July 21, 2024

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Notable market news this past week (21-Jul-24)

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

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🇺🇸 Pressure on President Joe Biden to drop his re-election bid continued

Spotlight back on Biden after Trump's rally incident: Attention shifted to 81-year-old Biden after Trump survived an assassination attempt at a Pennsylvania rally and accepted the Republican nomination in Milwaukee days later.

Biden doubling down: Biden remains committed to defeating the twice-impeached Trump, calling him a threat to democracy. However, more Democrats are urging Biden to step aside after his poor debate performance last month. Former President Barack Obama has reportedly urged Biden to consider the possibility of an exit following his disjointed debate performance last month.

DNC Delays Official Biden Nomination: The Democratic National Committee won't officially nominate Biden until at least August 1. Delaying further will make it harder for an alternative nominee to prepare for the general election campaign

PE winner prediction: Prediction markets give Trump 65% chance of winning and Biden at 7%.

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🇨🇳 Takeaways from China’s 3rd Plenum

What is the 3rd Plenum: China's ruling Communist Party commenced its so-called third plenum on Monday, a major meeting held roughly once every five years to map out the general direction of the country's long-term social and economic policies.

Key takeaways:

• The Communique aligns closely with recent government policies and leadership speeches, with minimal new language. Reform, development, and the economy were the overriding themes.
• Mentions of technology innovation and national security have nearly doubled since the 2013 Third Plenum, making technology innovation a top reform priorityfor high-quality growth, fostering new productive forces, and ensuring national security. This reveals the level of urgency in light of increasing tech restrictions from the US‍
• Improving people’s livelihood, especiallysocial safety nets, healthcare coverage, and education, gained more emphasis, with mentions more than doubling since 2013.‍
• Rural rejuvenation through urban-rural integration, particularly public services for migrant workers, was also highlighted.
• Amid the risk of new US tariffs, the government pledged to deepen China's opening-up and welcome foreign investors to support domestic structural reforms.

Implications: Overall, The Third Plenum has been largely uneventful, offering no clear direction for markets. Pro-reform and pro-growth stance should technically be positive for gradually repairing market sentiment. However, there was little sign, of any major stimulus to support the demand side of the economy, leaving markets waiting until further details are released.

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☕️ Quick fire happenings to note

🌏 Global macro

• Unprecedented IT outage on Friday: A global IT outage on Friday, caused by a botched update from CrowdStrike, disrupted airlines, hospitals, banks, governments, restaurants, highlighting the vulnerabilities of the modern economy. The incident had significant economic impacts, grounding flights, upending markets, and disrupting businesses worldwide before CrowdStrike could roll out a fix. CrowdStrike saw its share price plummet on Friday, although it is still up ~24% YTD.

• Trump's plans risk rekindling US inflation: Democrats highlight the strong US economy, low unemployment, and progress against inflation, but this doesn't resonate with Trump supporters. Despite inflation still affecting all Americans, the GOP blames Biden. Economists warn that Trump's plans, including tax cuts favoring the rich, tariff hikes, and immigration curbs, could reverse the Fed's progress, disrupt global trade, and reignite inflation.
• US retail sales report, an indicator of economic slowdown: On Tuesday, the Census Bureau released the latest Advance Monthly Sales report for Retail & Food Services. Total retail sales registered a slight decline in June, clocking in at $704.3bn vs the $704.5bn in May, a 0.0% monthly change. Annually, retail sales grew 2.3%. But this report does not adjust for inflation, only seasonality. So, real retail sales actually fell 0.7% when adjusted for June’s 3.0% CPI. A bright spot is e-commerce, which grew healthily at 8.9% vs last year. This is about as clear a sign of a pending economic slowdown.
• America looking to intensify chip crackdown on China: The Biden administration has warned allies, including Japan and the Netherlands, of potential severe trade barriers if they continue supplying advanced chip technology to China. The goal is to persuade these allies, who have already limited some key equipment shipments, to also stop servicing and repairing restricted parts in China, a restriction already imposed on US firms.
• UN court rules against Israel's occupation: UN top court issued historical ruling Israel: The UN's top court ruled that Israel must end its "unlawful" occupation of Palestinian territories. The Hague tribunal's decision followed a 2022 request from the UN General Assembly. The court found that Israel's policies in the West Bank and East Jerusalem violate apartheid and racial segregation laws, and mandated reparations to affected individuals in the occupied territories.
• Diamond comes under pressure from sluggish China demand: China's prolonged decline in luxury spending is further straining the diamond market. In response, Anglo American, the parent company of De Beers, announced it is reducing diamond production to mitigate the impact of China's waning demand for gemstones. In fact, Anglo American is also currently trying to sell De Beers.

🏦 Individual stocks/companies

• Unilever may sell its ice cream business to private equity buyers: Unilever is in early talks with buyout firms to sell its ice cream business, valued at up to $19.4b. The company is presenting to potential bidders, including Advent International, Blackstone, Cinven, and CVC Capital Partners. The business includes brands like Ben & Jerry’s and Magnum.
• Domino Pizza (-17.78% past 5 days) revenue miss: Revenue in Q2 missed estimates by a slight 0.6%, while EPS trounced estimates by 31% on 4.2% growth in U.S. same-store sales and 1.5% hikes to menu prices. 80% of that growth came from China, meaning other regions are downbad.
• ASML (-16.93% past 5 days) Q2 earnings: The semiconductor equipment manufacturer beat on sales and EPS, reporting a 24% jump in bookings on still-exorbitantly-high demand for chips. However, 49% of ASML’s revenue comes from China. If export restrictions are imposed, ASML will be one of the most impacted.
• Match Group (+9.03% past 5 days) stock rallied: Starboard Value disclosed a 6.5% stake in Match. It is urging the dating app operator to explore a sale if it is unable to revitalize its business, the activist investor said. Starboard is the third investor after Elliott Investment Management and Anson Funds Management to push for changes this year at Match, which has struggled with a post-pandemic slowdown in growth and delays in new features for key apps such as Tinder.
  

🇸🇬 Singapore related

• Astrea 8 ballot results: Astrea 8 Bonds Balloting Results – $9,000 allotment per investor for SGD Bonds, $4,000 per investor for USD Bonds.