Market Outlook for the Week Ahead
- Nvidia Earnings Awaited Amid High Expectations
- Bitcoin Soars, Analysts See $100K Target
- U.S. Housing Data and Fed Speeches in Focus
- Oil Slumps While Geopolitical Tensions Boost Gold
- Key Economic Data: UK, Eurozone, and China
US Investigates JPMorgan’s Links to Iranian Oil Trader’s Hedge Fund
The US Treasury Department is investigating JPMorgan Chase & Co.’s ties to Ocean Leonid Investments Ltd., a hedge fund allegedly linked to Iranian oil trader Hossein Shamkhani. The probe focuses on whether JPMorgan complied with regulations while providing leverage to the fund, which operates in London, Dubai, and Geneva. Although neither Shamkhani nor Ocean Leonid are on sanctions lists, US authorities are examining potential compliance gaps. The investigation highlights concerns over money laundering and terrorist financing, with the Federal Reserve also scrutinizing Western financial exposure to Shamkhani’s network. Both JPMorgan and Shamkhani have denied any wrongdoing, while the probe remains in its early stages.
Trump Nominates Pam Bondi for Attorney General After Gaetz Withdrawal
President-elect Donald Trump has selected Pam Bondi, former Florida attorney general, as his nominee for attorney general. Bondi, a staunch Trump ally, will lead the Justice Department if confirmed by the Senate, taking charge of law enforcement, immigration, and contentious social policies. Bondi replaces Trump’s initial pick, Matt Gaetz, who withdrew amid controversies over alleged misconduct. Trump praised Bondi as a “smart and tough” defender of his America First agenda. Bondi previously served on Trump’s impeachment defense team in 2020 and has supported his claims of voter fraud during the 2020 election. Bondi’s tenure as Florida’s attorney general included efforts to challenge the Affordable Care Act and tackle opioid abuse. Since leaving office, she has worked at a lobbying firm and joined the Trump-aligned America First Policy Institute. Her nomination comes as Trump pushes for significant changes in the Justice Department, including possible actions against federal investigators tied to Trump’s indictments. The Senate will consider her confirmation amid concerns about maintaining the DOJ’s independence.
US Charges Adani in $250 Million Bribery Case, Shaking India
US prosecutors have charged Indian billionaire Gautam Adani and other Adani Group executives in a $250 million bribery scheme involving solar energy contracts in India. The allegations accuse Adani of bribing government officials and misleading US investors while seeking funding for energy projects. Stocks of Adani Group plunged, erasing $30 billion in market value, while Indian markets also fell. Adani denies the charges and plans legal action. The indictment adds to prior scrutiny from a short-seller report and Indian regulators, further complicating Adani’s global ambitions and ties to Prime Minister Narendra Modi. If convicted, the defendants could face significant prison time, intensifying political and economic repercussions in India.
UK Interest Rates Unlikely to Fall Quickly Amid Persistent Inflation
Recent UK inflation data suggests the Bank of England (BoE) will maintain a cautious approach to interest rate cuts. Governor Andrew Bailey has shifted from considering aggressive rate reductions to advocating for a gradual easing of monetary policy. October’s Consumer Price Index (CPI) inflation rose to 2.3%, slightly above expectations, while core inflation increased to 3.3%, driven by sticky services inflation at 5%. With inflation projected to remain above 2.5% through 2025, markets anticipate no significant rate cuts until then. The weaker pound, rising employer National Insurance contributions, and uncertainties around productivity improvements further complicate the outlook. Savers should seek real interest rates on deposits, while borrowers are advised to secure favorable mortgage rates early. Despite hopes for productivity-driven economic gains, the BoE’s cautious stance reflects the unpredictable inflationary environment.
Japan’s Inflation Remains Above BOJ Target as Rate Hike Looms
Japan’s core inflation stayed above the Bank of Japan’s (BOJ) 2% target in October, with consumer prices excluding fresh food rising 2.3% year-on-year, down slightly from 2.4% in September but above the 2.2% forecast. Prices excluding energy and fresh food also climbed 2.3%, signaling strong underlying inflation. The slower pace of price increases reflected government subsidies on utilities, which shaved 0.54 percentage points off the overall index. Electricity cost growth fell to 4% in October from 15.2% in September. However, food prices surged, with processed foods up 3.8% and rice prices jumping 60%. Economists expect the BOJ to raise rates in December or January as inflation becomes entrenched, supported by a weaker yen and rising service prices, which grew by 1.5% from 1.3%. Meanwhile, Prime Minister Shigeru Ishiba is set to announce economic stimulus measures, including utility subsidies and cash handouts, to ease household burdens. Persistent price gains and yen depreciation continue to pressure the BOJ to tighten monetary policy, with its next decision due on December 19.
US Warns Defense Firms of Russian Sabotage Threats
US intelligence agencies have warned American defense firms of potential sabotage by Russian operatives targeting operations at home and abroad. The alert follows concerns over Moscow recruiting insiders and engaging in arson, cyberattacks, and other aggressive tactics, particularly against firms supporting Ukraine. European and US officials believe Russia has escalated sabotage activities, including an attempted assassination of a German arms CEO and plans to place incendiary devices on cargo planes to North America. Defense companies like Northrop Grumman, Rheinmetall, and Nammo AS are urged to enhance security as production ramps up for Ukraine and NATO stockpiles.
Future-Proofing Biden’s Chips Act Legacy Amid Challenges
As the Biden administration’s term ends, efforts are underway to solidify the Chips and Science Act, a centerpiece of its industrial policy aimed at revitalizing domestic semiconductor manufacturing. While investments in infrastructure and chip factories, like Taiwan Semiconductor Manufacturing Co.’s Arizona plants, are starting to yield progress, challenges persist. Labor shortages, Intel’s struggles, and limited production capacity in US fabs underscore the complexity of reshoring chip manufacturing. Experts warn that the full impact of these policies may take a decade to assess, leaving credit for potential success open to future administrations.
Swiss National Bank’s Equity Insufficient for Risks, Says President
Swiss National Bank (SNB) President Martin Schlegel emphasized that the central bank’s equity is too low to adequately cover the risks posed by its large $940 billion balance sheet. Speaking in Zurich, Schlegel prioritized strengthening the capital base over profit distributions to the government and cantons. Despite solid profits in 2024, the SNB may withhold payouts for a third consecutive year, citing volatile earnings driven by market conditions. The sizable balance sheet, a result of foreign currency purchases during the 2008 financial crisis, remains a significant risk factor.
Canada’s Retail Sales Accelerate Amid Economic Stimulus and Rate Cuts
Canadian retail sales grew for a fourth consecutive month in October, rising 0.7%, the strongest pace since July, following a 0.4% gain in September. The Bank of Canada’s recent rate cuts and Prime Minister Justin Trudeau’s stimulus measures, including sales tax waivers on select items and a one-time payment of C$250 to citizens, are boosting consumer spending. Core retail sales surged 1.4%, with food and beverage retailers leading gains, while gas stations saw a decline due to lower fuel prices. Alberta recorded the largest provincial growth at 2.3%, supported by higher car dealer sales.
*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
Nvidia, the darling of the AI sector, is set to announce its quarterly earnings. Meanwhile, the cryptocurrency market continues to rise, the UK is preparing to release its inflation data, and oil prices appear to remain sluggish.
Here are the top five events to watch in the market this week:
1. Nvidia Earnings Awaited Amid High Expectations
Nvidia (NASDAQ: NVDA) will release Q3 earnings Wednesday, a key test for tech and AI-driven stocks. Its 200% stock surge this year makes it the world’s most valuable company, but high expectations may trigger volatility. Other earnings include Walmart, Target, and key Chinese firms like Baidu and Pinduoduo.
2. Bitcoin Soars, Analysts See $100K Target
Since the U.S. election on November 5, Bitcoin has surged 30%, surpassing $90,000 for the first time. The crypto market’s total value now exceeds $3 trillion, rivaling Tesla, Meta, and Berkshire Hathaway.
The rally is fueled by expectations of a pro-crypto regulatory environment under the incoming Trump administration. Analysts increasingly believe Bitcoin could hit six figures, though the feasibility of Trump’s promises, including a national Bitcoin reserve, remains uncertain.
3. U.S. Housing Data and Fed Speeches in Focus
This week, investors will receive key housing reports, including building permits, housing starts, and existing home sales, along with jobless claims. Friday’s PMI data may offer insights into business reactions to Trump’s trade policies.
Earnings from Walmart and Lowe’s on Tuesday will shed light on consumer spending. Fed officials, including Austan Goolsbee, Jeffrey Schmid, and Beth Hammack, are also scheduled to speak.
4. Key Economic Data: UK, Eurozone, and China
The UK will release October CPI on Wednesday, with inflation expected to rise to 2.2%, surpassing the Bank of England’s 2% target. BoE Governor Andrew Bailey will address inflation and monetary policy at a parliamentary hearing on Tuesday. Retail sales and PMI data are due Friday.
China’s LPR rates, lowered last month to boost credit demand and growth, will be updated Wednesday.
The Eurozone will publish CPI data, while France, Germany, and the broader Eurozone release PMI figures on Friday.
5. Oil Slumps While Geopolitical Tensions Boost Gold
Oil prices fell 2% on Friday, with Brent down 4% and WTI off 5% for the week, amid weaker Chinese demand and cautious Fed rate-cut signals.
China’s slower refinery activity and the IEA’s forecast of an oil surplus by 2025 added to concerns. Fed Chair Powell hinted at a cautious approach to future rate cuts, limiting fuel demand growth.
Gold rebounded from a two-month low, reaching $2,597, as heightened geopolitical risks boosted safe-haven demand. Reports suggest the U.S. lifted restrictions on Ukraine’s use of American weapons, potentially escalating the conflict.
he most anticipated earnings releases for the week of November 25, 2024 are Dell Technologies #DELL, CrowdStrike #CRWD, Abercrombie & Fitch #ANF, Zoom Video Communications #ZM, Kohl’s #KSS, Workday #WDAY, Best Buy #BBY, Bath & Body Works #BBWI, Macy’s #M, and Autodesk #ADSK.
Published by Vikki Zhao
November 25, 2024, 10:00 AM EST. 6 min read
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