News Recap • Week 46 2024

Most financial markets took a bit of a breather this week after last week’s red-hot Trump rally. We got inflation data from the US and a series of macro numbers from China. Trump remained in the headlines as well. Before diving into that though, here’s a quick market recap.

Thanks for reading Money by CJ! Subscribe for free to receive new posts and support my work.

‍

Market recap

Equities

• S&P 500 fell 2.08% after nudging a new ATH on Monday. Most of the decline took place on Friday after some hawkish comments from Fed chair Jerome Powell.
• Nasdaq Composite dropped 3.15% for the week after a 2.24% decline on Friday.
• STOXX 600 fell 0.69% to its lowest weekly close since early August.
• Nikkei 225 dropped 2.17% for the week and continued the sideways action in place since February.
• Hang Seng plummeted 6.28% this week on the back of Trump’s hawkish admin picks and some disappointing macro data. More on that below. The CSI 300 index fell 3.29%.
• Nifty 50 fell another 2.55%, now down more than 10% since the peak in late September.

Currencies & Commodities

• The DXY rallied 1.64% to briefly trade above 107 for the first time since November 1 last year. The dollar has been strengthening aggressively since Trump won the election.
• USD.DKK gained 1.73% for the week and closed above 7 DKK for the first time since October 2023.
• USD.GBP soared 2.39% to 0.792, its biggest weekly gain since early February.
• USD.JPY rose another 1.12% to its highest level since the BoJ started supporting its weakening currency in July. The yen carry trade seems to be very much back in play.
• Gold plummeted 4.52% to $2,562.72 per ounce. This was the largest one-week decline since June 2021. Despite the recent weakness, gold is still up more than 24% for the year.
• Crypto is up around 10% as of Sunday evening (CET). The market briefly topped its previous record from 2021 around $3 trillion. Bitcoin has been the driver all week, currently up 12%. Solana is up more than 10% for the week but that’s only after an 8% jump on Sunday alone. Ethereum is once again underperforming, down3.4% for the week.

Other

• The VIX jumped 8% for the week after last week’s 31.7% decline. It remains at a historically low level though.
• The 10-year US treasury rallied another 3.1% to now offer a 4.441% yield, its highest since early June. The 2-year gained 1.2% to 4.307%.

‍

Inflation ticked up but remains close to target

The Consumer Price Index (CPI) rose 0.2% in October and 2.6% for the year in the most recent report. Both numbers were in line with expectations.

Core inflation, the data that excludes more volatile categories like food and energy, rose 0.3% for the month and 3.3% for the year.

The Producer Price Index (PPI) came in at 0.2% for the month and 2.4% for the year, both in line with expectations. Core PPI was at 0.3% for October and 3.1% for the year, also as expected.

Services rose 0.3% for the month and accounted for most of the increase in PPI. And most of this was attributed to Portfolio Management prices which jumped 3.6%.

Both food and energy prices actually fell on the month, 0.2% and 0.3% respectively.

While the numbers ticked up slightly from last month, they still show that inflation has been tamed and is very close to the 2% target. Especially when compared to the peak in the summer of 2022.

Inflation’s impact on rates

The market currently sees a 62% likelihood of a rate cut at the Fed’s next meeting in December. The number was 82% on Wednesday, a day before the PPI data was released.

The Fed raised rates aggressively to combat inflation but has started lowering them in response to cooler inflation. A pickup in inflation will likely push the Fed to keep rates higher for longer.

Trump vs inflation

What’s interesting is that Donald Trump campaigned heavily on inflation still being a major issue. And one that he can fix. Voters seemed to agree with both.

However, some of Trump’s planned policies are seen as rather inflationary. Take tariffs on imports and massive tax cuts, for instance. One literally makes products more expensive while the other boosts consumer spending which is likely to fuel price increases.

It will be interesting to see which of his suggested initiatives are actually implemented and to what extent. And then we’ll see the impact on inflation.

‍

Mixed macro data out of China

We got a big bag of macro data out of China on Thursday. All in all, I think it’s fair to say that the data was mixed, at best.

On the positive side, retail sales in China grew 4.8% year over year, well above the forecasted 3.8%. It was also significantly higher than the 3.2% annual growth reported in September.

However, industrial production growth fell short of expectations, coming in at 5.3% vs 5.6% expected.

Furthermore, investment in real estate fell by 10.3% for the January to October period. That’s worse than the 10.1% decline seen from January to September and the biggest drop since the year-to-date period ending in August 2021.

So far this year, the value of new properties sold is down 20.9%. While that sounds pretty horrendous on the surface, it was actually better than the 22.7% drop reported as of September.

Unemployment in cities fell from 5.1% to 5%. We’re still awaiting an updated figure for youth unemployment which fell from a record high 18.8% in August to 17.6% in September.

What we’re also awaiting is for the recent stimulus measures in China to take hold and make a real impact on the economy. For now, many investors remain skeptical of their efficacy.

And then there’s the whole tariff situation. How aggressive will Donald Trump be when he formally takes office in January and how big of an impact will he have on the Chinese economy?

There’s a lot of “wait and see” going on in China at the moment and the consensus approach among investors seems to be one of caution.

‍

Trump rocked the markets with his admin picks

Donald Trump was busy assembling his new team this week, appointing several people for key roles in his upcoming administration. Here are a few highlights and their potential impact on the financial markets.

Marco Rubio for Secretary of State

Donald Trump picked Marco Rubio for Secretary of State. He’s known for a very hawkish stance on China so we should probably expect the trade war to ramp up. Think higher tariffs and potential import bans of China good to the US.

In addition to being a risk for Chinese companies and thus the stock market, slapping tariffs on imported products is also inflationary. An increase in inflation could both hurt the US consumer and force the Fed to keep rates at a higher level than many investors hoped and expected.

RFK for Health & Human Services

Next up, Trump tapped Robert F. Kennedy Jr. for Secretary of the Health & Human Services Department. As a known vaccine skeptic, the pick unsurprisingly sent vaccine stocks lower on Thursday and Friday. Moderna and Pfizer, two Covid-19 high-flyers, dropped 7.34% and 4.69% respectively on massive volume. The stocks were already struggling though.

RFK is also highly critical of our health and food system overall. He sees some fundamental problems in the prevalence of processed food, pesticides, prescription drugs, etc. in modern society.

If he gets approved for the role and is able to follow through on some of the things he really cares about, the impact could be massive for a variety of industries and individual companies.

Will he make lives tougher for fastfood restaurants and processed food manufacturers? And help restaurants and companies focused on healthy food? Will Eli Lilly and Novo Nordisk be able to sell as much of their weight loss drugs if people actually begin eating healthier? Will he outright ban pharma companies from running ads on TV (an idea he’s floated before)?

There’s a series of potential impacts to consider if someone as radical as RFK gets appointed to the role of Health & Human Services secretary. It’s not official yet though, so I’ll be paying close attention to the story and do a deep dive at a later point.

Elon and Vivek for D.O.G.E.

Last but certainly not least, Trump appointed Elon Musk and Vivek Ramaswamy to lead the newly formed Department of Government Efficiency (DOGE). It’s unclear to me what impact this will have on the financial markets, except for one: The recently created D.O.G.E. meme coin, obviously.

The D.O.G.E. token was created in August when Elon Musk first started talking about the new department and peaked above a $500 million market cap on the heels of the official appointment this week.

So, to conclude: Elon Musk and memes keep winning. We live in interesting times.

‍

In other news

• Jerome Powell said on Thursday that the Fed doesn’t need to be in a hurry to reduce interest rates. Further, he said that the strength they’re currently seeing in the economy gives them the ability to approach their decisions carefully. US stocks seemed to sell off on the expectation of fewer rate cuts.
• Japan’s GDP expanded 0.3% year-on-year in Q3 after two straight quarters of year-on-year declines. It grew 0.2% on a quarter-on-quarter basis, or 0.9% annualized. While this beat estimates of 0.7%, it was still a sharp decline from the 2.9% rise in Q2.
• UK GDP was expected to grow 0.2% in September but surprisingly contracted 0.1%. For the third quarter as a whole, the economy grew just 0.1% following a strong rebound at the start of the year. The British FTSE 100 index was barely down on the news though.
• Gold prices have gone straight down since the election and now hit 2-month lows.
• Palantir on Thursday announced plans to move its stock listing from the New York Stock Exchange to the Nasdaq. Shares jumped 6% on Friday.
• Capri and Tapestry formally abandoned their merger plans after the Federal Trade Commission successfully sued to block the deal.
• Amazon launched a low-cost eCommerce service to rival competitor Temu in the US.
• AMD announced on Wednesday that it will lay off 4% of its workforce.
• Indian food delivery company Swiggy went public on Monday, soaring 15% in its trading debut. The company raised $1.34 billion in the IPO and is the 2nd largest in India this year.
• Satoshi Nakamoto, the pseudonymous creator of Bitcoin, is now worth more than $100 billion in BTC.
• Bitcoin’s 30-day correlation with gold dropped to a 11-month low this week. Since gold’s peak on October 30, its price has dropped 8% while Bitcoin has risen almost 30%. Check my post below for more on this topic.

‍

Earnings

• Spotify reported earnings on Tuesday after the bell and fell short on both revenue and earnings for Q3. Earnings missed by a significant margin with €1.45 per share vs €1.72 expected. However, the company guided to operating income of €481 million in Q4, well above the average analyst estimate of €432.7 million. Monthly active users are now expected to reach 665 million, more than analysts’ expectations for 659.3 million. Shares popped more than 11% after the report, reaching a new all-time high. It’s now up 150% in 2024 and 575% since the bottom in late 2022.
• Disney delivered a slight beat on both EPS and revenue, coming in at $1.14 and $22.57 respectively. The real bright spot, however, was the company’s streaming business which reported operating income of $387 million after losing money for years. Subscribers also grew by 4% to 122.7 million, raising hopes that Disney might actually be able to run a successful streaming business. The stock jumped 6.23% after the report on Thursday and added another 5.46% on Friday.

• Shopify reported earnings of 35 cents per share, well above the 27 cents expected. Revenue also came in higher at $2.16 billion vs $2.12 billion expected. The stock popped 21% on Tuesday after the report.
• Applied Materials beat expectations for both revenue and earnings but issued disappointing guidance. Shares fell 9.2% on Friday after the release.
• Alibaba delivered a massive beat with net income coming in at 43.9 billion yuan ($6.07 billion) vs 25.83 billion expected. This was a 58% rise year over year. Revenue rose 5% but came in slightly lower than expected at 236.5 billion yuan. Shares fell 2.2% after the report on Friday.
• Space infrastructure company Rocket Lab reported a 55% year-over-year increase in revenue, from $67.6 million to $104.8 million. Analysts had expected $102 million. Its net losses increased as well but came in better than expected. Shares closed 28% higher the day after the report.

‍