September 15, 2024

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Notable market news this past week (15-Sep-24)

Here is the Skeptivest roundup of the latest market headlines for the week

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🇺🇸 US Core CPI inflation surprised to the upside on on firmer shelter costs

Slightly higher than expected: August CPI inflation was slightly higher than expected, with the core CPI rising 0.28% m/m (Consensus 0.2%), keeping the y/y rate steady at 3.2%. Headline CPI matched expectations, increasing 0.2% m/m (2.5% y/y), the smallest annual rise since early 2021. The core CPI uptick, the largest since April, signals that inflation pressures persist.

The bulk of the firming in core CPI came from core services inflation: This was primarily led by an uptick in Owners' Equivalent Rent (OER) inflation and strong increases in airline fares and lodging away from home. In particular, annual shelter costs increased 5.2% in August, “accounting for over 70 percent of the total 12-month increase” in core CPI inflation.

Market overreaction followed by rationalization: Market probably overreacted to the unideal core CPI data via a deep selloff in the morning. However, the market was quick to return to rationality around noon. The figures are not ideal, but aren't that concerning after all. All in all, probability of a 50bps interest rate cut increased to 50% from 30% a week ago though the probability of 25bps interest rate cut decreased to 50% from 70% a week ago. (Source: CME FedWatch Tool). Continued Fed rate cut expectations may translate to further boost in stocks.

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🇺🇸 Biden targets fast fashion tariff loophole

New rules to require fast fashion retailers to pay tariffs: Biden Administration proposed new rules requiring fast fashion retailers like Shein and Temu to pay tariffs for the first time. This move aims to address the "overuse and abuse" of the de minimis rule, which exempts imports under $800 from taxes.

Fairer playing ground: Critics argue these retailers have exploited the rule to bypass border inspections and taxes, undercutting American products. The administration wants to reduce the over one billion packages entering annually under this exemption.

Market implication: Following the announcement, stocks of US e-commerce brands like Etsy and Wayfair rose over 5%, while PDD Holdings (Temu's parent company) fell more than 3%.

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☕️ Quick fire happenings to note

🌏 Global macro

• China raises retirement age: China will increase the retirement age for the first time since 1978, aiming to counteract a shrinking labor force amid economic slowdown concerns. Under the new plan, men will retire at 63 instead of 60, while women will retire at 55 instead of 50 for general roles and at 58 instead of 55 for managerial positions.
• China suspends PwC, impose record fines: China has suspended PwC for six months and fined it a record 441 million yuan ($62 million) for failing to address inflated financial reports of China Evergrande Group from 2018 to 2020. PwC’s Guangzhou branch is also closed. The penalty follows a major investigation into financial fraud, with regulators accusing PwC of ignoring Evergrande’s 564 billion yuan revenue overstatement.
• U.S. firms say confidence in China has hit an all-time low: In an annual report released Thursday, the American Chamber of Commerce in Shanghai found that out of the 306 of its member companies surveyed, only 66% were profitable in 2023, the lowest level on record.
• Harris gains lead post-debate poll: Vice President Kamala Harris's debate with Donald Trump appears to have boosted her lead over the 78-year-old Republican. Trump's performance, marked by falsehoods, rambling responses, and a strange comment about eating pets, didn't seem to work in his favor. He declined a second debate with Harris as both returned to campaigning.
• Gold prices continue to rally with Fed rate cut expectations: Gold hits new high, up 25% this year, driven by Fed rate-cut expectations, central bank purchases, and retail interest. Read up on our gold primer here.
• Bajaj Housing Finance's oversubscribed IPO points to investor interest in India: India’s largest shadow lender's home-loan unit saw its IPO oversubscribed by over 60 times, reflecting strong investor interest. Bajaj Housing Finance aimed to raise 65.6 billion rupees ($781 million) but attracted bids totaling around $39 billion. This is over 1% of India’s GDP. So far this year, India’s IPOs have raised $7.75 billion, with first-day gains averaging 30%.

🏦 Individual stocks/companies

• Bullish on streaming? Roku up 16.03% past 5 days: Analysts at Wolfe Research are optimistic about streaming platform Roku, raising their price target to $93 and increasing projections for sales, earnings, and free cash flow. They also noted that risks are now "more balanced," despite a 21.2% decline in shares year-to-date.
• Nvidia (+13.45% past 5 days) rallies again: At a Goldman Sachs event, Huang confirmed that current GPU demand is sustainable even as the AI era shifts from model training. He attributed this to the increasing use of virtual software engineers, who are driving the need for GPUs to develop various applications.
• Modena (-21.17% past 1 month) disappoints: Moderna's latest plans fell flat, receiving a tepid response as CEO Stephane Bancel outlined a strategy involving $1.1 billion in cost cuts and 10 new products by the end of FY 2027. Analysts are disappointed, noting that the timeline to profitability has been extended by over two years, and expressing concerns over reduced R&D spending.
• 33,000 Boeing factory workers went on strike: Boeingites chose to strike after overwhelmingly rejecting an agreement negotiated on their behalf by the International Association of Machinists and Aerospace Workers, a union representing 33,000 of the planemaker’s employees, 96% of whom voted to hit the picket line. Production is now halted at Boeing’s West Coast factories, including the Seattle-area facility that churns out its bestselling 737 Max planes.
• Amazon launched a budget-friendly grocery brand: Amazon introduced Amazon Saver, a budget grocery brand with over 100 items, mostly under $5, rivaling private-label options from Walmart and Target. This "no-frills" line is Amazon's most affordable, aiming to attract shoppers shifting to cheaper options amid inflation. Prime members get an extra 10% off Saver products.
• Michelin rates hotels in North America: The Michelin Guide handed out its first list of honors for hotels in North America: Just 10 received the highest rating of three keys for a “very special stay:” five in the US, three in Mexico and two in Canada
  

🇸🇬 Singapore related

• Qoo10 under Singapore police probe as vendors lodge reports over delayed payments: Singapore-based e-commerce platform Qoo10 and its logistics arm, Qxpress, are being investigated by police after vendors reported issues including delayed payments amounting to thousands of dollars and delivery disruptions by Qxpress.