Market Report.
๐ The distribution cycles that started a few weeks ago are reversing. We narrated in these reports how, as the technology sector slowed and lost steam, sectors such as healthcare and real estate gained traction in the market, indicating a redistribution of capital. This fits the narrative of a soft landing of the US economy and more conservative investments.
๐ However, the euphoria of the new highs is bringing the technology sector model back into the lead. So far this month, the technology sector is once again leading the way with a rise of over 4%, while the health care sector loses over 2.50% and real estate almost 2%. The strategic staples sector, which also benefited from the strategic reallocation, falls more than 1.80% in the last month.
๐ฐ At the same time, we have gold breaking new all time highs, and simultaneously the dollar rising sharply. Bond yields are also rising, in line with more aggressive and less conservative investing.
โ ๏ธ In short, something is not right. The above scenario presents contradictions or incompatibilities; we suspect that we may be close to further bitter surprises in equity markets.
๐ Final rules banning certain US investments in AI in China and requiring notification of some investments in sensitive technologies like AI and semiconductors are under review. The rules stem from Biden’s August 2023 executive order aiming to prevent helping China’s military with American investors’ expertise by investment from the US to China in areas like AI, semiconductors, microelectronics and quantum computing. The Treasury declined to comment on the rules but generally provides at least a 30-day period before such regulations take effect.
๐ Josรฉ Luis Escrivรก, member of the ECB governing council and governor of the Bank of Spain, was asked about risks that inflation could face too much pressure. Escrivรก said that currently, data suggests inflation is approaching the ECB’s target of around 2% in line with the central bank’s September macroeconomic projections. But He added that the risk balance included in the ECB’s latest projections after its October 17 rate decision contemplated inflation could be “somewhat higher than expected and vice versa”. For now, Escrivรก reiterated inflation appears on track to approach the ECB’s target in line with its September forecast case. Any signs that inflation deviates notably from projections could impact the ECB’s policy path.
๐ Another giant of the car industry is losing strength, Korea’s Hyundai. Hyundai Motor India’s โน270 billion IPO was oversubscribed 2.37 times, attracting strong bids from institutional investors. However, retail investor participation was low at just 50% due to concerns around the pricing not being attractive. Over 260 Indian companies have raised over $9 billion via IPOs so far in 2024, a record high share for the country. However, car sales in India have slowed after two years of highs on inflation worries deterring purchases.
๐ Additionally, according to data from the European Automobile Manufacturers’ Association (ACEA), new automobile registrations in the EU fell 6.1% last year to 809,163 units in September 2024, a less severe drop than the 18.3% drop in August. New automobile registrations in 2024 have stayed steady at +0.6%.
Market View:
๐ Equities are turning around. The SP500 futures are trading below 5900 points again, accumulating a fall of more than 0.50% and currently trading at 5866 points. The Nasdaq 100 is back down to the 2240 level from the 2400 level it reached in the last hours.
๐ต The dollar continues to rise with the DXY dollar index touching 104 points, while the EURUSD is now at 1.0815. US 2 and 10 year bond yields are above 4%. The Fed may be considering the idea of not cutting rates at upcoming meetings.
๐ European equities are also falling. The DAX 40 is down 0.40% towards 19400 points from its highs near 19700 reached last week. The Eurostoxx 50 remains below 5000 points and is currently trading at 4925 points, accumulating a fall of more than 0.30%.
๐ข๏ธ Oil prices strengthen again. Brent crude is close to 75 dollars a barrel. Gold is at new all-time highs, trading above 2750 dollars. Bitcoin, which approached $70,000 over the weekend, has fallen back to the current $67,000.
Geopolitics:
๐ Moldova’s referendum on EU membership passed by a razor-thin margin of 50.46% Yes to 49.54% No, amid accusations of Russian interference. However, Moldova itself has also been accused of unevenly facilitating expatriate voting to influence the outcome. The breakaway Russian-backed region of Transnistria further complicates Moldova’s geopolitical situation. In the presidential election, incumbent Sandu received only 41% versus 27% for her opponent, signaling a possible political shift. With opposition expected to consolidate for the runoff, Sandu appears in jeopardy of losing the presidency. Sandu blamed the close referendum result on an “unprecedented assault” of Russian interference. Her government also claimed a scheme emerged to buy 300,000 No votes on the referendum. The razor-thin referendum passage and weakening Sandu support show Moldova’s political winds may be changing direction again. In 2023, Anti-government protests in Moldova called for Sandu’s resignation over higher fuel prices and economic issues.
๐ According to Amstrong Economics, US administrations are manipulating inflation and employment data to favour the Biden-Harris administration. Not only that, they claims that the FBI has manipulated crime statistics to show that crime in the US has fallen. Professor Carl Moody of the College of William and Mary has devoted his career to the study of crime statistics. Moody told reporters that the sudden revision of crime statistics is extremely strange. โThere were no revisions from 2004 to 2015, and from 2016 to 2020, there were small changes of less than one percentage point. The huge changes in 2021 and 2022, especially without an explanation, make it difficult to trust the FBI’s data,โ Moody said. Amstrong Economics mentions that also during the 2020 election, the FBI actively worked to minimise the impact of scandals related to the Biden family, such as Hunter Biden’s laptop, by preventing them from being reported in the media and on social media and jeopardising Biden’s election.
๐ Putin declared during a press conference to the BRICS media that Russia possesses unlimited energy. โThe entire border is shared, and Russia’s energy resources are simply unlimited,โ Putin said. Russia’s trade with China exceeded $65 billion in the first half of this year, and exports of natural resources reached new highs, Vedomosti reported in July, citing Chinese customs data. Indeed, Russia has the world’s largest natural gas reserves and is the world’s second largest producer. It is the world’s third largest oil producer, with more than 12 per cent of global production, and its share of the enriched uranium market is estimated at 40 per cent. The country also ranks among the top ten nickel producers and is the world’s third largest producer of titanium.