📊 Market Report.
🚀 Nvidia shares closed at a record high on Monday as the company prepares to report earnings this season. Nvidia’s GPUs are used extensively by companies like Microsoft, Meta, Google and Amazon to build large AI clusters for advanced AI work like ChatGPT. These tech giants will report results by the end of October, providing updates on their AI infrastructure spending which heavily benefits Nvidia, that controls around 95% of the market for AI training and inference chips. Nvidia recently said demand for its new AI GPU called Blackwell is “insane” and will generate billions in revenue this quarter. At a market cap of $3.4 trillion, Nvidia is the second most valuable publicly traded U.S. company after Apple.
💼 Fed Governor Christopher Waller signaled future rate cuts may be less aggressive than the 0.5% cut in September due to concerns about the economy slowing less than desired. Recent data on employment, inflation, GDP and income suggest the economy is not slowing as much as the Fed would like to see. Waller says policy should “proceed with more caution on the pace of rate cuts” than the large half point cut in September. Officials had signaled another 0.5% cut in 2023 and 1% more cuts in 2024 but Waller did not commit to a specific path.
💷 UK pay growth slowed to 4.9% in the three months to August, the weakest in over two years and in line with forecasts. Inflation data due Wednesday is expected to show consumer prices fell to 1.9% in September, below the 2% target. This cooling data will likely be welcomed by the Bank of England as it considers interest rate cuts. Markets show an 80% chance of a 0.25 percentage point rate cut by the Bank of England in November.
🌏 According to a Reuters poll of economists, China’s economy is forecast to grow 4.8% in 2024, below the government’s around 5% target, and may cool further to 4.5% in 2025. GDP is expected to have risen 4.5% in Q3 2022, the weakest since Q1 2023.
💹 China may raise an additional 6 trillion yuan in special treasury bonds over 3 years to stimulate the slowing economy. This figure of $850 billion was reported but failed to significantly boost stock markets lacking official confirmation. The size of the expected fiscal stimulus package has been subject to speculation as growth misses targets. The property downturn has reduced local government revenues dependent on land sales. China relies heavily on debt-driven investment and exports, leaving consumption lower than other nations. The fiscal stimulus will provide support for low-income households, property and indebted local governments.
📉 Hong Kong’s Hang Seng HSI has fallen more than 12% in recent days from the highs reached after the announcement of stimulus measures. In our reports a fortnight ago we warned that this scenario was highly likely.
🛠️ Boeing is in trouble. It has been over a month since the strike began of over 30,000 Boeing machinists who rejected a tentative contract. The strike is adding pressure to new CEO Ortberg and costs Boeing an estimated $1B per month according to S&P while hurting its already difficult year. Talks have broken down with the union and company still at an impasse, idling plane production and depriving Boeing of cash. Boeing announced 10% global job cuts including executives and delayed 777X delivery to 2026. The strike is a “doom loop” adding to Boeing’s cash issues.
📈 Market Review:
📊 Yesterday, the Dow Jones broke all-time highs above 43,000 points. Nvidia also reached new all-time highs; we have explained the reasons for this above. Mini S&P 500 futures have already broken 5900 points and are currently trading above it. The Nasdaq-100, meanwhile, is almost at 20,500 points, just over 200 points off its all-time highs.
💵 The dollar continues to strengthen on suspicions that the Fed may delay further cuts. The dollar index DXY has risen to 103.35 in the last few hours and, although it has retreated, it still remains above 103. The EUR/USD lost the 1.09 level a few hours ago, but has regained it. The 2-year US bond remains in the range of 3.95% to 4%, in line with sentiment towards the Fed.
🇪🇺 The European market remains strong, paradoxically, despite poor economic data. The DAX reached a new all-time high at 19,650 points and is now slightly down at 19,580 points. The EuroStoxx 50 has managed to climb above 5,000 points and is currently trading at 5,025 points.
🛢️ Oil prices continue to fall and Brent crude oil is currently trading at 73.75 dollars. Gold has regained its bullish tone and rose above 2680 dollars yesterday, but is now slightly down. Meanwhile, bitcoin has surpassed 66,000 and has fallen slightly in the last few hours to 65,640 dollars.
🌍 Geopolitics:
⚔️ China conducted large-scale military drills called “Joint Sword-2024B” around Taiwan on Monday in response to President Lai’s speech. The drills simulated blockading key ports, assaulting maritime and ground targets, and involved warships, aircraft carriers, fighter jets and bombers. However, no missiles were launched and the drills appeared less intense than August exercises following Pelosi’s visit. Let us not forget that the US has recently announced more arms funding for Taiwan, which is interpreted by China as foreign interference in national affairs.
🚁 After South Korea last week sent drones into the North Korean capital dropping political leaflets, North Korea blew up sections of inter-Korean roads and rail lines along the border on Tuesday, South Korea’s military responds to explosions from North Korea by opening fire south of the Military Demarcation Line. Footage showed explosions in northern parts of border infrastructure and plumes of smoke rising. The destroyed sections were remnants of recent reconciliation efforts between the Koreas achieved during the Trump era.
🇪🇺 The European Parliament’s trade committee voted to approve a €35 billion loan package for Ukraine as part of a larger $50 billion loan agreed by G7 leaders. The loan package faces opposition from some far-right parties but was approved by the trade committee. The vote provides backing for further EU assistance and loans to Ukraine at a critical time. A few days ago, The Economist magazine suggested that it was time to change strategy given the imminent defeat of Ukraine.
🛑 Germany will no longer supply heavy equipment to Ukraine. Olaf Scholz also refused Vladimir Zelensky permission to bombard Russia with Western weapons. Berlin also gave Kiev no guarantees for a quick NATO membership.
⚠️ Joe Biden: ‘any attempt (by Iran) to kill Donald Trump would be an act of war’. Which coincidentally would provide the perfect pretext for warmongers in the US Congress who have called for the US to bomb Iran.
🛡️ The Pentagon has announced the immediate deployment of a Terminal High Altitude Area Defence (THAAD) battery operated by US soldiers in Israel to bolster Israeli defences against any future missile attack by Iran.
⏳ Israeli Prime Minister Netanyahu officially approves plans to attack Iran, “sooner or later”.
👽 Aliens? Drone swarms against US military bases are operated by a UFO ‘mother ship’, according to a senior Pentagon official.
