Notable market news this past week (19-May-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸🇨🇳 Trade Tensions: Fresh US tariffs on China
Biden unveiled steep tariff increases on China: US President, Biden unveiled this week, new tariff increases on an array of Chinese imports including EV batteries, computer chips and medical products, risking an election-year standoff with Beijing in an attempt to woo American voters in the upcoming US election. The new measures affect $18b in imported Chinese goods, quadrupling of EV duties to over 100% and doubling the duties on semiconductor tariffs to 50%.
China will mix retaliation, economic reforms, and diplomacy against US tariffs: China's strategy will likely involve a mix of immediate retaliatory measures, long-term economic reforms, and/or diplomatic efforts to mitigate the impact of US tariffs while addressing its domestic economic challenges. This is evidenced by Xi recent commitment to strengthen ties with Putin this week, highlighting China’s focus on bolstering international alliance in response to rising pressures.
Possible retaliation from China include: (i) buying planes from Airbus over Boeing, which was one of the US's largest single exporters to China before the trade war, (ii) China limiting exports of minerals and tech it holds dominant global supply of like it did last year with graphite, gallium, germanium, etc.
☕️ Quick fire happenings to note
🌏 Global macro
- Cooler than expected US CPI data: US CPI rose by 3.4% yoy in April 2024, easing from 3.5% increase in March. This has revived investor hopes of near-term Fed rate cuts. According to the CME Fedwatch Tool, the probability that the Fed would start on its interest rates cuts in September rose to 65% from 60% a week ago.
- DJIA rally: As a result of investor confidence for Fed rate cuts, the Dow Jones Industrial Average has closed >40,000 for the first time in its 128-year history. This marks the longest weekly winning streak since February.
- Beijing to auction 30-year special debts to fund stimulus: China’s first issuance of this year’s special sovereign bonds of ~$139b, its fourth time in 26 years. The special bond sale serves as a way for banks in the region to deploy its cash reserves as the market currently sees a shortage of investible assets due to weak credit demand
- China attempts to end property crisis with rescue package: The support package includes lower down-payment requirements for homebuyers and 300b yuan (~US$42b) of central bank funding to help government-backed firms buy excess inventory from developers. Those properties would then be converted into affordable housing. Though the market reacted positively with the index surged by 6.8%, the country is still not out of the woods yet as China banks’ bad loans climbed to record highs to over 3,000b yuan
- Bitcoin investments by US pension fund: State of Wisconsin Investment Board (SWIB) disclosed a nearly US$163m investment in Bitcoin through the recently launched Bitcoin ETFs in the US, becoming the first state pension to publicly announce its holdings in spot Bitcoin ETFs
🏦 Individual stocks/companies
- Sea (+33.96% MTD) shares soar after beating estimates: The stock rose 3.7% after the market opened in New York on Tuesday after reporting first-quarter earnings that exceeded analysts’ estimates. Sea said it is on track to reach its target of a second straight annual profit this year and would ramp up efforts to build out its live-streaming arm, which would potentially help it cope with rising competition against TikTok and weigh on margins
- Tencent Holdings (+23.28% MTD) shares jump: China’s largest company reported a 62% surge in net income after doubling ad sales through its TikTok-style video accounts service. Users spent 80% more time on WeChat’s video accounts, signifying the company’s strong moat which helped to drive a 26% rise in ad sales
- Walmart (+8.6% MTD) jumps to all-time high after stellar earnings: The retail giant posted $161b in revenue, marking a 6% increase, while posting a profit of $5.1b. There were several strategies to diversify its business and revenue streams outside of traditional retail including its advertising business, which grew another 24% in the first quarter of the year after generating $3.4b in ad sales last year. Meanwhile, the firm also saw growth in its membership subscription service Walmart+, a similar offering to Amazon Prime.
- Chubb (+9.62% MTD) rallies as Buffett revealed new holdings in Chubb: Warren Buffett's Berkshire revealed a US$6.7b stake in Chubb, one of the biggest property-casualty insurers in the US.
🇸🇬 Singapore related
- Singapore's 4th Prime Minister: Lawrence Wong was sworn in as Singapore’s fourth Prime Minister on Wednesday, marking Singapore’s first leadership transition in 20 years. Mr Wong made small changes to the Cabinet, retaining his finance portfolio and promoting seasoned politician Gan Kim Yong to Deputy Prime Minister
- COVID-19 infections on the rise: The estimated number of COVID-19 infections in Singapore rose to 25,900, a 90% increase compared to the previous week, prompting the Health Ministry to take steps to ensure sufficient capacity at public hospitals. The two latest strains, KP.1 and KP.2 currently accounts for more than two-thirds of Singapore’s cases and WHO classified KP.2 as a Variant Under Monitoring
