June 23, 2024

Notable market news this past week (23-June-24)

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

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🛒 Softness in US retail sales data bolstering investor confidence in near-term US Fed rate cut

US Retail Sales reach $703.1b with modest growth of 0.1% monthly: US retail sales totaled a measly $703.1b last month, growing just 0.1% monthly and 2.3% compared to May 2023. That means real retail sales actually fell 1% for the year while the monthly growth rate remains at 0.1%, adjusting for May’s MoM and YoY CPIs of 0.0% and 3.3%. With retail sales at 70% of US GDP in any given year, this can be a cautionary sign.

Bright spots, nonetheless: 

• Non-store retailers (i.e. online shopping) saw sales rise 6.8% for the year
• Restaurant and drinking places saw growing sales by a healthy 3.8%

While restaurants and other discretionary spending are usually first to be affected in a slowdown, Gen Z spending on these categories seem to be keeping growth elevated.

Rate cut implications: Weakness in the US retail sales data has led to investors gaining confidence that the Fed may cut rates this year. Yet, rate cut expectations were unchanged in response (According to the CME Fedwatch Tool, investors expect the first rate cut to be in September this year).

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🤖 From green washing to AI washing; SEC Crackdown on companies exaggerating AI claims to investors

SEC escalating enforcement against AI-washing: The SEC is set to escalate its enforcement against companies exaggerating artificial intelligence to investors, with recent actions accusing three firms of AI washing since March. This crackdown follows warnings by SEC Chair Gary Gensler about the potential for misleading claims surrounding AI's capabilities, underscoring the agency's proposed restrictions on AI usage by brokerages and advisers.

• E.g. The SEC's recent lawsuit against the founder of Joonko, a recruiting platform, for falsely claiming AI capabilities underscores the agency's commitment to tackling AI-related misrepresentations.
• E.g. In March, two money managers, Delphia (USA) and Global Predictions, agreed to pay a combined $400k to settle SEC charges for making “false and misleading” statements about their purported use of AI.

Especially critical amidst the AI hype in the financial markets: The SEC's actions are part of its strategy to enforce accurate disclosures in the evolving AI sector, aiming to prevent misleading claims that might disrupt financial markets.

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☕️ Quick fire happenings to note

🌏 Global macro

• ‍French banks sink as Macron called snap elections: French President Emmanuel Macron's efforts to attract financial firms to Paris after Brexit may be jeopardized by his call for snap elections, causing uncertainty in the industry. Major firms like JPMorgan and Bank of America have already moved significant assets and staff to Paris. However, with the far right gaining ground in Europe, the financial community is adopting a cautious stance, even though relocating might be difficult due to rising extremism in other European countries.
• China continues to struggle to attract overseas investors: According to data released by the Chinese Ministry of Commerce on Friday, inbound FDI in China fell by 28.2% in the first 5 months of 2024 compared to the same period last year. This decline worsened from the 27.9% drop in April and continued a trend since June 2023.
• Push for Mastercard and Visa in China: China is urging Visa and Mastercard to lower transaction fees to facilitate payments for foreign visitors. With retailers increasingly cashless, high processing fees deter merchants from accepting foreign bank cards.
• US Adds Japan to FX Monitoring List: The US Treasury added Japan to its "monitoring list" for foreign-exchange practices, citing large trade and current account surpluses but stopped short of labeling any trade partner a currency manipulator. On Thursday, the yen fell for a sixth-straight session, the worst stretch of losses in three months, to end the day just shy of 159 per dollar — its weakest closing level since April 1990.
• Signs of buyer fatigue in the US stock market: US stocks pulled back from record highs amid concerns of buyer fatigue, with the S&P 500 briefly surpassing 5,500 before losing ground, especially in the tech sector as the Nasdaq 100 retreated following a seven-day rise.
• India's sovereign debt gains global interest amid index inclusion: Foreign interest in India is rising as global index providers prepare to include the country's $1.3t sovereign debt, offering fixed-income investors an alternative to Russia and China. JPMorgan's decision on June 28 to add Indian government bonds to its major emerging-market index could attract up to $40b in global investment as financial institutions realign their portfolios.
• Malaysia preparing to join BRICS: Malaysia is preparing to join the BRICS group of emerging economies, Prime Minister Anwar Ibrahim said in an interview with Chinese media outlet Guancha. The group last year began to expand its membership as it looks to challenge a world order dominated by Western economies, with Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates joining and more than 40 countries expressing interest.

🏦 Individual stocks/companies

• ‍Trump Media & Technology Group (Nasdaq: DJT) dilutes shareholders: DJT (-28.89% past 5 days) tanked as the company is issuing and allowing the sale of a large amount of shares. The firm received a notice of effectiveness from the SEC for its supplemental prospectus detailing a primary and secondary offering of shares. The firm is diluting investors with up to 14.375m new common shares and allowing for secondary sales of up to ~146m shares.
• Chegg exploring AI to prevent going obsolete: American homework help provider almost became obsolete when ChatGPT came into the market. The company is now laying off and exploring options for AI product offerings to prevent itself from getting disrupted.
• Huawei Negotiates WeChat Deal to Ensure Harmony OS Continuity and Monetize In-App Purchases: Huawei is aggressively promoting its Harmony OS following restrictions from using Google's Android, aiming to profit from in-app purchases with a negotiated 20% fee from game developers. Despite this strategy, Huawei may exempt Tencent's WeChat from revenue sharing to ensure the app's availability on Harmony, pivotal for maintaining its edge over Apple in the domestic market. Additionally, Huawei has sought a revenue-sharing agreement with ByteDance's Douyin (TikTok), although ByteDance has not expressed interest in the proposal.

🇸🇬 Singapore related

• PM Wong reiterates his vision for Singapore to embrace a wider definition of success: Prime Minister Lawrence Wong outlined his vision for Singapore, aiming to create a society that embraces diverse paths to success and values every individual's contribution, beyond traditional academic achievements. He urged Singaporeans to support one another's journeys, celebrate various forms of success, and foster an inclusive environment conducive to personal growth and collective well-being.
• Singapore climbed three spots to reclaim the top position in the 2024 IMD World Competitiveness Ranking among 67 countries: It excelled in business efficiency, leading in labor market factors with a three-spot increase, and showed significant improvement in attitudes and values, jumping 12 positions. Singapore also surged 21 places to second in management practices and ranked fourth overall in technological infrastructure, up from ninth previously.‍
• Singaporean students excel in creative thinking in the PISA study: Singapore's 15-year-olds came out top in an international benchmarking study on creative thinking, even though they do not think of themselves as creative. Singapore students were tested on how well they generate creative ideas, as well as evaluate and improve on them.