China Moves to Support Markets After Data Showing Economic Slowdown
China’s central bank implemented measures to boost capital markets after data revealed the slowest economic growth in six quarters, signaling the government’s commitment to further stimulus. The People’s Bank of China (PBOC) outlined strategies to support key sectors like real estate and stock markets. GDP grew 4.6% in Q3, while retail sales and industrial production improved in September, supported by government subsidies. Despite these signs, deflationary pressures persist, and challenges such as weak exports and a sluggish property market remain. Analysts expect additional fiscal measures to stabilize the economy.
Trump Considers Tax Exemption for Military, Police, and Firefighters
Donald Trump, the Republican nominee, has floated the idea of exempting police officers, firefighters, active duty military members, and veterans from paying federal taxes. He introduced this proposal during an online show, suggesting it could be a way to incentivize people to join these professions. This potential tax break could benefit over 20 million people, including about 18 million veterans and 1.3 million active duty troops, along with police officers and firefighters. Trump’s campaign has featured various tax proposals aimed at appealing to key voter groups, though his plans could add significantly to the federal debt. Trump’s idea would require congressional approval to become law, alongside his pledge to extend tax cuts passed during his presidency and reduce corporate tax rates further. He also suggested military veterans could become teachers to help secure schools.
Headhunter Allegedly Used Fake Identities to Mislead Wall Street Traders
Odin Partners, a prominent recruitment and market intelligence firm, is accused of using false identities and non-existent job offers to extract sensitive information from traders at some of the world’s largest banks, including Goldman Sachs and Morgan Stanley. The firm allegedly used a tactic called “rusing,” where employees posed as fake recruiters to gather salary data, profit and loss statements, and other confidential information from unsuspecting traders. The information was then shared with Odin’s clients, which include major financial institutions. Former employees admitted to participating in these efforts, describing it as a “necessary evil,” while some left the firm due to ethical concerns. Odin has denied the allegations, and its co-founders have not publicly commented. The incident has raised concerns about data privacy and possible breaches of fraud laws.
S&P 500 Eyes Longest Weekly Winning Run in 2024 as Corporate Earnings Impress
The S&P 500 is on track for its longest weekly winning streak in 2024, buoyed by strong corporate earnings, particularly in the tech sector. Netflix surged 10% to a record high after posting strong quarterly results, while Apple saw iPhone 16 sales jump 20% in China. Despite a 4% dip in American Express shares due to a lowered revenue forecast, the “Magnificent Seven” tech companies are expected to lead a significant rise in profits. Analysts expect broader earnings growth in the coming quarters, and market sentiment has turned optimistic despite looming political uncertainties. Oil prices slumped 2.3%, while gold hit $2,700 an ounce.
India Central Bank Governor Warns Rate Cut Now Is “Very Risky”
India’s central bank Governor Shaktikanta Das cautioned that cutting interest rates at this stage would be “very, very risky” due to inflation risks. Despite inflation expected to moderate, significant threats remain, and the Reserve Bank of India (RBI) is not in a hurry to join the global trend of easing rates. The RBI has kept its key rate unchanged for nearly two years, with future actions depending on incoming data and inflation stabilizing around the 4% target. Das reiterated that while the RBI won’t miss the opportunity to ease rates, it will wait until inflation aligns with its target.
ECB’s Olli Rehn Seeks Second Term as Head of Finnish Central Bank
Olli Rehn, a current member of the European Central Bank’s Governing Council and the governor of Finland’s central bank, has announced his intention to seek another seven-year term. Rehn, 62, whose current term ends in July 2025, expressed his willingness to continue his role if elected. The Finnish central bank’s parliamentary supervisory council has opened applications for the position, with President Alexander Stubb having the final say on the appointment. Rehn, a former European Union commissioner, is known as one of the neutral voices on the ECB Governing Council, which recently enacted its third rate cut of the year to support the euro-zone economy.
Japan’s Inflation Slows for First Time Since April Ahead of BOJ Meeting
Japan’s key inflation measure slowed in September for the first time in five months, driven by government subsidies on utilities. Consumer prices, excluding fresh food, rose 2.4% year-on-year, down from 2.8% in August. The overall inflation rate decreased to 2.5% from 3.0%, largely due to lower electricity and gas prices. However, a core index excluding energy and fresh food slightly quickened to 2.1%, indicating that inflationary pressures persist. The Bank of Japan is expected to keep interest rates unchanged at its upcoming meeting, while potential future inflation depends on whether government subsidies are extended and the yen’s relative weakness against the dollar.
US Eases Export Curbs on Space-Related Products to Boost Aerospace Industry
The Biden administration has eased export restrictions on certain space-related products, including satellites and spacecraft components, to facilitate international business for US aerospace companies. The Commerce Department has removed license requirements for exporting specific space-related items to allied countries and proposed shifting oversight of some defense-related space technologies from the State Department to the Commerce Department. This move is intended to reduce the burden on US companies, allowing them to innovate and lead in the space sector while still ensuring critical technologies do not fall into the hands of foreign adversaries. The changes aim to enhance international trade without compromising national security.
JPMorgan Lends Panama $1 Billion to Address Budget Deficit
JPMorgan Chase & Co. is providing Panama with a $1 billion loan to assist in addressing its liquidity needs for the 2024 budget. The three-year loan has an interest rate of 150 basis points over the 6-month secured overnight financing rate, with possible adjustments based on conditions like new debt issuance or a credit downgrade. This financial support comes as Panama works to reassure investors that it remains committed to fiscal and economic growth targets, following concerns over its credit rating. While Fitch Ratings downgraded Panama to junk status this year, S&P Global Ratings and Moody’s still consider the country investment grade. The loan will help Panama manage its external debt obligations, including $1.25 billion in bond amortizations due in 2025.
South Africa Considers Rules for Catastrophe Bonds and Climate Insurance
South Africa’s National Treasury is considering regulations to promote the use of financial tools like catastrophe bonds and parametric insurance to address climate-related risks. The country has been hit by several climate disasters, including a severe El Niño-induced drought and torrential rains in 2022 that killed over 400 people and caused $2 billion in damage. Catastrophe bonds, which offer high yields and pay out during natural disasters, and parametric insurance, which triggers payments based on predefined climate events, are being explored to provide faster relief and resilience. The Treasury is also looking to increase green bond issuances and is engaging with pension funds to support climate investment projects.
*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
Tesla Falls Further as Reported Robotaxi Delay Weighs on EV Maker
Reported on July 12 by AIMSTAR.CA – Tesla (TSLA) shares are slipping more than 1% in premarket trading after suffering the steepest losses of any S&P 500 constituent Thursday with an 8.4% plunge on a report the EV maker is postponing its robotaxi unveiling by two months. The company previously indicated it would hold an event to introduce the autonomous vehicles on Aug. 8, but Bloomberg reported the presentation has been pushed back to October. Tesla shares entered Thursday on an 11-session winning streak to move into the green for the year, fueled by its better-than-expected second quarter deliveries report, but returned into negative territory for 2024 on yesterday’s plunge.
U.S. Inflation Cools, Possible Fed Rate Cut in September
Reported on July 11 by AIMSTAR.CA – U.S. inflation slowed in June, mainly due to reduced housing costs, raising the possibility of a Federal Reserve rate cut in September. Core CPI, excluding food and energy, increased by just 0.1% from May and 3.3% year-over-year, marking the slowest rise in over three years. Overall CPI fell 0.1% from the previous month. The labor market showed mixed signals, with high jobless benefit applications but a drop in first-time filings. Traders anticipate a rate cut in September, and Fed Chair Jerome Powell emphasized that decisions will be data-driven.
July 15 – July 19 COMING UP
- Federal Reserve Chairman Jerome Powell speaks on Monday, with other Fed officials making remarks throughout the week.
- Goldman Sachs, Bank of America, and Morgan Stanley are among the major bank earnings coming this week.
- Netflix and Johnson & Johnson also report earnings this week, while Amazon hosts its annual Prime Day sales event.
- The Republican National Convention will feature remarks from presidential candidate Donald Trump.
The most anticipated earnings releases for the week of October 21, 2024 are Tesla #TSLA, Verizon #VZ, Enphase #ENPH, Lam Research #LRCX, Vertiv #VRT, Boeing #BA, SAP #SAP, IBM #IBM, General Motors #GM, and AT&T #T.
Published by Vikki Zhao
October 21, 2024, 10:00 AM EST. 6 min read