Your Weekly Digest of Market News and Analysis from the Editors
April 28, 2024
Notable market news this past week (28-Apr-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸 Pace of growth is decelerating, and stubborn inflation remains a concern in the US
Source: US Bureau of Economic Analysis
US economic growth is slowing: Real GDP grew 1.6% in the Q1 2024 (below projections of 2.4% and down from 3.4% for Q4 2023), according to the Commerce Department on Thursday. Nevertheless, nominal GDP saw solid growth, growing at 4.8% - implying a Q1 GDP of $28.28t.
Source: US Bureau of Economic Analysis
Key issue lies in reaccelerating inflation: Quarterly core Personal Consumption Expenditures (PCE), which excludes food and energy, increased 2.8% from a year ago in March, the same as in February. This was above the 2.7% consensus estimates.
Some key positive highlights:
Imports surged at an annualized rate of 7.2% - While they typically detract from GDP, their robust increase indicates significant demand for international products among both consumers and businesses
Residential investments grew 13.9% - boosting confidence in the housing market
Disposable personal incomes increased 4.5%
🌐 TikTok ban in the US
The ban is official: President Joe Biden has signed a bill compelling TikTok to find a new owner within one year or risk being banned. This action aims to sever China's access to the video-sharing platform, which is utilized by 170m Americans.
TikTok and the Chinese government's reaction:
TikTok has pledged to oppose the sale by exercising its legal rights in the US courts. Bloomberg reported that Michael Beckerman, TikTok’s head of public policy for the Americas, sent a memo to staff saying, “At the stage that the bill is signed, we will move to the courts for a legal challenge.”
There are indications from the Chinese government that it will intervene to prevent it. When asked about TikTok this week, China’s foreign ministry referred to a previous commerce ministry statement pledging to “take all necessary measures to resolutely safeguard its legitimate rights and interests.” This development has sparked worries about potential retaliation against US companies heavily invested in China, such as Apple and Tesla.
Chinese response may be tempered by the backdrop of a slowing Chinese economy: Any measures taken by China would probably aim to minimize damage to its own economy, especially with a lingering property crisis dampening growth. Additionally, officials would be cautious not to unsettle foreign investors, whom Xi Jinping has been actively courting.
☕️ Quick fire happenings to note
🌏 Global macro
Bank Indonesia unexpectedly hike rates: BI has defied majority expectations and hiked rates by 25bp to 6.25% after keeping policy rate unchanged for 5 consecutive meetings since Oct-23. Bank Indonesia Governor Perry Warjiyo said the interest rate increase is to strengthen the rupiah's exchange rate stability against the possibility of worsening global risks.
All eyes on Japan: The market closely watches Japan's potential intervention to bolster the yen following its decline to a 34-year low, which later rebounded when the central bank maintained rates.
China stalls: In March, Chinese inflation remained stagnant (0.1% yoy vs estimates of 0.4% and 0.7% rise in February), alongside a persistent decline in industrial prices, highlighting the deflationary challenges confronting the nation's economic resurgence. Nonetheless, Goldman Sachs and Morgan Stanley have revised their forecasts for China's economic expansion this year, citing enhanced factory output and exports.
🏦 Individual stocks/companies
Google surpass estimates, announce dividend: Alphabet (+14% MTD) unveiled earnings surpassing investor expectations. Additionally, they announced their first ever dividend payout and a fresh $70b stock repurchase program.
Tesla share price popped despite poor earnings: Tesla (+19.7% past 5 days) shares rallied following Elon Musk's announcement that the company plans to commence production of a new affordable electric vehicle by early 2025. This is despite a 55% year-on-year decrease in net profit for the 1Q, attributed to reduced demand for electric vehicles and continued price reductions.
Meta's disappointing outlook: Meta (-9.47% past 5 days) disappoint investors with its weaker than expected 2Q revenue forecast. In addition, investors were shocked by big spending plans for AI as full-year capital expenditure forecast was raised to $35b-$40b up from $30b-$37b. Nevertheless, Meta beat analyst expectations for both 1Q revenue and profit.
IBM on shopping spree: IBM (-12.48% past MTD) doubles down on hybrid cloud with $6.4b HashiCorp acquisition. This comes as IBM missed yet again on revenue ($14.46b vs 14.55b expected), though EPS beat estimates ($1.68 vs $1.60 expected).
De Beers is reportedly for sale: The Wall Street Journal reported that Anglo American is considering selling its 136-year-old diamond mining subsidiary, De Beers. There are significant worries about the ability of rough diamonds to compete with lab-grown diamonds, which are bloodless and cheaper. The potential sale is unfolding within the context of a larger deal, as BHP, Anglo American's Australian competitor, has proposed a $39b acquisition of Anglo American. (note: BHP is considering improved proposal after initial bid was rejected).
🇸🇬 Singapore related
Housing prices continue to rise: Private home prices in Singapore rose 1.4% in the 1Q 2024, down from the 2.8% in the previous quarter. This was the slowest quarterly gain since 3Q 2021, indicating "stability". Nonetheless, property prices have gone up 49.6% since a low in Q2 2017. Resale of public HDB flats rose 1.8% in 1Q 2024, an increase from 1.1% in the prior quarter.
