Notable market news this past week (21-Apr-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🧈 Gold soars past US$2,400/oz as investors seek safe haven assets
Escalating global geopolitical risks as Israel strikes back at Iran: In response to Tehran's retaliation for an April 1 attack on its diplomatic compound in Damascus, Israel conducted a limited-scale drone operation targeting a military site in Iran. This action came after Tehran launched over 300 missiles and drones at Israel a week prior.
Ongoing strong China based demand: With savings levels still near all-time highs according to official data from the People’s Bank of China, and plunging property and equity markets, many consumers turned to gold, including gold jewelry, as a means of wealth preservation
Mounting fiscal deficits have aided the gold rally: Mounting debt levels in the OECD, and notably the US, may also be playing a role in encouraging safe-haven buying in gold. This is further exacerbated by US war/aid efforts - such as the US$95b aid package above
- The Congressional Budget Office's (CBO) projections, released 26 March, showed the US debt-to-GDP ratio surpassing the World War Two record debt-to-GDP ratio of 116% in 2029, should present policies be maintained.
- In fact, the CBO director has also said that the US fiscal deficit was on an "unsustainable" trajectory.
Check our our primer on gold here
🇺🇸 $95b foreign aid package and TikTok ban; Rare bipartisan unity in the US House of Representatives
Bipartisanship in the deeply divided House: 165 Democrats voted alongside 151 Republicans to advance a $95 billion proposal that includes aid for Ukraine and Israel, and provisions that could effectively ban TikTok
US$95b foreign aid package:
- The greenlight from the US for over US$60b in aid provides crucial support to Ukraine's struggling military, yet it's doubtful that this alone will shift the course of the war. With the package languishing in Congress for six months, Kyiv's military has faced a deepening crisis of dwindling ammunition and manpower, even as Kremlin forces continue to exploit their upper hand
TikTok ban:
- TikTok ban proposal was attached to the aid package - observers say this tie-in with emergency funds for allies heightens the chances that the proposal wins bipartisan support.
- The proposal requires TikTok’s Chinese parent company, ByteDance, to sell the app’s US operations within nine months or face a ban. This will be a huge blow to ByteDance - While US based TikTok users make up only ~10% of TikTok's user base, monetization in wealthier countries are much higher.
- The bill will be brought to the Senate floor for consideration, and upon its passage, President Biden, who has already indicated his support, will sign the legislation.
- Social media apps like Snap rallied (+8.37%) ahead of potential ban
☕️ Quick fire happenings to note
🌏 Global macro
- Japanese executives call for govt. to bolster yen: Small to mid-sized Japanese companies are suffering from the rising costs of imported materials as yen trades near a 34-year low against the dollar (~153 USD/JPY). While the yen’s depreciation has helped industries with a high ratio of overseas sales, domestic demand-oriented companies have struggled. The Japanese Government may be forced to take action soon.
- Auto insurance is keeping US inflation high: Transportation services were up 10% in March, powered in large part by the rapid rise in car insurance prices which increased 22% in the past year. Modern, high-tech cars are expensive to repair with EV repairs are twice as pricey as regular cars. Additionally, the industry may be short around 800,000 mechanics to meet demand in the next half-decade
- New Iran oil sanctions passed by US House: The new legislation could impact Iranian petroleum exports and add as much as $8.40 to the price of a barrel of crude. However, this has little effect on Iran as ~80% of Iran’s roughly 1.5m barrels of daily oil exports are shipped to independent refineries in China
🏦 Individual stocks/companies
- Ford is enticing Tesla owners with EV discount: Ford dropped the price of its F-150 Lightning EV pickup by $5,500 and is offering a $1,500 rebate for customers who own or lease a 2008 or later Tesla model, as the company is betting on customers not willing to wait till 2025 or pay a premium for Tesla’s Cybertruck
- Tesla is laying off more than 10% of its global workforce: Equivalent to at least 14,000 roles, the company cited production problems caused by unforeseen factors such as attacks on shipping in the Red Sea, an arson attack on its factory in Berlin and a softening in global demand
- AI correction: Super Micro Computer and Nvidia, two AI favorites, plunged in a broad tech selloff, with Super Micro dropping 23%—its largest since August, and Nvidia experiencing a 10% decline, marking its sharpest drop since March 2020.
- Apple iPhone sales declines by 10%: Apple faces its most significant iPhone sales slump since the onset of the Covid pandemic, with shipments dropping nearly 10% in the first quarter of 2024, notably in China, where increased competition from local rivals like Huawei and Xiaomi has intensified. Despite a global rebound in smartphone sales, Apple struggles to maintain its market share amid stiff competition and changing consumer preferences, especially in China, its largest retail market outside the US
- Goldman reports 16% jump in revenue: GS’s IBD posted its best quarter in two years, aided by economic tailwinds. Total global deal value for M&A surged 35% in the first quarter and recent public market debuts by Astera Labs and Reddit offer plenty of optimism for more momentum
- Morgan Stanley plans to cut IB jobs in Asia: The planned cuts affect about 13% of the 400 bankers in Asia, excluding Japan. More than 40 people in Hong Kong and mainland China are expected to lose their jobs in the coming round as revenue from China continues to slide.
🇸🇬 Singapore related
- PM Lee to step down on 15 May: Deputy Prime Minister Lawrence Wong will officially become Prime Minister on May 15, taking the reins from current Prime Minister Lee Hsien Loong. DPM Wong also launched the Forward Singapore exercise in 2022, which laid out a roadmap for a new Singapore vision. More details here.
- Singapore 6-month T-bill cut-off yield falls to 3.75%: Demand for the latest tranche increased, with the total amount applied rising to S$16b, from S$15.6b applied in the previous tranche. The total amount allotted at the latest auction stood at S$6.3b, representing a bid-to-cover ratio of 2.54
