Portfolio Update – April – May 2024

General news

• On 02/04/2024, Crude oil futures surged on the first day of second-quarter trading Monday following reports of a missile strike on the Iranian consulate in Damascus, Syria. The West Texas Intermediate (WTI) contract for May delivery rose by 0.65% to settle at $83.71 a barrel, while the Brent contract for June delivery increased by 0.48% to settle at $87.42 a barrel. According to Syrian and Iranian state media, the strike, reportedly carried out by Israel, resulted in casualties, including a senior commander from Iran’s Revolutionary Guard. Analysts suggest that this escalation in the Middle East conflict is likely to further boost oil prices in the near term. Additionally, ongoing geopolitical tensions, such as Ukraine’s strikes on Russian oil refineries and Houthi militant attacks in the Red Sea, continue to impact crude deliveries, further supporting oil prices. The market remains optimistic about strong global demand, with expectations of limited oil supply from OPEC+ through at least the second quarter. Both WTI and Brent have seen three consecutive months of gains, with WTI up 17.8% and Brent up 14.2% year-to-date.
• Gold prices surged to another all-time high on Monday, driven by expectations of U.S. interest rate cuts and the metal’s status as a safe haven asset. Spot gold climbed 0.3% to reach $2,240.04 per ounce, while U.S. gold futures rose 0.8% to settle at $2,257.10 per ounce, hitting a peak of $2,286.4. Market sentiment regarding potential Federal Reserve rate cuts in June is bolstering confidence among investors, with the key Fed inflation gauge showing a 2.8% year-on-year increase in February, likely keeping the central bank cautious. Gold prices typically move inversely to interest rates, making the metal more attractive as rates decline. Overseas demand, particularly from China, has also contributed to the rally, driven by economic uncertainties and weakness in real estate and stock markets. Central banks worldwide continue to increase gold purchases to diversify reserves amid geopolitical tensions, domestic inflation concerns, and a weakening U.S. dollar, further fueling the gold market’s momentum.
• On 03/04/2024, Cleveland Federal Reserve President Loretta Mester expects interest rate cuts this year but ruled out the possibility at the upcoming May policy meeting. She noted that the long-term rate trajectory is higher than previously thought. Mester emphasized the need for more evidence of subdued inflation before considering cuts, indicating that additional data is required to assess recent anomalies. Her comments align with the recent decision to maintain the current rate range. Mester’s remarks suggest a rate cut in April-May is unlikely, consistent with market expectations. She will leave the FOMC in June after reaching her 10-year limit.
• Oil prices climbed to their highest level since October on Tuesday as investors monitored emerging threats to supply amidst escalating tensions in the Middle East and a reported Ukrainian drone strike on a significant Russian oil refinery. The U.S. West Texas Intermediate contract for May delivery increased by $1.44, settling at $85.15 per barrel, while the Brent contract for June delivery rose by $1.53 to reach $88.94 per barrel. Brent futures had been trading within a relatively narrow range of $75 to $85 per barrel since the beginning of the year, but increased geopolitical risks and strong economic data have led to upward movement. Tamas Varga, an analyst at oil broker PVM, noted the rise in tension in the Middle East, particularly with reported indirect Iranian involvement. Iran accused Israel of a deadly air strike on its consulate in Damascus, promising retaliation. Varga warned that if the conflict between Israel and Hamas escalates further, it could lead to a broader regional conflict with potential implications for oil supply.
• On 04/04/2024, Private sector job growth accelerated in March, marking its strongest pace since July 2023, as reported by payrolls processing firm ADP on Wednesday. Employers added 184,000 workers during the month, surpassing the upwardly revised February figure of 155,000 and aligning with expectations. Alongside robust job creation, wages for existing workers rose by 5.1% compared to the previous year, with job switchers seeing a notable 10% increase. ADP’s chief economist, Nela Richardson, noted the unexpected pay gains across various sectors, indicating a tightening labor market despite cooling inflation. Job gains were widespread, led by leisure and hospitality, construction, trade, transportation, utilities, and education and health services. However, professional and business services saw a slight decline. The majority of job growth originated from medium to large-sized companies, while small businesses contributed modestly. Regionally, the South saw the largest gains, adding 91,000 jobs. ADP’s report serves as a precursor to the Labor Department’s upcoming nonfarm payrolls survey, though disparities between the two datasets are common.
• Eurostat’s data release on Wednesday revealed that the Eurozone’s annual Harmonized Index of Consumer Prices (HICP) climbed by 2.4% in March, down from February’s 2.6% increase and falling short of market projections of 2.6%. Core HICP inflation also softened to 2.9% year-on-year in March, below February’s 3.1% rise and missing estimates of 3.0%. Meanwhile, the bloc’s HICP rose by 0.8% month-on-month in March, up from a 0.6% increase in February, with core HICP inflation standing at +1.1% in March compared to a 0.7% rebound in February. These figures hold significance for the European Central Bank’s interest rate outlook. In terms of components, services are anticipated to exhibit the highest annual inflation rate in March (4.0%), followed by food, alcohol, and tobacco (2.7%), while non-energy industrial goods recorded an annual inflation rate of 1.1% and energy prices saw a 1.8% decrease. Additionally, the Eurozone’s unemployment rate remained unchanged at 6.5% in February, holding steady from the revised figure of 6.5% in January.
• On 05/04/2024, Crude oil futures surged on Thursday, rebounding from earlier losses as tensions escalated in the Middle East. West Texas Intermediate (WTI) crude for May delivery rose by $1.16, or 1.36%, settling at $86.59 per barrel, while Brent for June delivery climbed $1.30, or 1.45%, to reach $90.65 per barrel, marking the highest settlement prices for both since October 20. Reports from the Jerusalem Post indicated heightened security measures at Israeli embassies following Iran’s pledge of retaliation over a missile strike on its consulate in Damascus earlier in the week, with Israel Defense Forces halting home leave for combat troops amidst rising tensions with Tehran. President Biden also warned Israeli Prime Minister Benjamin Netanyahu about strikes on aid workers in Gaza, deeming them “unacceptable,” and stressed that U.S. policy regarding the Gaza conflict will be influenced by Israel’s actions to address humanitarian concerns. While geopolitical tensions in the Middle East and Eastern Europe have contributed to this year’s oil price rally, John Kilduff, founding partner at Again Capital, highlighted Ukraine’s drone strikes on Russian oil infrastructure as a significant factor driving prices.
• Geopolitical and structural factors are aligning to propel gold towards $2,600 per ounce within the coming year, predicts Juerg Kiener, chief investment officer at Swiss Asia Capital. Gold has been consistently hitting record highs this year, with spot gold breaking above $2,300 on Thursday before slightly retreating. Kiener’s forward curve analysis indicates strong potential for further gains, citing pent-up demand and an inventory collapse in the gold market. He warns that this situation puts derivative structures at risk and could trigger a short squeeze, driving gold prices even higher beyond the projected $2,600 mark.
• On 06/04/2024, March saw robust job creation in the United States, surpassing expectations and indicating a continued uptrend in the resilient labor market. Nonfarm payrolls expanded by 303,000, exceeding the anticipated 200,000 increase and surpassing February’s revised gain of 270,000, according to the Labor Department. The unemployment rate dipped to 3.8%, as forecasted, while the labor force participation rate climbed to 62.7%. Average hourly earnings rose 0.3% for the month and 4.1% year-over-year, in line with projections. Growth was observed across various sectors, with health care, government, leisure and hospitality, and construction leading the way. The positive revisions for January and February underscore the strength of the labor market, reflecting broad-based job creation.
• Federal Reserve Governor Michelle Bowman cautioned on Friday that the possibility of interest rates moving higher to combat inflation should not be ruled out, contrary to the anticipated rate cuts. Citing several inflationary risks, Bowman emphasized the importance of a cautious approach to monetary policy adjustments. While she still sees a potential for rate cuts in the future, she highlighted the need to avoid premature easing, which could lead to a resurgence in inflation, necessitating further rate hikes. Bowman’s remarks, delivered to the Shadow Open Market Committee, underscore the current uncertainty surrounding Fed policy, with various officials expressing differing views on the trajectory of interest rates. Chair Jerome Powell and others have advocated for a cautious stance, indicating a reluctance to commit to significant rate cuts amidst lingering inflation concerns.
• On 07/04/2024, U.S. Treasury Secretary Janet Yellen commenced her official meetings in China by addressing concerns over overcapacity and advocating for market-oriented reforms. Arriving in Guangzhou on Thursday, she is scheduled to proceed to Beijing on Saturday, staying until Tuesday. In her meeting with Vice Premier He Lifeng on Friday, Yellen emphasized the importance of close communication on issues like overcapacity and national security-related economic actions. Stressing the need for a fair economic relationship benefiting both countries, she highlighted areas for collaboration, including climate change and addressing debt distress in emerging markets. Yellen is expected to engage in several discussions with He Lifeng until Saturday morning, followed by meetings with Premier Li Qiang, Finance Minister Lan Fo’an, and Beijing mayor Yin Yong upon her arrival in Beijing.
• On 08/04/2024, Labor ministry data released on Monday revealed that real wages in Japan experienced a 23rd consecutive month of decline, signaling ongoing challenges with high inflation impacting consumer purchasing power in the nation. In February, real wages fell by 1.3% compared to the previous year, marking a faster rate of decline compared to the revised 1.1% drop recorded in January. Despite this, nominal wages increased by 1.8%, driven by a 2.2% rise in the base pay component. However, special payments, including bonuses, declined by 5.5% year-on-year. Although Japan’s unions negotiated the highest wage increases in 33 years, the benefits primarily reach a small fraction of workers, as only 16.3% of the workforce is unionized, with most union members employed in large corporations. This disparity suggests that the potential positive cycle between wages and prices may be limited, particularly as workers in small and medium-sized enterprises face stagnant wages amidst rising prices. Japan has been experiencing inflation exceeding the Bank of Japan’s 2% target consistently since April 2022. Continued declines in real wages could lead consumers to prioritize saving over spending, potentially dampening demand and limiting upward pressure on prices.
• On 09/04/2024, Gold prices continued their upward trajectory, marking a seventh consecutive session of record highs on Monday, driven partly by increased purchases by Asian central banks. U.S. gold futures rose by 0.5% to $2,357.2, while spot gold climbed nearly 0.4% to $2,337.82 per ounce, reaching a peak of $2,353.79 earlier in the session. China’s central bank disclosed adding 160,000 ounces of gold to its reserves in March, with similar moves observed in Turkey, India, Kazakhstan, and some Eastern European nations throughout the year. Bart Melek, head of commodity strategies at TD Securities, noted that despite strong economic indicators, market expectations of rate cuts by June persist, influencing gold prices. However, sustained robust economic data, as seen in Friday’s labor market report in the U.S., may challenge these expectations. Lower interest rates, which reduce the opportunity cost of holding gold, alongside central bank purchases and geopolitical tensions, remain supportive factors for gold prices. Meanwhile, spot silver also saw gains, rising 0.4% to $27.59, reaching its highest level in nearly three years. UBS analysts foresee further upside potential for silver, projecting a target price of $32 per ounce.
• Former European Central Bank President Mario Draghi emphasized the urgent need for substantial investment in the European Union to address its pressing challenges, particularly in the realms of energy, digital transition, and green initiatives. In discussions with EU ministers, Draghi highlighted the significant funding gap between Europe and the United States, estimating it at half a trillion euros annually, with a third of that requiring public financing. While there was consensus on the necessary measures to enhance EU competitiveness, including lowering energy costs and reducing regulatory burdens, disagreements arose regarding the allocation of public funds. Draghi advocated for bold action and suggested leveraging European private savings alongside potential EU-level initiatives, such as creating new common cash facilities or utilizing private partnerships involving the European Investment Bank. While some, like French President Emmanuel Macron, supported the idea of common debt issuance, others, including Germany’s Economy Secretary Sven Giegold, expressed reservations, emphasizing the need for increased spending in research, development, and innovation sectors.
• On 10/04/2024, Gold sales have become a lucrative venture for Costco, with analysts estimating revenue to be between $100 million to $200 million per month, marking a significant acceleration since the product’s introduction in late summer 2023. Wells Fargo analysts attribute this success to Costco’s aggressive pricing and high customer trust, noting a surge in momentum evidenced by frequent Reddit posts, online sell-outs, and robust monthly e-commerce sales. Costco’s offering includes 1-ounce bars of nearly pure 24-karat gold, typically priced around 2% above the spot price, which was approximately $2,357 an ounce as of Tuesday morning. This surge in gold sales coincides with the metal’s strong performance in 2024, driven by inflation concerns and investor apprehension over the U.S. fiscal situation, characterized by a growing deficit and mounting debt exceeding $34.6 trillion.
• State Street Global Advisors is anticipating a significant shift in Federal Reserve policy, with predictions of a 50 basis point interest rate cut as early as June, according to a Bloomberg report. The asset manager, managing $3.6 trillion, foresees a total reduction of 150 basis points by the end of the year, a departure from the current market expectations. Despite a strong jobs report last week fostering optimism for fewer rate hikes, State Street asserts that underlying indicators such as credit card delinquencies and small business credit costs suggest an impending downturn later in the year. Lori Heinel, the firm’s chief investment officer, emphasizes that the market may be underestimating the probability of deeper rate cuts and highlights the fragility of the economic recovery beneath its surface resilience. She also anticipates the upcoming U.S. election to influence Fed decisions, forecasting more substantial cuts leading up to and following the election period.
• Fitch Ratings’ decision to revise China’s sovereign credit rating outlook to negative underscores growing concerns over the country’s public finances amid economic shifts towards new growth models. Despite affirming China’s IDR rating at “A+,” Fitch forecasted a rise in the general government deficit to 7.1% of GDP in 2024, reflecting the highest level since 2020. This move comes as China navigates uncertainties stemming from transitioning away from property-dependent growth towards a more sustainable model. While recent data, including robust factory output and retail sales, signal early optimism, Fitch’s outlook revision reflects the challenges ahead. The decision was met with regret from China’s finance ministry, echoing Moody’s previous warning in December regarding the country’s credit rating due to financial pressures from local government bailouts and the property crisis.
• On 11/04/2024, The consumer price index (CPI) in March rose more than expected, recording a 0.4% monthly increase and pushing the annual inflation rate to 3.5%, up from February’s rate. This uptick, driven primarily by higher shelter and energy costs, may temper expectations for an imminent Federal Reserve interest rate cut. Core CPI, which excludes food and energy, also rose by 0.4% monthly and 3.8% annually, surpassing predictions. The report led to a decline in stock values and an increase in Treasury yields, indicating concerns about persistent inflation. Energy prices continued their upward trend with a 1.1% increase, while shelter costs, a significant component of CPI, rose by 0.4% monthly, challenging the Fed’s outlook for easing inflation. Food prices saw a modest 0.1% monthly increase, with notable rises in meat, fish, poultry, and eggs, particularly a 4.6% surge in egg prices. Meanwhile, used vehicle prices dropped by 1.1%, and medical care services experienced a 0.6% price increase.
• DeAnne Julius, a former member of the Bank of England’s Monetary Policy Committee, predicts the U.S. Federal Reserve will likely cut interest rates before the European Central Bank, contradicting current market predictions. This insight comes amid significant inflation reductions in major economies, boosting equity markets since late 2023. Switzerland led with a rate cut in late March. Despite market expectations heavily favoring a June rate cut by the ECB, Julius believes the Fed’s dual mandate—considering both inflation and employment—will prompt quicker action in the U.S. Recent strong U.S. job figures and a reduction in inflation, though still above the Fed’s 2% goal, support this view. Consequently, while early 2024 forecasts anticipated six Fed rate cuts, current expectations have adjusted to about three.
• On 12/04/2024, In February, the U.K.’s gross domestic product (GDP) grew by 0.1%, matching expectations and signaling a modest rebound in economic activity. This figure comes after the U.K. experienced a technical recession in the latter half of 2023, with the economy shrinking in both the third and fourth quarters. Despite this slight uptick, the annual GDP still showed a decline of 0.2%. The growth in February was driven primarily by a 1.1% increase in production output, although the construction sector saw a decrease of 1.9%. The services sector, which is a major component of the U.K. economy, grew by only 0.1%, slowing from 0.3% in January. This data suggests the recession might have ended last year, according to Paul Dales, chief U.K. economist at Capital Economics, who remains cautious about the strength of the recovery. This comes in contrast to U.S. economic conditions, where unexpectedly high inflation has pushed back expectations for interest rate cuts. Meanwhile, Goldman Sachs has adjusted its forecast for the Bank of England, expecting fewer rate cuts this year, starting in June.
• In March, the Producer Price Index (PPI) rose by a modest 0.2%, falling below the expected 0.3% and down from February’s 0.6% increase, according to the Labor Department’s Bureau of Labor Statistics. This slower growth in wholesale prices suggests potential relief from persistent inflation concerns, though the PPI still climbed 2.1% year-over-year, indicating ongoing inflationary pressures. The core PPI, excluding food and energy, also rose by 0.2%, meeting expectations. Notably, goods prices decreased by 0.1%, with a significant 1.6% drop in energy prices, contrasting with a rise in services prices by 0.3%. This comes amid concerns raised by higher-than-expected consumer price inflation, which could impact Federal Reserve rate decisions. Market reactions were subdued, with slight gains in stock futures and a decline in Treasury yields.
• On 13/04/2024, Wall Street faced a significant sell-off as concerns over inflation and geopolitical tensions dampened investor sentiment. The Dow Jones Industrial Average fell by 1.24% to close at 37,983.24, while the S&P 500 and Nasdaq Composite dropped by 1.46% and 1.62% respectively. Financial stocks particularly suffered, with major banks like JPMorgan Chase plummeting over 6% after announcing potential shortfalls in net interest income and persistent inflation concerns. Citigroup also saw a decline despite exceeding revenue expectations. Geopolitical worries were amplified by news of potential military actions between Israel and Iran, contributing to a rise in oil prices, with U.S. crude reaching $85.66 a barrel.
• On 15/04/2024, The situation between Israel and Iran escalated significantly over the weekend. Iran launched a barrage of drones and missiles at Israel, which Israel claims was in response to a suspected Israeli strike in Syria that killed top Iranian officials. Israel reported that it successfully intercepted 99% of the attacks, with only a 10-year-old girl severely injured by shrapnel. This marked the first time Iran directly targeted Israel, although Iran-backed groups like Hezbollah, Hamas, the Houthi movement, and forces loyal to Bashar al-Assad have previously engaged with Israel. Additionally, Iran’s Revolutionary Guards seized a cargo ship in the Strait of Hormuz, alleging ties to Israel. Major General Mohammad Bagheri of Iran declared the operation completed and stated there would be no further actions unless provoked. Iran’s Foreign Minister, Hossein Amir-Abdollahian, also indicated Iran’s readiness to defend its interests if necessary. This intensification of hostilities follows a pattern of retaliation and conflict escalation in the region.
• On 16/04/2024, Tesla is set to lay off over 10% of its global workforce, a move detailed in a memo from CEO Elon Musk to employees, highlighting a push for cost reductions and increased productivity as the company prepares for future growth. The news, which was first reported by Electrek and later confirmed by CNBC through the obtained memo, sent Tesla shares down by more than 5% on Monday. As of December 2023, Tesla employed 140,473 people worldwide. This workforce reduction comes amidst a challenging period for Tesla, with its shares declining 31% year to date and slowing sales growth in the competitive electric vehicle market. Despite the popularity of EVs globally, Tesla has faced heightened competition, notably from China’s BYD, which recently surpassed Tesla as the world’s top EV maker. Additionally, Chinese smartphone maker Xiaomi entered the EV market in March, announcing an electric car priced significantly lower than Tesla’s Model 3. Musk himself has acknowledged the intense competition from China, where Tesla operates a major factory, suggesting that the future automotive industry could be dominated by Chinese companies.
• Gold prices reached near record-highs on Monday, with a 20% rally over the last two months driven by safe-haven demand amidst ongoing Middle Eastern conflicts. Spot gold peaked at an all-time high of $2,431.29 last week, while US gold futures were around $2,373.30 an ounce. Goldman Sachs, observing gold’s resilience in the face of a stronger-than-expected US CPI and stable despite fewer anticipated Federal Reserve rate cuts and strong equity markets, has revised its year-end gold price forecast from $2,300 to $2,700 per ounce. The firm highlighted that traditional market factors like real rates, growth expectations, and the dollar do not fully account for the rapid and significant increase in gold prices, suggesting the continuation of an unshakeable bull market without signs of overvaluation.
•  Recent data from the UK’s Office for National Statistics highlights a complex scenario in the labor market, with wage growth outpacing expectations at 5.6% in the three months to February, slightly above the forecasted 5.5%. Meanwhile, unemployment has increased to 4.2%, up by 0.3 percentage points, with the employment rate falling to 74.5% and the proportion of working-age adults not in work or seeking employment rising to 22.2%. This mixed picture suggests a cooling labor market that could ease inflationary pressures, yet the Bank of England may remain cautious about reducing interest rates from their current 16-year peak of 5.25%, given the underlying volatility noted by the ONS in job data.
• On 17/04/2024, U.K. inflation decreased slightly to 3.2% in March, down from 3.4%, according to the Office for National Statistics, although the figure was still above the anticipated 3.1%. The largest downward influence on inflation was from food prices, while motor fuels exerted upward pressure. The core inflation rate, which excludes volatile items like energy, food, alcohol, and tobacco, was reported at 4.2%, slightly higher than the expected 4.1%. Services inflation also saw a slight decrease from 6.1% to 6%, yet it remained above both economist and Bank of England (BOE) expectations. Concurrently, signs of a weakening labor market emerged, with unemployment increasing to 4.2% and wage growth slowing slightly. BOE Governor Andrew Bailey recently remarked on the effectiveness of higher interest rates in controlling inflation, which has declined from its peak of 11.1% in October 2022. The BOE predicts that inflation will momentarily hit the 2% target in the spring before rising again slightly. This array of higher-than-expected figures has led investors to delay expectations for the BOE’s initial rate cut
• On 19/04/2024, An Israeli strike on Iran sent chills through the global oil market on Friday, causing prices to jump over 3% on fears of a wider Middle Eastern conflict.  While the exact target remains unclear, with Iran denying damage to nuclear facilities, explosions near a major airport and flight disruptions fueled worries. This incident highlights the delicate situation in the region, where any disruption to Iranian oil, a major player in the global market, could cause significant price spikes. The international community is watching closely as this latest development, likely a response to Iran’s nuclear program, raises concerns about escalation.
• Japan’s core inflation dipped slightly in March, with prices rising 2.6% compared to last year. This remains above the central bank’s 2% target, although it’s the first time since November 2022 that broader inflation (excluding fresh food and energy) fell below 3%. This slowdown comes after the Bank of Japan ended its negative interest rate policy last month. The central bank is now looking for signs of wage growth to accompany stable inflation before considering further policy changes.
• Tensions between Israel and Iran flared again on Friday as Israel launched a direct military strike on Iranian soil. This follows Iran’s first-ever direct attack on Israel with drones and missiles earlier in the week. While details are unclear, Iranian media reports explosions caused by air defense, not an Israeli attack.  The world is watching closely to see if this escalates further, with oil prices jumping over 3% on fears of a wider conflict. Investors are also seeking safer assets, pushing gold prices to record highs while US stock futures slipped.
• On 22/04/2024, On Saturday, the House passed a series of bills aimed at providing aid to Ukraine, Israel, and Taiwan, alongside a measure targeting the Chinese company ByteDance to sell TikTok. Following morning debates, these bills will be consolidated into a single package and forwarded to the Senate for approval before reaching President Joe Biden’s desk for signing into law. Despite acknowledging imperfections in the legislation, House Speaker Mike Johnson stressed the importance of supporting overseas conflicts without risking American troops. Johnson’s decision to push for the vote came with political risks, including threats from within his own party to remove him from his position. Despite this, he remained focused on fulfilling his duties. Following the passage of the aid package, Johnson received widespread recognition for his efforts. President Biden commended Speaker Johnson, along with other bipartisan lawmakers, for prioritizing national security and urged the Senate to swiftly approve the package. Senate Majority Leader Chuck Schumer indicated that the Senate could vote on the package as early as Tuesday.
• On 23/04/2024, Express, a longtime mall retailer, has filed for Chapter 11 bankruptcy protection in Delaware federal court, signaling financial distress. However, a group of investors led by brand management firm WHP Global is aiming to salvage the company by acquiring it. Express plans to shutter 95 of its namesake stores and all UpWest locations as part of its restructuring efforts. Despite the closures, remaining stores will maintain regular operations, including order processing and returns. The company attributes its bankruptcy filing to facilitate the sale of most retail operations to the investor consortium, which includes WHP, Simon Property Group, and Brookfield Properties. Express has secured a nonbinding letter of intent from the investors and $35 million in new financing from existing lenders, pending court approval. Additionally, the company received $49 million in cash from the IRS under the CARES Act, bolstering its liquidity. CEO Stewart Glendinning expressed optimism about the company’s progress in refining product offerings, driving demand, and enhancing operations amidst these challenging times.
• Tesla shares continued their downward trajectory for a seventh consecutive day, hitting their lowest point since January 2023 amidst increasing apprehensions ahead of the company’s first-quarter earnings report scheduled for Tuesday. The stock plummeted by 3.4% on Monday, closing at $142.05, marking a 43% decline for the year, positioning it as the second worst performer among S&P 500 constituents. Over the weekend, Tesla implemented further price cuts across the U.S., China, and Europe, slashing prices by up to $2,000 on its popular Model Y SUV and entry-level Model 3 sedan. Additionally, the price of Tesla’s premium driver assistance system, branded as Full Self-Driving (FSD), was reduced by one-third. Despite being marketed as FSD, the system necessitates a human driver behind the wheel, ready to intervene if necessary. Previously priced at $12,000 upfront or $199 per month on a subscription basis for most U.S. customers, the FSD option is now available at $8,000 upfront and $99 monthly. This price adjustment follows a month-long free trial offered by Tesla to customers across North America from late March onwards. These latest price cuts have exacerbated investor concerns in the wake of lackluster first-quarter deliveries, layoffs, and a recall of Cybertruck vehicles. Last week, Tesla initiated a voluntary recall of 3,878 Cybertruck units to rectify a serious “trapped pedal” defect, highlighted in a viral TikTok video from a Cybertruck owner. According to a filing with the National Highway Traffic Safety Administration, a pad atop the Cybertruck’s accelerator pedal could become dislodged and trapped in the interior trim, potentially leading to unintended acceleration.
• On 24/04/2024, China’s state-driven economy may be setting the stage for a new wave of bond defaults, potentially emerging as early as next year, according to a report by S&P Global Ratings released on Tuesday. This would mark the third wave of corporate defaults in roughly a decade, amidst concerns about overall growth in the world’s second-largest economy. While China has seen remarkably few defaults in recent years, with the corporate bond default rate falling to a mere 0.2% in 2023, this trend raises concerns about market distortion resulting from government directives to discourage defaults. Charles Chang, S&P Global Ratings’ Greater China country lead, highlighted the potential consequences of these directives, particularly as they relate to the bond market. The report suggests that while Chinese authorities have emphasized the importance of preventing financial risks, their heavy-handed approach, particularly in the real estate sector, may yield unintended consequences. This sector, once a cornerstone of the economy, has struggled following Beijing’s crackdown on developers’ excessive debt reliance, contributing to the broader economic slowdown. S&P’s analysis indicates that real estate has been a primary driver of defaults in recent years, underscoring the challenges faced by China’s economic policymakers.
• Shares of Kering, a French luxury conglomerate, nosedived by over 9% as trading commenced on Wednesday, following the company’s cautionary statement predicting a substantial decline in first-half profits due to diminishing demand for its flagship brand, Gucci. The company disclosed an expected 40% to 45% decrease in first-half operating income compared to the same period last year, attributing the downturn to challenging market conditions, especially in China, and the strategic repositioning of key brands, notably Gucci. Despite the initial plunge, the stock managed to slightly recover, trading down by 7.8% later in the morning. François-Henri Pinault, Kering’s chairman and CEO, cited a challenging first quarter marked by sluggish sales, particularly in China, and underscored the company’s commitment to investing in the long-term appeal of its brands, despite the anticipated decline in operating profit for the first half of the year.
• On 25/04/2024, A Russian court has ruled in favor of state-owned VTB Bank in its pursuit to recover $439.5 million held by JPMorgan Chase in U.S. accounts following the Ukraine invasion. The court has ordered the seizure of funds from JPMorgan’s Russian accounts and other assets, including its stake in a Russian subsidiary. VTB initiated legal action seeking compensation for the frozen funds and relief due to JPMorgan’s announced exit from Russia. JPMorgan, the largest U.S. bank, declined to comment, while VTB did not immediately respond. This case underscores the challenges faced by American banks amid Western sanctions and overseas interests. Meanwhile, President Biden signed a foreign aid bill granting expanded powers to locate and seize Russian assets in the U.S. JPMorgan, in its own lawsuit against VTB, argued that U.S. law prohibits the release of the funds, leaving the bank vulnerable to significant losses. JPMorgan contends that VTB’s pursuit in Russian courts breaches contractual agreements and poses substantial harm to the bank.
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• President Biden has signed into law a bill that would compel the sale of TikTok by its Chinese parent company, ByteDance, or potentially ban it altogether, raising concerns over national security due to the app’s Chinese ties. However, the process is expected to face numerous complexities, including legal challenges, a scarcity of qualified buyers, and potential opposition from Beijing. The legislation grants TikTok a window of 270 days, extendable to a year by the president, to complete a sale. Legal battles and geopolitical tensions may prolong the resolution of the issue, allowing TikTok to continue operating in the U.S. during this period. TikTok has vowed to contest the law, signaling a protracted and contentious legal battle ahead.
• The yen weakened beyond 155 against the U.S. dollar on Thursday, marking a new 34-year low amid the dollar’s persistent strength. Despite verbal warnings from Japanese authorities, the currency’s decline persisted, leading some to anticipate potential intervention as it reached multi-decade lows. However, market analysts suggest that the Bank of Japan (BOJ) may not take immediate action to support the yen in its upcoming monetary policy decision. The yen’s weakness is attributed partly to the dollar’s strength, fueled by ongoing concerns over U.S. inflation and indications from Federal Reserve Chair Jerome Powell that rate cuts may not be imminent. While Japanese authorities have increased verbal intervention efforts, their impact may be limited given the broader trend of dollar strength against other currencies. Investors are closely watching the BOJ meeting this week for insights into inflation forecasts, particularly in light of the weaker yen, rising oil prices, and robust wage growth.
• On 26/04/2024, The U.S. economy showed weaker growth than anticipated in the first quarter of the year, with the Commerce Department reporting a 1.6% annualized increase in gross domestic product (GDP), falling short of economists’ expectations of a 2.4% rise. Consumer spending, a significant driver of economic activity, also grew less than expected at 2.5%, contributing to the lower-than-expected GDP growth. While fixed investment and government spending helped sustain GDP growth, declines in private inventory investment and an increase in imports acted as drags. Additionally, net exports subtracted from the growth rate. On the inflation front, there was concerning news as well, with the personal consumption expenditures price index rising at a 3.4% annualized pace, the highest gain in a year. Core PCE prices, excluding food and energy, also surged at a 3.7% rate, well above the Federal Reserve’s 2% target. These figures suggest significant inflationary pressures, prompting market reactions, including a slump in futures tied to the Dow Jones Industrial Average and higher Treasury yields. David Donabedian, chief investment officer of CIBC Private Wealth US, commented that the report indicates slower growth coupled with higher inflation, likely pushing Federal Reserve Chair Jerome Powell toward a more hawkish stance for the upcoming Federal Open Market Committee meeting. This report arrives amid heightened uncertainty about monetary policy and speculation regarding potential interest rate cuts by the Federal Reserve, despite the current federal funds rate remaining at its highest level in about 23 years.
• Alphabet’s shares surged in after-hours trading on Thursday following the release of its quarterly results, which surpassed analysts’ expectations and showcased robust profits in its cloud division. Additionally, Alphabet announced its inaugural dividend, contributing to a post-market boost that pushed its market capitalization beyond $2 trillion. Key highlights from the report include earnings per share of $1.89, surpassing the expected $1.51, and revenue of $80.54 billion, exceeding the anticipated $78.59 billion. Notable metrics from the report include YouTube advertising revenue of $8.09 billion and Google Cloud revenue of $9.57 billion, both outperforming expectations. Alphabet’s revenue saw a notable 15% increase compared to the previous year, marking its fastest growth rate since early 2022. The company’s board also approved a cash dividend of 20 cents per share, scheduled for payment on June 17, with plans for future quarterly dividends. Moreover, Alphabet announced authorization for the repurchase of an additional $70 billion in shares. Despite a slight decline in cash, equivalents, and marketable securities compared to the previous year, Alphabet reported a significant 57% surge in net income to $23.66 billion.
• On 27/04/2024, Inflation remained persistent in March, with key indicators suggesting continued elevated price pressures, according to the latest report from the Commerce Department. The personal consumption expenditures price index, excluding food and energy, rose by 2.8% compared to a year ago, matching February’s rate and surpassing expectations. Including food and energy, the all-items PCE price gauge increased by 2.7%, slightly above estimates. Despite these figures, market reaction was muted, with Wall Street poised for higher opening, and Treasury yields fell. While there’s a slight increase in optimism regarding potential rate cuts, analysts caution against assuming a significant shift in Fed policy. Consumer spending remained resilient, with personal spending exceeding expectations, although the personal saving rate declined as households dipped into savings to support spending. The report, coupled with Thursday’s data showing a robust increase in PCE and below-expectation GDP growth, is likely to keep the Fed cautious, maintaining interest rates until substantial changes in economic data occur.
• On 30/04/2024, Australia’s ASX stock exchange is poised to debut its inaugural batch of approved spot bitcoin exchange-traded funds (ETFs) by the conclusion of 2024, as reported by Bloomberg. Several issuers, including VanEck and local firms BetaShares and DigitalX, have already submitted their ETF applications earlier this year. ASX, Australia’s leading equity exchange, facilitating roughly 80% of local trades, has a domestic market capitalization of $2.7 trillion as of March. While ASX confirmed ongoing discussions with interested issuers regarding crypto asset-based ETFs, it refrained from further commentary. Since 2022, Australian investors have traded spot bitcoin ETFs listed on CBOE Australia, with the Global X 21Shares Bitcoin and Ethereum ETFs being the sole spot crypto funds available. In the U.S., spot crypto ETFs were introduced in January and have since amassed $53.16 billion in total net assets across 11 funds, surpassing initial expectations. Additionally, Hong Kong anticipates its inaugural line of spot bitcoin and ether ETFs, with six funds set for official listing on April 30 following initial approval on April 15, a development hailed as significant despite its smaller estimated size compared to the U.S.
• On 03/05/2024, The possibility of the European Central Bank (ECB) diverging from the Federal Reserve on interest rate cuts could have significant negative implications for the euro zone, according to economist Daniel Lacalle. With the ECB likely to cut interest rates in June, recent inflation data has reinforced the case for reducing borrowing costs. Meanwhile, the Federal Reserve has maintained steady interest rates, citing a lack of progress in achieving its 2% inflation target. Lacalle expressed concern that the ECB’s rate cuts could signal weakness in the euro and lead to increased import costs, hindering economic growth in the euro zone. He noted that rate cuts alone may not stimulate credit demand without sufficient economic and investment opportunities, which are currently limited by regulation and energy policy in the euro area.
• The Japanese yen experienced a significant weakening, reaching levels not seen in 34 years against the U.S. dollar on Monday, briefly touching 160.03 before rebounding to around 156 later that day amid speculation of intervention by Japanese authorities. This strengthening continued on Wednesday, with the currency gaining more than 2% to trade near 153 against the dollar, likely due to further intervention. While Japanese authorities have not officially confirmed their role in supporting the currency, analysts estimate the size of the interventions, with the first suspected intervention possibly totaling between 5 trillion and 6 trillion yen ($32.7 billion to $39.2 billion). The yen’s weakening had persisted despite warnings from Japanese authorities, and the intervention came after it hit the 160 mark against the dollar. Factors contributing to the yen’s weakness include the Bank of Japan’s recent policy decision, continued strength in the dollar, and watered-down expectations for early interest rate cuts by the Federal Reserve. Additionally, recent U.S. inflation readings have highlighted challenges for the Fed in addressing stubborn inflation, while Japan’s ultra-loose monetary policy has led to concentrated carry trades in the yen, where traders borrow in low-interest-rate currencies to invest in higher-yielding assets elsewhere.
• On 04/05/2024, The latest U.S. labor market report showed that job growth in April was below expectations, leading to a slight increase in the unemployment rate. This has raised optimism among investors that the Federal Reserve might consider reducing interest rates soon. According to the Bureau of Labor Statistics, nonfarm payrolls increased by 175,000, falling short of the estimated 240,000. Additionally, the unemployment rate rose to 3.9%, contrary to expectations of it remaining at 3.8%. Average hourly earnings saw a modest rise of 0.2% from the previous month and 3.9% from a year ago, below consensus estimates, indicating subdued inflationary pressure. The report also noted a slight uptick in the broader measure of unemployment, while the labor force participation rate remained stable. Following the report, Wall Street reacted positively, with futures tied to major indices extending gains, and Treasury yields experiencing a notable decline. Overall, the report suggests a balanced economic environment, potentially easing pressure on the Federal Reserve to tighten monetary policy further.
• On 06/05/2024, Warren Buffett, the renowned co-founder of Berkshire Hathaway and one of the world’s wealthiest individuals, recently addressed the topic of artificial intelligence (AI) deepfakes and their potential implications for financial scams during the company’s annual shareholder meeting in Omaha, Nebraska. Despite admitting his lack of expertise in AI, Buffett emphasized its significance and compared its impact on illicit activities to that of nuclear weaponry. He recounted an unsettling encounter with a deepfake impersonating himself, highlighting the alarming potential for financial fraud enabled by AI technology. While acknowledging AI’s potential for positive applications, Buffett expressed concern about its misuse and the growing threat of scams in the digital age. This discussion underscores Buffett’s longstanding apprehension about the risks associated with AI technology, despite Berkshire Hathaway’s significant investments in tech giants like Apple.
• U.S. Treasury yields continued their decline on Monday, following a downward trend initiated by Friday’s release of the April jobs report, which revealed weaker-than-anticipated growth in payrolls and an unexpected uptick in unemployment. The 10-year Treasury yield dropped by 2 basis points to 4.4975%, while the 2-year Treasury yield saw a slight decrease to 4.8056%. These movements are inversely correlated with bond prices. The report from the Bureau of Labor Statistics showed a modest increase of only 175,000 jobs last month, falling short of the economists’ estimate of 240,000. Additionally, the unemployment rate rose to 3.9%, contrary to expectations of it remaining steady at 3.8%. Wage growth also failed to meet projections. This disappointing labor report has fueled uncertainty regarding the timing and extent of potential interest rate cuts by the Federal Reserve, with many investors now anticipating fewer cuts later in the year. Monday’s economic agenda includes scheduled speeches by Richmond Fed President Tom Barkin and New York Fed President John Williams.
• On 07/05/2024, The Reserve Bank of Australia (RBA) opted to maintain interest rates unchanged, holding steady at the current 12-year high of 4.35 per cent, despite facing persistent inflationary pressures and escalating housing prices. RBA Governor Michele Bullock indicated that while the board discussed the possibility of raising rates, they ultimately decided to maintain the status quo. Bullock emphasized that the current policy stance is seen as restrictive, and while the board doesn’t anticipate further rate hikes imminently, it remains open to adjustments if inflation remains elevated. Bullock underscored the cautious approach, noting that recent economic data suggests the need for vigilance, and reiterated the bank’s readiness to act if inflation persists above forecasts. She also acknowledged that, without the rate increase last November, the board might have considered a rate hike today. Financial markets had largely anticipated this decision, though economists remain divided on the timing of future rate adjustments.
• On 09/05/2024, The Bank of England is expected to maintain its current interest rates at 5.25% during its upcoming meeting, with Governor Andrew Bailey’s statement drawing significant attention as speculation mounts about a potential rate cut in the summer. The Monetary Policy Committee is anticipated to announce the decision at midday, evaluating various data points including the recent UK inflation figures, which exceeded expectations at 3.2% in March. While core inflation and services inflation remain high, Bailey has indicated confidence in a gradual decline in inflation due to tighter financial conditions. However, April is expected to see a significant drop in headline inflation, primarily driven by a year-on-year decrease in energy prices. Market sentiment regarding a June rate cut appears divided, with around a 50-50 probability, while expectations for a reduction in August have increased, with an estimated 80% likelihood of a 25 basis point trim. Investors will closely monitor the MPC’s voting split for insights into the June meeting, with Bailey’s commentary and the Bank’s outlook forecast serving as crucial indicators for future policy decisions. Additionally, the rapid decline in headline inflation towards the target could exert pressure on the Bank to initiate policy normalization.
• On 10/05/2024, The Bank of England (BOE) kept interest rates unchanged as expected, signaling that its current restrictive monetary policy was effectively controlling inflation, but cautioned that a rate cut in June was not guaranteed. The Monetary Policy Committee voted 7-2 to maintain rates at their current levels, with some members still advocating for a rate cut. This decision maintains the BOE’s key Bank Rate at 5.25%. While acknowledging elevated indicators of inflation persistence, particularly in services inflation, the MPC also noted that geopolitical issues were introducing upside risks to the near-term price outlook. The BOE announced a new approach, stating it would assess forthcoming data releases to determine if risks from inflation persistence were diminishing. Despite encouraging recent figures, BOE Governor Andrew Bailey emphasized that it was not yet appropriate to consider cutting Bank Rates.
• On 10/05/2024, The Bank of England (BOE) kept interest rates unchanged as expected, signaling that its current restrictive monetary policy was effectively controlling inflation, but cautioned that a rate cut in June was not guaranteed. The Monetary Policy Committee voted 7-2 to maintain rates at their current levels, with some members still advocating for a rate cut. This decision maintains the BOE’s key Bank Rate at 5.25%. While acknowledging elevated indicators of inflation persistence, particularly in services inflation, the MPC also noted that geopolitical issues were introducing upside risks to the near-term price outlook. The BOE announced a new approach, stating it would assess forthcoming data releases to determine if risks from inflation persistence were diminishing. Despite encouraging recent figures, BOE Governor Andrew Bailey emphasized that it was not yet appropriate to consider cutting Bank Rates.
• On 14/05/2024, Monday’s astonishing surge in GameStop inflicted nearly $1 billion in losses on short sellers, as per data from S3 Partners. With GameStop skyrocketing by 74%, hedge funds engaged in short selling suffered a mark-to-market loss of $838 million in the traditional video game retailer. Ihor Dusaniwsky, S3’s managing director of predictive analytics, highlighted the likelihood of short covering in response to the stock’s high squeeze score prior to the trading day. The sudden surge was seemingly ignited by “Roaring Kitty,” also known as Keith Gill, who reemerged on social media with a cryptic post, reminiscent of the 2021 meme stock frenzy that made Wall Street history. This phenomenon involved individual investors targeting short sellers and hedge funds, forcing them to cover their positions and driving up the targeted stocks’ prices. Currently, GameStop’s short position comprises over 24% of its freely available shares, known as the float, according to FactSet.
• On 15/05/2024, Federal Reserve Chair Jerome Powell emphasized on Tuesday that inflation is declining at a slower pace than anticipated, signaling that the central bank will maintain its current stance for an extended period. Addressing the Foreign Bankers’ Association’s annual general meeting in Amsterdam, Powell highlighted the unexpected inflation readings, indicating a need for patience in allowing current policy measures to take effect. While he anticipates inflation to decrease over time, Powell emphasized the importance of maintaining current policy rates for a longer duration than previously anticipated. However, he reiterated that the Fed is not considering rate hikes at this point. Despite Powell’s remarks, market reactions were subdued, with Treasury yields slightly declining and futures traders adjusting the probability of the Fed’s first rate cut, potentially in September. This stance aligns with Powell’s previous statements during the May 1 Federal Open Market Committee meeting, where the committee unanimously opted to maintain rates due to insufficient progress in curbing inflation, despite multiple rate increases. The latest inflation data, particularly the higher-than-expected rise in the producer price index for April, further underscores the persistent challenges in addressing inflationary pressures.
• Vanguard Group announced the appointment of Salim Ramji, a former executive at BlackRock, as its new chief executive officer and board member, effective July 8, according to a statement released on Tuesday. Ramji will succeed Tim Buckley, who has served as chairman and CEO for over three decades and announced his departure in February. During Buckley’s tenure, Vanguard significantly expanded its assets under management to $9 trillion, representing an 80% increase. Ramji previously held roles at BlackRock, including global head of corporate strategy and global head of iShares and Index Investments, overseeing a substantial portion of the firm’s assets and growth. With Ramji’s appointment, Vanguard aims to continue its position as the world’s second-largest asset manager, managing 423 funds globally and employing approximately 20,000 individuals.
• On 16/05/2024, In April, inflation showed a slight easing, offering some relief for consumers, although it remained above levels that would indicate an imminent interest rate cut. The consumer price index (CPI), a measure of the cost of goods and services, rose by 0.3% from March, slightly below the expected 0.4%. However, on a year-over-year basis, the CPI increased by 3.4%, in line with expectations. Excluding food and energy, core inflation rose by 0.3% monthly and 3.6% annually, matching forecasts. Despite these figures, which were the lowest since April 2021 in the case of the core 12-month inflation reading and the smallest monthly increase since December, markets reacted positively, with stock index futures rallying and Treasury yields falling. Futures traders adjusted their expectations, raising the implied probability of the Federal Reserve starting to cut interest rates in September. However, retail sales remained flat in April, falling short of the estimated 0.4% increase, suggesting that consumers may not be keeping pace with price increases.
• On 17/05/2024, Managing credit card debt is becoming increasingly challenging for Americans, as total credit card debt has surged to $1.12 trillion, according to a recent report by the Federal Reserve Bank of New York. The average consumer’s credit card balance has risen to $6,218, marking an 8.5% increase from the previous year, as highlighted by TransUnion’s quarterly credit industry insights report. Charlie Wise, TransUnion’s senior vice president of global research and consulting, noted that consumers are heavily relying on credit cards to manage current economic conditions. Higher prices and interest rates have put significant strain on households, despite a gradual decline in the consumer price index from a peak of 9.1% in June 2022 to 3.4% in April. Young adults, in particular, face financial pressure due to rising rents, increasing student loan balances, and larger auto loan payments. As a result, essential expenses such as rent, auto loans, and utilities are prioritized over credit card payments. This financial juggling has led to a rise in credit card delinquency rates, with 8.9% of balances transitioning into delinquency over the past year, as reported by the New York Fed. TransUnion also noted that “serious delinquencies,” those 90 days or more past due, have reached their highest level since 2010.
• On 18/05/2024, Chinese authorities have announced new measures to support the real estate sector by enabling state-owned enterprises (SOEs) to purchase unsold apartments. This initiative aims to provide developers with additional funding to complete construction on pre-sold properties. The People’s Bank of China Deputy Governor Tao Ling stated that the central bank would allocate 300 billion yuan ($42.25 billion) to financial institutions, which in turn would lend to local SOEs for buying already-built but unsold apartments. This support is expected to generate 500 billion yuan in financing, with SOEs potentially converting these purchases into affordable housing. The funds generated from these sales would allow real estate companies to finish constructing other apartments. Additionally, since January, commercial banks have provided 935 billion yuan in loans to complete construction on pre-sold properties listed under a specific program, as reported by the National Financial Regulatory Administration Deputy Director Xiao Yuanqi. According to Larry Hu, chief economist at Macquarie, this move by the government acts as a last-resort buyer, injecting much-needed liquidity into developers and facilitating housing delivery.
• On 22/05/2024, The U.K.’s inflation rate dropped to 2.3% in April, down from 3.2% in March, according to the Office for National Statistics, but the decline was less than economists’ expectations of 2.1%. This marked the first time inflation has fallen below 3% since July 2021, bringing it closer to the Bank of England’s (BOE) 2% target. Despite the overall decrease, services inflation only slightly eased to 5.9%, missing forecasts of 5.5%, and core inflation, excluding volatile items, dipped to 3.9% from 4.2%. These figures have led traders to reduce their expectations for a June interest rate cut by the BOE, with the probability dropping to 15% from 50% earlier. The chance of an August cut also fell to 40% from 70%, reflecting a cautious approach by investors who are now closely watching core and services inflation for future monetary policy decisions.
• The Biden administration plans to release 1 million barrels of gasoline from reserves in the Northeast to help lower prices at the pump ahead of the Fourth of July holiday and the summer driving season. Energy Secretary Jennifer Granholm announced this strategic release to ensure a sufficient supply for the tri-state region and the Northeast during a critical time for American drivers. Gasoline futures have increased by 19% this year due to rising oil prices influenced by OPEC’s production cuts and geopolitical tensions. Despite recent declines in gas prices, which averaged $3.59 per gallon nationwide on Tuesday, the administration aims to maintain affordability. The Department of Energy will release the gasoline in batches of 100,000 barrels, ensuring delivery by June 30 to maximize competitive bidding and impact prices at the pump.
• On 23/05/2024, U.S. stocks declined on Wednesday as investors reacted to the Federal Reserve’s May meeting minutes, which suggested that persistent inflation might prevent near-term interest rate cuts. The Dow Jones Industrial Average fell by 201.95 points, or 0.51%, to 39,671.04, marking its worst session in May. The S&P 500 decreased by 0.27% to 5,307.01, and the Nasdaq Composite dropped by 0.18% to close at 16,801.54. The meeting minutes indicated a lack of significant progress in reducing inflation, with some participants considering further rate hikes if the inflation target of 2% remains unmet. Investors were also focused on Nvidia’s upcoming earnings report, with the chipmaker’s stock falling 0.5% ahead of the results. Analysts expect Nvidia to report substantial year-on-year growth in earnings per share and revenue, potentially influencing broader market movements. Deutsche Bank strategist Henry Allen highlighted the significance of Nvidia’s earnings, noting that its last report in February had led to a notable surge in the S&P 500.
• On 24/05/2024, U.K. retail sales volumes dropped 2.3% in April due to wet weather, which deterred shoppers, as reported by the Office for National Statistics. Economists had expected a smaller decline of 0.4%. The ONS noted declines across most sectors, including clothing, sports equipment, games and toys, and furniture, attributing these to reduced footfall from the poor weather. Although sales were up 0.7% over the three months to April compared to the previous three months, they were down 0.8% year-on-year. Kris Hamer from the British Retail Consortium highlighted growth in cosmetics and computer sales as positive aspects of the data. He expressed optimism that with summer approaching and inflation nearing the Bank of England’s 2% target, consumer confidence and spending would improve. Indeed, a GfK survey released on Friday showed an improvement in consumer confidence regarding personal finances and the broader economic outlook in May.
• On 25/05/2024, The U.S. economy is experiencing a “selective recession,” according to JPMorgan analyst Matthew Boss, characterized by a significant disparity between upper-income and lower-income Americans. While wealthier consumers remain relatively unaffected, lower-income individuals are struggling with the rising cost of living as their savings dwindle. Boss noted that over 70% of low-income consumers report difficulties in making ends meet. Middle-class Americans are also feeling the pressure, with 67% indicating their income isn’t keeping up with inflation. Despite a decrease in inflation from its peak in 2022, consumer prices are still 22% higher than five years ago, intensifying financial strain on lower- and middle-income households. Many Americans have likely exhausted the savings they built up during the pandemic, with a significant portion lacking a $1,000 emergency fund. Recession fears persist as the job market weakens and interest rates remain elevated, with the New York Fed estimating a 50-50 chance of a downturn within the next year.
• On 28/05/2024, Gold prices have recently reached record highs, peaking at $2,449.89 per ounce, with silver and copper also experiencing significant gains. Currently, gold trades at $2,351.3, supported by a weakened U.S. dollar, declining Treasury yields, geopolitical tensions, and strong demand from China, which has overtaken India as the largest buyer of gold jewelry. Chinese consumers’ increased purchases, totaling 603 tons last year, are expected to continue driving demand. UBS has raised its gold price forecasts to $2,500 per ounce by September and $2,600 by year-end, citing strong Chinese demand and softer U.S. economic data, which influence expectations for Federal Reserve rate cuts.
• On 29/05/2024, The International Monetary Fund (IMF) has raised its forecast for China’s economic growth in 2023 to 5%, up from 4.6%, citing robust first-quarter figures and recent policy interventions. Following an IMF visit to China, the organization also upgraded its 2025 growth forecast to 4.5% from 4.1%. However, by 2029, the IMF predicts growth will slow to 3.3%, down from a previous estimate of 3.5%, due to an aging population and declining productivity growth. China’s economy exceeded expectations by growing 5.3% in the first quarter, driven by strong exports, although consumer spending remained weak while industrial activity increased. Recent Chinese government measures to support the real estate sector, such as removing the mortgage rate floor, were noted as positive steps. Gita Gopinath, the IMF’s first deputy managing director, emphasized the need for more comprehensive actions to protect buyers of unfinished homes and resolve issues with insolvent developers. She also highlighted the importance of structural reforms to sustain high-quality growth and mitigate economic risks. During her visit, Gopinath met with various Chinese officials, stressing the need for policies that bolster domestic demand and address economic imbalances.
• The U.S. stock market is now settling trades in a single day, a speed last seen about a century ago, under new SEC rules that took effect on May 28. This transition to the T+1 system, which also occurred in Canada and Mexico, aims to reduce financial system risks by halving transaction completion time. However, concerns exist about initial challenges, such as international investors struggling to source U.S. dollars on time and global funds moving at different speeds. The SEC has warned of possible short-term increases in settlement fails and challenges for a small segment of market participants. The Securities Industry and Financial Markets Association has set up a T+1 Command Center to address potential issues. Despite extensive preparations, including staff relocations and workflow overhauls, the industry is wary of potential dependencies and rough patches among firms, as noted by Tom Price, Sifma’s head of technology, operations, and business continuity.
• On 31/05/2024, MSCI’s global equities gauge declined on Thursday, and bond yields, along with the U.S. dollar, also dropped as investors digested weaker-than-expected U.S. growth data and comments from the Federal Reserve for indications on future interest rates and the economic outlook. The Commerce Department reported that the U.S. economy grew at an annualized rate of 1.3% in the first quarter, down from the initial estimate of 1.6%, following downward revisions to consumer spending. The U.S. dollar index fell after reaching a two-week high the previous day, and U.S. Treasury yields declined following two days of gains due to weak government debt auctions. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, noted that the weaker economic and consumption data could lead to less inflation, increasing the likelihood of rate cuts by the Fed, though he emphasized that the outlook for rates is just one factor among many.