July 28, 2024

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Notable market news this past week (28-Jul-24)

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

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🇺🇸 US soft landing and Sep rate cut in sight as the Fed's preferred inflation measure rose moderately

Underlying US inflation rises at modest pace: In June, the Fed's preferred inflation measure (i.e. PCE) rose moderately, and consumer spending stayed strong, signaling controlled inflation. The core PCE price index, which excludes food and energy (as they are very volatile), rose 0.2% from May and 2.6% y/y.

Investors are betting for a Sep rate cut: This bolstered investor confidence that the Fed will indicate plans next week to start easing tight monetary policy in September, potentially with a quarter-point rate cut. Chances of September rate cut is up to >90%. Next event to watch is the FOMC meeting on 31-Jul / 1-Aug.

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☕️ Quick fire happenings to note

🌏 Global macro

• ‍Lacklustre earnings by big tech stocks: Earnings season is in full swing with major tech companies reporting results. Tesla saw a 45% drop in Q2 net income due to slowing EV sales and heavy AI infrastructure investments. Alphabet's earnings met expectations, but investors were let down by weaker YouTube ad revenue. These underwhelming results have investors questioning the tech stock rally and shifting towards more value-oriented sectors.‍
• Soft landing and rate cut in sight: In June, the Fed's preferred inflation measure (i.e. PCE) rose moderately, and consumer spending stayed strong, signaling controlled inflation. This bolstered investor confidence that the Fed will indicate plans next week to start easing tight monetary policy in September, potentially with a quarter-point rate cut.
• China makes surprise rate cuts following top policy meeting: On Monday, the People’s Bank of China unexpectedly lowered its benchmark lending rates and a noteworthy short-term policy rate, days after leading government officials acknowledged several long-term economic challenges stymieing growth during the 3rd Plenum (once every 5 years meeting). After the cuts, the yuan fell to a near-two-week low against the US dollar.
• Paris Olympics amid policital tension: The Paris Olympics begin amidst political tensions in France and other participating countries. This is the first Games since the IOC reformed its host city bidding process. Hours before the Opening Ceremony, a "massive attack" paralyzed trains to and from Paris, including the Eurostar. Days earlier, French authorities arrested a Russian man allegedly plotting to destabilize the Games.

🏦 Individual stocks/companies

• 3M (+22.7% past 5 days) notched its biggest gain in >40 years: 3M’s stock saw its biggest gain in over 40 years as investors welcomed new CEO Bill Brown's plan to revive the company. Taking charge on May 1, Brown addressed 3M’s issues and outlined future priorities in his first earnings report. Under former CEO Mike Roman, 3M lost over $60b in market value due to stagnant sales, legal liabilities, and high raw material costs. Despite agreeing to pay over $10b for water cleanup, 3M still faces significant liabilities over forever chemicals
• Hermes weather through luxury demand slowdown: Hermès outperformed peers during the luxury demand slowdown by relying on its wealthiest clients. Its American depositary receipts rose in New York trading after a strong second-quarter sales increase. Revenue at constant exchange rates increased by 13.3%, surpassing analysts’ expectations. All regions saw double-digit growth except for the region including China. Hermès remains more resilient than other luxury brands due to strong pricing power and long waitlists for its coveted Kelly and Birkin handbags, which start at around $10,000.
• Apple's China downturn: Apple lost market share in China’s smartphone market in the June quarter as local companies like Huawei surged ahead. iPhone shipments fell 3.1% during this period, while Android-powered competitors saw an 11% y/y increase, according to IDC. This pushed Apple out of the top five handset makers in China for the first time in four years.‍
• Pershing Square IPO postponed: The highly-anticipated IPO for billionaire Bill Ackman’s Pershing Square USA Ltd. has been mysteriously postponed. Originally targeting $25b, the planned share sale was reduced to between $2.5b and $4b. The listing is now delayed indefinitely.
• Lululemon (-10.05% past 5 days) tank as analysts downgrade the stock: Lulu shares came as JPMorgan, Citi, and TD Cowen coincidentally downgraded shares prior to open. The firms cite a category slowdown in premium apparel. Price targets were slashed by 26%, 28%, and 6%, respectively, but all still see upside.
  

🇸🇬 Singapore related

• Allianz announced on Jul 17 that it had intended to purchase 51 per cent of Income Insurance's shares: NTUC Enterprise reassured Income Insurance’s shareholders and policyholders amid Allianz's €1.5 billion bid for a 51% stake, emphasizing its commitment to Income's long-term competitiveness and affordable insurance options.
• Grab acquires Chope, pulls out of TransCab acquisition: Grab acquires Chope as part of its latest efforts to build a F&B presence and enhance its superapp offerings, while it withdrew from the TransCab acquisition.