Key Takeaways
Bond Market Closed: U.S. bond markets are closed Monday for Veterans Day.
Fed Speeches: Key Fed officials, including Chair Powell, will speak this week, with market insights expected.
Inflation Data: October CPI releases Wednesday, alongside retail sales and wholesale inflation reports.
Earnings Reports: Home Depot, Disney, Cisco, Alibaba, and Tencent report quarterly earnings this week.
Market Watch: Investors focus on inflation’s impact on the ongoing U.S. stock rally.
Trump’s White House Return Boosts His Billion-Dollar Fortune
Former President Donald Trump’s return to the White House is set to significantly boost his wealth across a range of investments, including his social media company, real estate holdings, and ventures in crypto. Hours after his election win, shares in Trump’s social media platform surged, adding $2.4 billion to his paper wealth. Trump’s presidency will likely enhance his financial standing, giving him added leverage in key areas like real estate, foreign investments, and legal challenges. Trump Media and Technology Group, his biggest asset, has seen major gains, and assets like Mar-a-Lago and 40 Wall Street stand to benefit from his renewed political influence. Additionally, foreign investments in countries like Vietnam and Saudi Arabia are expected to grow, and Trump’s control over the Justice Department could aid in stalling federal criminal charges. Analysts suggest Trump may be focusing on power over wealth, as his second term opens new opportunities for expanding his influence and assets.
Canada’s Economic Growth Revised Upward Amid Strong Investment
Canada’s economy grew faster than previously estimated over the past three years, according to revised data from Statistics Canada. The agency reported that real GDP growth reached 1.5% in 2023, up from an initial 1.2%, with upward revisions to 4.2% for 2022 and 6% for 2021. The revisions suggest Canada’s economy had stronger momentum despite the Bank of Canada’s rapid interest rate hikes. The updates reflect an increase in business investment, particularly in machinery and equipment, and indicate improved potential growth estimates. Household consumption also rose slightly, and government spending was revised higher, particularly at provincial levels. The stronger GDP may offer fiscal benefits, potentially boosting tax revenue and benefiting the federal government.
Five Key Takeaways from Fed Chair Jerome Powell’s Press Conference:
- Election Impact on Fed Policy
Powell noted that Donald Trump’s reelection will not affect immediate Fed policy, as it’s too early to know what steps the administration will take. The Fed only adjusts forecasts after a policy or law is enacted. - Commitment to His Term
Powell affirmed he would not resign if pressured by Trump, saying it’s “not permitted under the law” for the president to dismiss him. His term is set to end in May 2026, and he intends to fulfill it. - Cautious Approach on Rate Guidance
Powell avoided providing specific forward guidance on future rate decisions, emphasizing that the Fed will take a measured approach to easing, given the strength of the economy and the current restrictive policy stance. - Adjustment of Rate Cut Pace
The Fed could accelerate cuts if the labor market weakens or slow them as they approach a neutral rate. However, no decisions have been made regarding the rate adjustment pace. - Market Reaction
The market reaction was modest. Stocks advanced, with the S&P 500 approaching a record close. Treasury yields dipped, and the dollar lost 0.8%, giving back some of Wednesday’s gains.
Peru Cuts Key Rate to 5% as Core Inflation Declines
Peru’s central bank reduced its benchmark interest rate to 5% from 5.25% on Thursday after core inflation, a key indicator for policymakers, continued to ease for the fourth consecutive month. The decision, expected by some analysts, brings the real interest rate closer to the neutral level where it neither stimulates nor restrains economic activity, according to the central bank’s policy statement. While overall inflation is expected to remain within the bank’s target range, a slight increase may occur due to base effects. October saw annual inflation at 2.01%, with core inflation moderating to 2.5%, providing the room for this rate cut. Peru’s economy is projected to grow around 3% this year, supported by favorable inflation levels and relatively lower borrowing costs than regional peers.
US Labor Costs Rise, Adding Inflationary Pressure as Fed Considers Rate Strategy
US labor costs rose sharply in the third quarter, with revisions indicating much stronger wage gains throughout 2024, raising concerns about inflationary pressures. Unit labor costs, or the expense of paying employees per unit of output, increased at a 1.9% annualized rate, with prior quarters revised upward, according to the Bureau of Labor Statistics. The revisions reflect robust pay gains, supporting consumers’ spending power and economic resilience. While productivity rose at a 2.2% annual rate, the upwardly revised labor costs may lead the Federal Reserve to adopt a cautious approach to rate cuts, especially following Donald Trump’s re-election, which could impact inflation due to anticipated fiscal policies. The Fed is expected to announce a quarter-point rate cut, but wage-driven inflation risks could slow future rate reductions.
REC Reports UK Hiring Declines Sharply Amid Anticipation of Tax Hikes
Hiring at UK businesses fell at the steepest rate in seven months in October, with employers pausing recruitment as they brace for anticipated tax increases in Labour’s upcoming budget. According to the Recruitment & Employment Confederation (REC) and KPMG survey—closely monitored by the Bank of England (BOE)—wages for permanent jobs slowed, rising at their weakest pace since 2021, while vacancies also declined. Chancellor Rachel Reeves’ £40 billion annual tax increase is set to impact employers as they face higher payroll levies and a substantial minimum wage hike, prompting them to reduce hiring and limit wage increases to protect profit margins. With inflation concerns still in focus, the BOE recently cut borrowing rates but plans a “gradual” approach to future reductions, as it tracks labor market changes to guide further rate decisions.
BlackRock in Early Talks to Acquire Minority Stake in Millennium Management
BlackRock Inc. is reportedly in early discussions with Millennium Management to acquire a minority stake in the $70 billion hedge fund led by Izzy Englander. This move aligns with BlackRock’s strategy to expand its portfolio into alternative assets. While discussions are ongoing, a deal is not guaranteed. Millennium has historically refrained from selling stakes to external investors, though it has backed smaller hedge funds. BlackRock, which manages $450 billion in alternative assets, seeks to strengthen its foothold in the hedge fund and private investment space to compete with industry giants like Blackstone and Apollo.
Japan’s Household Spending Drops Again Amid Rising Prices
Japan’s households reduced their spending for the second consecutive month as inflationary pressures continued to curb consumption, suggesting a need for caution in the Bank of Japan’s approach to rate hikes. Household spending fell 1.1% in September compared to a year earlier, slightly better than the expected 1.8% decrease, but still following a 1.9% decline in August, the Ministry of Internal Affairs reported on Friday. Spending has only increased twice in the past year. Consumer spending, which makes up more than half of Japan’s economy, remains below pre-pandemic levels. Despite a record 31-year high in base salary growth reported in September, the weak yen continues to strain household purchasing power, contributing to October’s drop in consumer confidence. The yen’s recent slide following Donald Trump’s re-election could further impact inflation by driving up import costs, potentially accelerating the timeline for the BOJ’s next rate hike to December.
Northvolt Delays Battery Projects Amid EV Market Slowdown
Northvolt AB, a key European battery manufacturer, may delay ramp-ups at its four major production sites due to slower-than-expected demand for electric vehicles (EVs). CEO Peter Carlsson announced that timelines for sites in Sweden, Germany, Canada, and a joint venture with Volvo Car AB in Gothenburg are under review to align with a challenging market outlook. This adjustment comes as automakers reduce their electrification targets, which is affecting related sectors, including material suppliers like BASF SE and Umicore SA, who recently halted projects. Northvolt is also grappling with internal production issues and customer quality concerns, with BMW AG withdrawing a €2 billion battery order. Last year, Northvolt’s losses tripled to $1.03 billion despite revenue growth, highlighting scaling difficulties as it seeks a 25% European market share by 2030. The company’s IPO plans have also been postponed, and it faces leadership changes with Chairman Jim Hageman Snabe stepping down.
Record-Hot 2024 Likely to Breach 1.5°C Paris Climate Target
This year is on track to be the hottest on record and the first to surpass the 1.5°C target set by the 2015 Paris Agreement, according to data from the EU’s Copernicus Climate Change Service. The temperature for 2024 is projected to be 1.55°C above pre-industrial levels, exceeding the agreement’s goal to keep warming ideally below 1.5°C, with an upper limit of 2°C to avoid irreversible climate impacts like severe floods and droughts. October alone was 1.65°C warmer than pre-industrial levels, marking the 15th out of 16 months to surpass the threshold, fueling concerns that sustained high temperatures may become inevitable. The findings add pressure on delegates heading to the COP29 climate talks in Baku, Azerbaijan, next week, where they are expected to address ambitious climate policies amidst growing global emissions. Samantha Burgess, deputy director at Copernicus, emphasized the urgency, saying the temperature record should be a catalyst for stronger climate action.
*The viewpoints are attributed by Wallis Zeng.
Market Momentum Slows, But Long-Term Outlook Remains Positive: AimStar’s Take on Diversification Opportunities
Uptrend Still in Place, but Some Short-Term Caution Needed:
AimStar remain positive on the stock market over the next 12 months, supported by the Federal Reserve’s easing cycle. However, momentum is starting to slow down. We’re seeing signs such as fewer stocks making new highs and defensive sectors (like utilities and healthcare) showing strong performance, which usually signals potential market weakness. The current sentiment suggests that the market could experience a short-term pullback. Despite this, we recommend using any dips as a chance to accumulate stocks as the broader uptrend is still intact.
Rising Concerns on the Horizon:
There are a few growing concerns impacting the market. Recently, East Coast port closures and escalating tensions in the Middle East have spooked investors. These events could disrupt supply chains, particularly in the retail industry, which depends heavily on these ports. On the flip side, geopolitical risks have boosted defense stocks, as we’ve seen a breakout in the Aerospace & Defense sector.
Strong September Performance Defies Expectations, but Election Year Could Add Volatility:
September is usually a weak month for stocks, but this year, the S&P 500 posted a 2.02% gain, defying its usual negative trend. However, with the upcoming election, October might see some volatility or consolidation. Still, any market dips should be viewed as buying opportunities, as the long-term outlook for stocks remains strong.
Market Signals Remain Positive:
In the medium to long term, things are looking good for equities. Around 76% of stocks in the S&P 500 are trading above their 50-day and 200-day moving averages, which is a positive sign. Additionally, riskier sectors like consumer discretionary are outperforming defensive sectors, indicating that the market is positioning itself for more upside over the next 12-18 months.
Focus on Diversification:
For the past year and a half, concentrated bets on a few large stocks have worked well. However, the market is now broadening out, and we believe a diversified approach will be more effective. Historically, when markets become highly concentrated, it often sets the stage for more average stocks to catch up, which is good news for diversified portfolios.
*The viewpoints are attributed by Tony Yuan
Following Donald Trump’s victory in the U.S. presidential election, market attention has quickly shifted to U.S. inflation data as investors seek clues on how the election results may impact the economic outlook. Additionally, after last week’s rate cut, several Federal Reserve officials are scheduled to speak, providing further guidance to market expectations.
Here are the top five events to watch in the market this week:
1. U.S. Consumer Price Index (CPI) Set to Be Released
The U.S. October CPI data will be released on Wednesday (13th). Economists forecast a 2.4% year-over-year increase, remaining at a three-and-a-half-year low, which reinforces expectations of further Fed rate cuts.
However, Trump’s election as president could introduce a new variable for the Fed. There is a broad expectation that Trump’s policies, particularly his stance on tariffs, could drive inflation higher. Although the Fed cut rates by 25 basis points last Thursday (7th), Fed Chair Jerome Powell provided no clear guidance on future rate paths.
2. U.S. Stock Rally Faces Inflation Test; Chinese Tech Giants’ Earnings Reports on Deck
A focal point this week is whether the inflation data will be sufficient to sustain the U.S. stock rally driven by Trump’s victory. Expectations for Trump’s tax cuts and regulatory easing have boosted risk appetite, leading the S&P 500 index to hit a record high, surpassing the 6,000 mark for the first time last Friday (8th).
The earnings season also continues, with major Chinese companies such as Alibaba, JD.com, Tencent, and NetEase set to release their results. In the U.S., retail giant Home Depot, tech companies Cisco and Disney, chip manufacturer Applied Materials, and consumer goods company Tyson Foods will also report their earnings.
3. Federal Reserve Officials to Speak
This week, several Federal Reserve officials are scheduled to make speeches. On Tuesday, Fed Governor Christopher Waller will kick things off, followed by Richmond Fed President Thomas Barkin and Philadelphia Fed President Patrick Harker.
After the CPI data release on Wednesday, Dallas Fed President Lorrie Logan, St. Louis Fed President Alberto Musalem, and Kansas City Fed President Jeff Schmid will offer their perspectives on the latest inflation data, which is expected to draw significant market interest. Fed Chair Powell will speak on Thursday, while New York Fed President John Williams will deliver the final address of the week at the “Building Missing Markets” event later that day.
4. Bitcoin Reaches New High, Surpassing $80,000
Buoyed by expectations that the Trump administration may introduce more crypto-friendly regulations, Bitcoin surged past the $80,000 milestone for the first time.
As of this report, Bitcoin had risen 3%, reaching $81,533.7, with an intraday high of $81,792.4, marking a record level. Trump’s stronger-than-expected performance in the election, alongside the Republican Party’s control of the Senate and its potential majority in the House of Representatives, has contributed to this rise. Furthermore, Chair Powell’s statement that the Fed’s policy stance remains unchanged in light of recent political shifts has also supported Bitcoin’s rally.
5. Oil Price Fluctuations
Last Friday (8th), oil prices dipped as China’s latest stimulus package did not enthuse energy traders. Despite the dip, oil prices still ended the week higher.
U.S. crude futures fell to $70.35 per barrel, down 2.7%. The global benchmark Brent crude also dropped 2.3%, closing at $73.87 per barrel. China announced measures to alleviate local government debt burdens, but analysts noted these would have limited direct impact on boosting oil demand.
However, with market expectations that the upcoming Trump administration will impose stricter sanctions on Iran and Venezuela, potentially reducing global oil supply, oil prices remained buoyant. The Fed’s rate cut last Thursday also provided support for oil, as rate cuts typically stimulate economic activity and energy demand.
Earnings season continues this week of November 11, with key reports expected from Chinese tech giants Alibaba, JD.com, Tencent, and NetEase.
In the U.S. market, major companies including retail giant Home Depot, tech firm Cisco, entertainment leader Disney, chip manufacturer Applied Materials, and consumer goods company Tyson Foods are set to release their quarterly earnings.
Published by Vikki Zhao
November 11, 2024, 10:00 AM EST. 6 min read