News Recap • Week 37 2024

This was another busy week on the macro front with plenty of data to digest from both the US and UK. On top of that, the European Central Bank (ECB) came out and cut interest rates and gave an updated economic forecast for 2024. Oh, and then there was a debate between Kamala Harris and Donald Trump which was just as big of a reality show drama as you’d expect. Let’s dive in.

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The ECB cuts rates by another 25 bps

The ECB lowered interest rates by 0.25% as expected while simultaneously lowering their growth forecast from 0.9% to 0.8% for 2024. They cited weaker domestic demand in the coming quarters as the main reason. The cut was fully expected and puts the EU two rate cuts, or 50 bps, ahead of the US. The Fed’s next rate meeting will be interesting to follow.

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US inflation continues to cool

US CPI came out in line with expectations of a 0.2% headline increase for August. The annual inflation rate came in at 2.5%, slightly below the 2.6% estimate and down 0.4 points from July. This also marked the lowest level since early 2021 when inflation first took off.

Core CPI, however, rose 0.3% in August, more than the 0.2% expected. The annual rate was in line with forecasts at 3.2%, unchanged from last month.

Shelter costs rose 0.5% in August and accounted for 70% of the core increase with its 1/3 index weighting. Shelter was up 5.2% YoY.

Markets initially seemed to sell off on the news but staged a massive reversal in the late morning. All major indices performed similarly with the Nasdaq leading the way, down 1.3% at the lows but finishing the day higher by 2.2%.

Next up, we got US PPI on Thursday. Economists’ expectations were met with a 0.2% rise in the headline number in August. Core was slightly higher than expected though, with a 0.3% increase instead of 0.2%. The numbers are up from 0.1% and flat respectively in July.

On a 12-month basis, headline PPI is now at just 1.7% while core remains significantly higher at 3.3%.

The numbers seemed to quell any worries investors may have had about inflation picking back up or the economy slowing down. The optimism didn’t kick in immediately though, as the stock market initially fell on the news. The Nasdaq fell as much as 1.3% in early trading Wednesday but closes the day 2.2% higher, an impressive 3.5% intraday reversal.

As a matter of fact, both the S&P 500 and Nasdaq Composite logged five straight days of gains this week, totaling 4.02% and 5.95% respectively. This marked the best week of 2024 for both indices.

The worst of the year? Last week.

The second-best? Just four weeks ago.

What this speaks to, more than anything else is the increased uncertainty in the market. Last week, many investors seemed to think the global economy was about to drop off a cliff. This week, we didn’t get any data to further support that belief. This seems to have been enough to ignite a somewhat depressed market.

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Harris beats Trump in heated debate

Trump and Harris met for their first debate with Harris the consensus winner. The ‘Trump Trade’ took a hit with oil and crypto dropping on the back of the debate. Trump has been very outspoken about his positive stance on Bitcoin and crypto at large, a stark contrast to the Biden administration’s outright war against the industry.

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In other news

• Apple unveiled their next iPhone on Monday, built for AI from the ground up. This came along with new AirPods and the next gen Watch. The stock dipped initially but closed flat after the event.
• China seemingly dipped further into deflation according to data released on Monday, worsening their already-poor growth prospects.
• Dollar bank deposits in Argentina have surged 40% to $19.8 billion since Milei took office, likely a vote of confidence in his leadership and tax amnesty program.
• JP Morgan and other big banks dropped sharply Tuesday on pessimistic outlooks.
• Chinese consumers are taking more last-minute trips, many booking as late as three days in advance. This points to more economic uncertainty and perhaps an increased interest in finding good deals, all signs of a struggling consumer.
• August unemployment fell to 2.4% in South Korea, the lowest level since 1999 when the data was first tracked.
• Japanese wage growth may surpass inflation for the first time in 30 years.
• Oracle jumped 11% on an earnings beat.
• BoJ board member, Junko Nakagawa, said the bank would continue to raise interest rates if the economy and inflation continue to move in line with their forecast. Japan’s recent rate hike - and signal of more to come - was partially to blame for the great yen carry trade unwinding and immediate market crash.
• UK GPD flatlined in July month-on-month, doing worse than the 0.2% growth expected. It was also flat in June. The services sector grew by 0.1% while production and construction fell by 0.8% and 0.4% respectively.
• Initial jobless claims in the US were expected to slide from 227k to 225k this week vs last. The number came in slightly hotter at 230k.
• Novo Nordisk jumped 4% on positive trial data of their GLP-1 pill.
• Adobe dropped 9% on Friday after disappointing earnings guidance on Thursday.
• Larry Ellison briefly passed Jeff Bezos as the world’s second richest man as Oracle sees its best week on the stock market since 2021.
• Tiger Global is planning to join OpenAI’s new funding round, potentially valuing the company at more than $150 billion. Thrive Capital will be leading the round with a $1 billion investment.
• An IPO by the home-loan unit of India’s largest shadow lender, Bajaj Housing Finance, was oversubscribed by more than 60x, highlighting continued excitement around the Indian market. It was the biggest IPO of the year, seeking to raise $781 million and attracting bids for $39 billion. Indian IPOs have raised more than $7.75 billion so far in 2024 with first-day gains averaging 30%.
• China plans to raise the retirement age for the first time since 1950s. Men will be able to retire at 63 instead of 60, while retirement age will go from 50 to 55 for women in ordinary jobs and from 55 to 58 in management positions.
• DSV acquired Deutsche Bahn AG’s road-based logistics operations, DB Schenker, for €15 billion.
• There was another failed assassination attempt at Donald Trump on Sunday, although this didn’t get nearly as close as the last one.