September 22, 2024

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Notable market news this past week (22-Sep-24)

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

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🇺🇸 FOMC initiated its rate-cutting cycle with a larger-than-expected 50bps cut

First rate cut in four years, marking start of rate-cut cycle: The FOMC lowered the fed funds rate target range 50bps to 4.75-5.00%. This came as a surprise to some because historically, 50-basis-point cuts have been used during emergencies. Chair Jerome Powell explained during the press conference, this large cut was intended as a "re-calibration" of the policy stance, to bring it to a more neutral stance, with risks to the inflation and employment sides of the Fed's mandate now roughly in balance.

Hint that further rate cuts will be 25bps increment: Powell continued to refrain from offering much guidance, other than to caution against assuming that 50 is “the new pace” for cuts. The FOMC statement indicated that upcoming rate cuts will probably occur in 25 basis point increments. This was reflected in their lack of concern over the softening labor market and their assessment that the risks to achieving both employment and inflation targets are relatively balanced.

Fed dot plot - expectations of future cuts: The dots generally revised downwards and the median participant projects four rate cuts in 2024, four in 2025, two in 2026 and zero in 2027

Market reaction : The S&P 500 hit an all-time intraday high before closing down a modest 0.3%. The muted market response suggests that investors may have already priced in expectations of a cut, and were not overly rattled by its size. GIC CIO Jeffrey Jaensubhakij has warned that the market exuberance following the Fed rate cut could be short-lived amid the risk of rising inflation due to tight labour markets across the US, Europe, Japan. Tight labour markets, which imply low unemployment and potentially rising wages, could increase demand, placing upward pressure on prices. If inflationary pressures materialize, the Fed could find itself needing to reverse course and raise rates again to cool inflation

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☕️ Quick fire happenings to note

🌏 Global macro

• BOJ kept policy unchanged: BOJ signals no rush in raising rates again and kept policy unchanged at 0.25%. Ueda stressed risks surrounding the U.S. economy and re-confirmed the view the BOJ won't hike rates when markets are unstable. That may have led to receding market expectations of a year-end rate hike.
• China is considering removing restrictions on home purchases to revive an its housing market: The potential measures would allow non-local buyers in major cities like Beijing and Shanghai to purchase homes more easily. The proposed changes are part of a broader effort by policymakers to reverse a housing slump that has persisted for four years, hampering China’s economic growth and leading to widespread job losses. ‍
• Dalio Sees ‘Real Issues’ in China, Keeps Small Exposure: Ray Dalio highlighted China's economic challenges, noting slowing industrial output, property sector issues, and the need for restructuring, while still seeing investment opportunities despite the risks. “There’s a small percentage of our portfolio which is in China and we’ll stay in China through this process,” Ray Dalio said on the sidelines of the Milken Institute Asia Summit 2024. ‍
• UAE hoping to expand $1 trillion partnership with U.S. through AI, Investment: The UAE seeks to expand cooperation in areas such as AI, renewable energy, and space. Anwar Gargash, a senior Emirati advisor, emphasized the shift from a traditional focus on oil, defence, and conflict to a broader economic partnership. This visit underscores growing U.S.-UAE investment ties, with major U.S. firms like Microsoft investing heavily in UAE-based AI companies. The UAE is also seen as a potential testing ground for AI regulations, following comments by OpenAI CEO Sam Altman‍
• Britain is back and ‘open for business’, says trade policy minister on boosting economic ties: Southeast Asia presents significant trade opportunities for the UK, with the region's growing economy and population, while Britain seeks to strengthen global trade ties, including joining the CPTPP, amid rising protectionism and evolving geopolitical dynamics.‍
• Analog Devices, Tata Group in talks to make semiconductors in India: Analog Devices (ADI) and Indian salt-to-aviation conglomerate Tata Group have signed a pact to explore making semiconductor products in India, the U.S. chipmaker said on Wednesday. Tata Electronics and ADI intend to explore opportunities to manufacture ADI's products in Tata Electronics' fab in Gujarat and the facility in Assam, Analog Devices said in a statement. ‍
• Scaramucci bullish on Bitcoin: Hedge fund manager Anthony Scaramucci predicted that Bitcoin could reach new record highs, driven by a combination of interest rate cuts and clearer US crypto regulations following November’s presidential election. “We are going to get pro-cryptocurrency, Bitcoin, and stablecoin legislation in the first part of the next congressional term in the US,” the founder of SkyBridge Capital said in an interview. “At the same time, you’re intersecting with rate cuts from the Federal Reserve.”

🏦 Individual stocks/companies

• TikTok’s fight to stay in the US starts: TikTok's legal battle against a potential U.S. ban hinges on First Amendment rights, national security concerns, and foreign ownership, with a decision expected by November.
• Intuitive Machines (+50.25% past 5 days) rallies with NASA contract: The space exploratory company earned a contract 4x the size of its market cap from NASA; involving a 5-year term with max value of $4.82b and $150m award upfront to build "lunar data satellites".
• Shopee (SE up 5.17% past 5 days) and YouTube collaborate in Indonesia: Under the YouTube Shopping tie-up, users can purchase goods on YouTube via links to Shopee. This is a positive for Shopee, especially given TikTok's acquisiiton of Tokopedia in Indonesia.
• Shein faces growing scrutiny in the US and UK, potentially disrupting London IPO plans: Shein is under intensified scrutiny as the US plans to close a tax loophole benefiting its business, while a UK Labour official pushes for forced labor legislation targeting Chinese supply chains, potentially disrupting Shein's IPO plans in London. Both Shein and rival Temu, which use low-cost China-based manufacturers, have seen US package imports rise sharply under the de minimis exemption.
• BP puts US wind power business on the market: BP is selling its $2 billion US onshore wind assets, signaling a shift away from renewables as new CEO Murray Auchincloss focuses on oil and gas growth to appease shareholders, following concerns about the US wind market's profitability. Despite tax breaks, US wind projects have slowed, and local government bans on new wind and solar developments have made the sector less attractive for investment, leading BP to prioritize solar and traditional energy assets like oil.
• Uber (+2.97% past 5 days) and Waymo collaboration: Waymo, Google-parent Alphabet’s self-driving unit, alongside Uber, announced plans to launch their self-driving rideshare partnership in two more cities.
• Nike change of CEO: Nike announced Thursday afternoon that Hill, who retired as the company’s head of commercial and marketing operations in 2020, will replace Donahoe, who joined Nike as its CEO in Jan 2020. This highly anticipated leadership change will inject a much-needed sense of urgency at Nike as the current CEO struggled to grow company profits. Shares of Nike rose as much as 8.7% to $88 on Friday, hitting their highest intraday price since June 27, closing with a 6.9% gain
• Japan's Rigaku aims to raise up to $888 million in IPO: Rigaku, owned by private equity firm Carlyle Group, is eyeing a market value of $2 billion after the offering. The company makes X-ray testing tools is planning to start bookbuilding on Oct 10 and debut on Oct 25
• Berkshire Hathaway sells BAC shares: Berkshire Hathaway resumed sales of Bank of America stock in recent days, unloading about $845 million worth of shares and dropping its stake in the big bank to $34 billion, or 10.8% of the shares outstanding
  

🇸🇬 Singapore related

• 1 in 3 youth in Singapore reported very poor mental health, says IMH survey: A national survey in Singapore revealed that nearly one-third of youth face severe depression, anxiety, or stress, with key factors including excessive social media use, body image concerns, and cyberbullying, highlighting the need for targeted mental health interventions.
• Interest rate for CPF Special, Medisave and Retirement accounts increases to 4.14% in Q4: up from 4.08 per cent in the previous quarter. The government has also extended the 4 per cent interest rate floor for interest earned on all Special, Medisave and Retirement accounts for another year from Jan 1 to Dec 31, 2025