage growth also increased above expectations: Wage growth reaccelerated as well, further signaling strength in the US labor market. The average hourly pay increased by 0.4% from the previous month and 4.1% over the year, also exceeding analysts’ expectations.
Rate cut is now looking less likely: The robust jobs data led investors to anticipate that the US Fed will refrain from cutting interest rates. According to the CME Fedwatch Tool, investors pushed back expectations of the first rate cut from September to November.
Perhaps this is a good thing?: Bank of America warns that Fed easing would be the “first hint of trouble” for the economy, with the chance of a hard landing increasing if the market grows more confident of lower rates in the second half of 2024
Note: US Fed has a dual mandate to combat inflation and to promote job growth. With job growth this strong, there is less reason to use its levers (like lowering interest rates).
☕️ Quick fire happenings to note
🌏 Global macro
- Biden announced a new US$235m aid package for Ukraine: During a meeting with Ukrainian President Volodymyr Zelenskiy, US President Joe Biden pledged a new $225m aid package for Ukraine. The aid includes support for rebuilding the electrical grid, targeted by Russian attacks, and provisions for munitions, artillery systems, and air defense interceptors to defend against the assault on Kharkiv. Biden assured Zelenskiy of continued support, emphasizing that he wouldn't abandon Ukraine, despite aid blockages from Congressional Republicans.
- China stops buying gold: China's central bank halted its gold purchases last month after an 18-month spree, which drove the precious metal to recent record highs. The purchasing spree, initiated in November 2022 amid escalating geopolitical tensions, involved China and other central banks stocking up on reserves. However, the cessation of China's buying has left gold vulnerable to any future shifts in demand, raising concerns for gold investors.
- BlackRock, Citadel back Texas Stock Exchange to contest NYSE, Nasdaq: The Texas Stock Exchange (TXSE) has secured $120 million and intends to file registration documents with the US SEC to commence operations later this year. TXSE targets companies seeking relief from rising compliance costs at the NYSE and Nasdaq, capitalizing on the surge in stock listings amid the market recovery. Additionally, the exchange plans to list exchange-traded funds and cryptocurrencies to gain a competitive advantage. TXSE plans to conduct its inaugural trade in 2025 and host its first listing in 2026.
- Credit checks now mandatory for BNNPL in Australia: The Australian government proposed legislation mandating buy-now-pay-later (BNPL) firms to conduct credit checks on borrowers, aiming to regulate the fast-expanding industry. This requires firms to obtain an Australian credit license and be overseen by the Australian Securities and Investments Commission. The legislation will establish a new category of "low-cost credit" to reflect BNPL's lower risk and cost compared to other credit forms.
- Jokowi assurance on new capital city as senior executives overseeing it resign: Indonesian President Joko Widodo announced his intention to begin working in Nusantara, the country's new $32 billion capital city, next month. This follows concerns about the project's future following the unexpected resignation of senior executives overseeing it. Widodo reassured that several infrastructure developments in Nusantara have reached approximately 80% progress and dismissed concerns when asked about the issue.
🏦 Individual stocks/companies
- GameStop plunge as the Kitty roared: GameStop stock plummeted up to 44% on Friday after Keith Gill ("Roaring Kitty") returned to YouTube and the company unexpectedly released earnings and announced plans to sell up to 75 million additional shares. Gill didn't really say much. He reiterated his views on GameStop, confirmed his massive positions, and praised CEO Ryan Cohen and the management team's ability to rework the business. GameStop shares rallied 47% when Gill made a post saying he'd return to YouTube.
- Crowdstrike (+8.84% past 1 month) rallies on AI boom: Amid the buzz around AI, people tend to overlook the importance of cybersecurity in safeguarding our data from unauthorized access. With the increasing prevalence of AI and related threats, cybersecurity is experiencing significant growth, as evidenced by Crowdstrike's robust earnings. For over a decade, Crowdstrike has been integrating AI into its cybersecurity efforts, resulting in impressive annual sales growth of 33% and consistently surpassing expectations. With a 35% free cash flow margin and optimistic prospects, analysts are upgrading their outlook, recognizing Crowdstrike's distinction in the field.
- GSK (-9.47% past 1 month) stock down with court rule: Stocks plummeted following a U.S. court's decision to permit 70,000 cases alleging that the firm's former heartburn medication, Zantac, causes cancer to proceed to trial. GSK announced their intention to appeal, but investor reactions indicate that the harm has already been inflicted.
- Bath & Body Works (-12% past 5 days) tank with weak guidance: Although the company beat estimates for the first quarter, reporting $0.38/sh on sales of $1.38b vs estimates for $0.33/sh on $1.37b, guidance was weak. Analysts were expecting flat earnings in Q2, but the firm say they'd fall to a range of $0.31 to $0/36/sh
- FDA lift Juul ban: US Food and Drug Administration (FDA) announced that it revoked its 2022 order for Juul to remove its vapes from store shelves due to concerns about youth vaping. Despite the ban, Juul's products remained available, prompting the FDA to reconsider their application pending further health data review and ongoing court cases.
🇸🇬 Singapore related
- Malaysia's passport QR code trial at JB-SG causeway delayed: Proof of concept (POC) testing for QR code clearance for Malaysians crossing the Johor-Singapore Causeway anticipated to start last Saturday (Jun 1), has been delayed for two weeks, according to a Malaysian state official.
