Notable market news this past week (18-Aug-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸 US economy approaches soft landing (i.e. slowdown w/o outright recession) as inflation eases
Context - Markets panicked just a few weeks back: Just at the start of the month, market was panicking on the back of US hard landing (i.e. recession) fears. US non-farm payroll and unemployment rate fell short of expectations alongside disappointing manufacturing PMIs across regions. Skeptivest wrote about it here.
US looks to be approaching soft landing with latest data:
- The US Consumer Price Index (CPI) increased by 2.9% in July year-over-year, marking the slowest rise since 2021.
- Consumers remain upbeat and continue to spend. US retail sales increased by 1.0% in July, the biggest rise in 18 months. Walmart in particular benefited from US consumer spending, with a 4.2% sales increase, 8.5% rise in operating income, and 22% surge in digital sales. The retailer also raised its annual outlook as shoppers continue to spend despite inflation concerns.
Markets reacted well with equities rebounding: S&P500 is back to the 5.5k range, up from 5.2-5.3k during the earlier part of August, where fears of US recession were rising at the back of disappointing employment and manufacturing data. There is more optimism that the US may avert a recession.
☕️ Quick fire happenings to note
🌏 Global macro
- Paetongtarn Shinawatra elected as Thai PM after Srettha Thavisin's surprise dismissal: The 37-year-old daughter of controversial political figure Thaksin Shinawatra easily secured a house vote and now faces a baptism of fire, just two days after ally Srettha Thavisin was ousted as premier, barely a year in office. The Thai Constitutional Court's decision on Wednesday (Aug 14) to remove PM Srettha Thavisin of the ruling Pheu Thai party for ethical violations (e.g. appointing to Cabinet a former lawyer who served jail time) took most political observers by surprise.
- Powell urges big banks to support capital proposal: Fed Chair Jerome Powell met privately with major bank CEOs, urging cooperation to avoid a lengthy legal fight over the Biden administration’s bank capital plan. Despite industry resistance and a softened proposal, Powell emphasized the need for public input and consensus to finalize the reform, which stems from the 2008 financial crisis.
- Iron ore slumps amid China steel concerns: Iron ore prices hit their lowest since 2022, dropping nearly 9% this week as Chinese steel mills cut output due to weak demand and falling prices. Conditions in China’s steel sector are like a “harsh winter” that will be “ longer, colder and more difficult to endure than we expected,” said Baowu Steel's Hu Wangming, adding that the industry is facing a crisis more severe than the downturns of 2008 and 2015.
- WHO declared mpox outbreak in Africa global health emergency: The World Health Organization has labeled a rapidly spreading mpox strain in Africa as a global health emergency, with over 15,000 infections and 500 deaths in the Democratic Republic of Congo. The outbreak has reached six countries, raising concerns about further spread across Africa and beyond.
- Biden Administration secures landmark drug discounts: The new pricing, set to take effect in 2026, will reduce the cost of some drugs by up to 79% from 2023 prices, excluding current rebates and discounts.
🏦 Individual stocks/companies
- Google breakup: The US Justice Department is weighing breaking up Google following a court ruling on its online search monopoly, marking a potential first attempt to dismantle a company for illegal monopolization since the Microsoft case two decades ago, with less drastic alternatives like data-sharing requirements also under consideration.
- Starbucks appoints Chipotle CEO as its new CEO: Starbucks has appointed Chipotle CEO Brian Niccol as its new CEO and chairman, replacing Laxman Narasimhan, prompting a record 23% surge in Starbucks shares and a 13% drop in Chipotle shares amid reported stakes by activist investors. Starbucks is hoping that Niccol can perform a turnaround like it did for Chipotle for Starbucks. In his 6 year tenure, Niccol oversaw a ~690% share price increase.
- UBS (+5.48% past 5 days) beats expectations with CS integration: Q2 earnings were strong, with EPS of $0.34/share on $11.9b revenue representing a 4.2% beat vs consensus. Assets grew $27b while top-line grew 55% YoY, indicating that integration with Credit Suisse is going well.
🇸🇬 Singapore related
- Celebratory parade for Olympians: 10 S’pore Olympians, including Max Maeder, greet public in celebratory parade through town.
