📉 Market Report.
The US technology sector is once again weighing on the markets. The Justice Department has escalated its antitrust investigation of Nvidia by sending subpoenas to the chipmaker and other companies. Subpoenas are legally binding requests for information, taking the probe closer to a potential formal complaint. The DOJ is investigating Nvidia’s acquisition of RunAI and concerns it will hinder customers switching away. Nvidia’s stock fell 9.5%, erasing $278.9 billion in value—the largest value drop for a US firm ever. Chip titans SK Hynix and Taiwan Semiconductor Manufacturing both saw at least 4% declines.
🏭 Yesterday’s manufacturing data released in the US left several key findings. Manufacturing PMIs show that industrial activity is slowing, coming in worse than expected and below 50. Construction spending also contracted, despite expectations for a slight increase of 0.1% in July. ISM manufacturing employment is a 46 in August, indicating a slowdown in the hiring of workers in the sector. And finally, the ISM manufacturing prices for August rises to 54, above expectations and indicating inflationary pressure in the manufacturing sector. Nothing that smells of inflation and weak employment is positive, as it blocks monetary tools.
🛢️ In previous reports, we mentioned the internal battle in Libya regarding the central bank’s control over its crude oil revenues. The governor of Libya’s central bank, who fled Tripoli in the face of threats between government factions, would be willing to return if a governing agreement is reached. UN-led talks in Tripoli led to “significant understandings” and a plan to finalize an agreement, though details were not provided. An agreement would pave the way for over 500,000 bpd of Libyan oil supply to return to global markets. In the last few hours, the price of crude oil has fallen to the lowest level since 2023, with Brent crude oil reaching 73 $ and WTI crude oil falling to 69 $.
🥛 China Targets EU Dairy at the Same Time as Its Own Milk Sector Collapses. Milk production has surged 40% in a decade but consumption is falling as the economy slows, leaving many farmers unprofitable. The severe downturn in its own industry could be the result from overproduction outstripping slowing consumption. China’s dairy imports were already declining this year while exports increased sharply. Measures against the EU are seen as retaliation for its tariffs on China, though impact may be limited due to existing trade shifts.
📈 Market View:
The markets are trying to contain fear after Nvidia’s sudden drop yesterday, which set a record for capital outflow from a company in a single session, something expected considering its market weight. The SP500 has retreated to 5500 points, where it tries to hold in the last hours. Nasdaq 100 has retreated to 18,825 points and also tries to stay at those levels. Unfortunately, even the indices less dependent on the technology sector have fallen, and Russell 2000 is in the area of 2150 points.
💵 The dollar has stopped advancing, but remains stable in the area of 101.50 points DXY dollar index. The EURUSD is in the area of 1.1050, but charts discount possible further declines. The 2-year US bond has retreated to 3.85%, as in this scenario, rate cuts are taken for granted.
📉 European stocks have also retreated. The Dax has fallen from its highs practically at 19,000 points to the current 18,600 in recent hours. Even Asian stocks have also weakened in recent hours, the Hang Seng HSI index has lost the support of 17,500 points again.
🪙 The crude oil market we commented on above. Surprisingly, gold has weakened although it is still trading above 2500 $ an ounce. Bitcoin has also retreated to the area of 56,500 $, if it does not manage to advance clearly bullish shortly, it faces possible bearish patterns on the charts.
🌍 Geopolitics:
Goldman Sachs takes a stance and claims that a Donald Trump victory could reproduce an economic shock for the US economy. Apparently, the team of analysts have chosen a candidate, as they claim that if Kamala Harris wins, it will be a boost for the economy. It is worth noting that in the 2016 election they did the same thing, claiming that a Donald Trump victory would sink the stock markets. However, after Donald Trump’s 2016 victory, the SP500 broke all-time highs and rose uninterruptedly until 2018.
⚔️ Ukraine’s Minister of Strategic Industries and four other ministers resigned in a major government shake-up amid critical war developments. On the battlefield, Ukraine presses an incursion into Russia’s Kursk region as Moscow’s troops advance in eastern Ukraine. At least 50 were killed in the deadliest Russian missile strike of the year hitting a military institute in Poltava. Upcoming changes could affect agriculture and infrastructure, and the opposition is calling for a unity government, following the suspension of elections and the end of Zelensky’s term in May 2024.
