Notable market news this past week (07-Apr-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸 Higher than expected job gains alongside inflation concerns in the US may lead to deceleration in rate cuts
US labor market remain robust: Nonfarm payrolls advanced 303,000 last month while unemployment rate fell to 3.8%. Job growth was led by faster hiring in health care, leisure and hospitality, and construction.
Alongside inflation, US crude futures hits $85: US crude futures hits $85 for the first time since Oct-23. The rally is mainly driven by OPEC+ production cuts, increased demand and heightened geopolitical tensions.
Robust employment + inflation has impacted rate cut expectations: Traders on the Street shifted their expectations for a Fed rate cut to September from July. On Wednesday, the 10-year US government bond yield briefly surged to a new peak for 2024, reaching 4.429%, which subsequently subdued sentiment in the S&P 500.
☕️ Quick fire happenings to note
🌏 Global macro
- Taiwan hit with worst quake in 25 years: Taiwan’s strongest earthquake of the century has disrupted chip production lines TSMC and UMC have halted some operations of their chipmaking machines and working on it to get back online.
- Zimbabwe launches gold-back currency to replace local dollar: The sweeping move is Zimbabwe’s sixth attempt to have a functional local currency since 2008. The new currency - Zimbabwe Gold (ZiG) is anchored by a composite basket of foreign currency and precious metals. To foster demand for ZiG, Zimbabwe makes it mandatory for companies to settle at least 50% of their tax obligations via the new currency
- Global travel expected to exceed pre-COVID levels this year: According to the 2024 gobal Economic Impact Research released on Thursday by the World Travel & Tourism Council, this year, the travel industry is expected to reach a record-breaking US$11.1 trillion, surpassing its prior high of US$10 trillion in 2019.
- Inflow into cash is still strong: Investors poured $82 billion into cash funds in the week through Wednesday, as per the latest Bank of America Flow Show report. Money-market funds are now annualizing $1.2 trillion of inflows, the second highest ever. Cash inflows in recent months significantly surpass those into other asset classes, including US equities. Past trends suggest redemptions from cash funds could begin a year after the Fed starts cutting rates. Expect prices of other asset classes to go up then.
- Southeast Asia trust China > US: In the 2024 State of Southeast Asia survey released this week, over half of the respondents from Southeast Asia, 50.5%, expressed a preference for China over the US, if the region were forced to align itself in the ongoing US-China rivalry. The US as a choice dropped from 61.1% in the previous year to 49.5%. The annual survey (view here) is conducted by the Singapore-based ISEAS-Yusof Ishak Institute.
- Mexico is becoming an AI-hardware manufacturing hub: Mexico emerges as an AI-hardware manufacturing hub, capitalizing on geopolitical uncertainties between the US and China. Proximity to the US and the US-Mexico-Canada Agreement make it an attractive location. Foxconn leads the charge, investing $690m in AI server facilities for Nvidia, Google, and Amazon. Other tech giants like HP and Dell are following suit, with Mexico's share of US imports surpassing China's in 2023.
🏦 Individual stocks/companies
- UPS to replace FedEx as primary USPS shipper: United States Postal Service (USPS) announced that UPS will soon become its primary air cargo shipper, replacing its rival FedEx after 20 years. In 2023, USPS remained the largest client for FedEx’s air-based Express segment, contributing $1.7b to FedEx’s revenue, down from $2.4b in 2020. The prevailing consensus on the Street is that while losing the contract with USPS is not a substantial blow to FedEx, as it was not the most profitable venture, it does represent a notable loss of a consistent revenue stream. Share price has largely remained unchanged.
- Tesla fell short in production for 1Q: Tesla manufactured ~433k cars in 1Q below the Street’s estimate of 453k. The production setback was mainly due to delays in the Red Sea and electrical disruptions leading to Tesla’s Berlin factory being shut down for nearly a week. Tesla’s share price plunged roughly 33% year-to-date, and is down more than 50% from two years ago.
- BYD to launch first EV truck this year: The Chinese giant steps ups competition to compete with the likes of Ford Ranger, Tesla Cybertruck and Toyota Hilux. Nevertheless, just BYD is not immune to the broader challenges facing EV players by way of waning demand. The Chinese firm sold 300,114 electric vehicles in the first quarter of the year, down 43% from the December quarter of 2023.
- UBS issues a $2b share buyback: UBS first announced a share buyback of $1b in Feb. The company is expanding it up to $2b which will run until 2026. If exercised in full, the new share buyback will amount to around 64.1m shares - equivalent to roughly 1.85% of UBS's share capital. UBS shares hit a 16-year high last week and have risen more than 60% since it agreed to take over Credit Suisse last March, but the bank is under pressure from investors to improve its valuation versus US peers.
- Spotify plans to raise prices, leads to stock uplift: By end of the month, subscription fees are set to rise by $1 to $2 monthly. Additionally, Spotify is introducing a new "basic" plan priced at $11 per month, aligning with the current cost of Premium membership. Consequently, Spotify share price is now up ~18% this week.
- Apple's next big thing - Home robots: Apple is now turning its attention to home robots in pursuit of its "next big thing". Earlier this year, the tech giant abandoned its plans for electric vehicles and has been trailing behind in the field of generative AI. Details are scarce, but the only known projects include a household robot that accompanies users and a tabletop device utilizing robotics to rotate its display.
🇸🇬 Singapore related
- Singapore’s employment grew by 88,400: Singapore’s employment grew by 88,400 in 2023 of which 94% belongs to non-residents. Bulk of the new job increase goes to work permit and other work pass holders in sectors such as construction
- Eu Yan Sang acquired by Mitsui and Rohto Pharmaceutical at a ~S$800m valuation: Post-deal, Mitsui will hold ~30% while Rohto will hold ~60% with the remaining interest held by the Eu family. Eu Yan Sang was delisted from the SGX in 2016 after it was privatized in a buyout led by Tower Capital. Eu Yan Sang was then valued at S$269m, which translates to a ~3x value-creation in ~8 years. The main value driver is likely attributed to its expansion into the US health and wellness market.
