Breakfast FM-Radio: News Briefing for Oct 25, 2024
Market Overview
Positive economic data from the United States supports the market's bets on a 25 basis point interest rate cut by the Federal Reserve in November, leading to gains in many U.S. stocks. The Dow Jones Industrial Average (DJIA) was the only U.S. stock index to fall. The DJIA experienced its first four-day losing streak since June, dragged down by IBM and Boeing. The S&P 500 saw its first increase in four trading days. Following its earnings report, Tesla's stock soared by 22%, marking its best single-day gain in over a decade and turning positive for the year. Hermes' earnings report led to a stock increase of over 1%.
The 10-year U.S. Treasury yield and the U.S. dollar fell from their three-month highs.
The China concept index fell by 1.6%, then halved its losses, with Li Auto's stock rising by more than 1%. The offshore renminbi appreciated by over a hundred points.
The Japanese yen rose through 152. Bitcoin increased by nearly 3%.
Oil prices rose by over 2% before turning negative, rapidly falling by more than 1% during the U.S. stock market session due to Israel's claim that its intelligence agency, Mossad, was involved in negotiations in Doha. Gold approached historical highs, while silver temporarily fell by 1.4%. Palladium surged by 10% due to supply threats from Russia.
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In the Asian trading session, the Shanghai Composite Index closed down by nearly 0.7%, the Beijing Stock Exchange 50 Index closed up by 4%, the Hang Seng Tech Index fell by over 2%, and government bond futures closed broadly lower.
Highlights
The 16th BRICS Leaders' Meeting Kazan Declaration.Tesla's stock surged by 22%, marking the largest increase in a decade, with its annual return turning positive. Elon Musk's net worth skyrocketed by $33.5 billion in a single day, sparking intense debates on Wall Street about the future market, with significant disagreements.
In the United States, the October Markit manufacturing PMI shrank again, while the service sector remained robust, inflation improved, and employment was weak. The number of first-time unemployment claims in the U.S. unexpectedly decreased last week, but the number of continuing claims rose to the highest level in three years due to the impact of hurricanes.
In the Eurozone, the October manufacturing PMI continued to be sluggish, with Germany's manufacturing sector performing better than expected, while France experienced a full acceleration of contraction.
OpenAI dissolved its AGI (Artificial General Intelligence) preparation team, with the head of the team leaving and the safety policy facing renewed scrutiny. OpenAI has released a new model, sCM, which increases image generation speed by 50 times, making real-time video generation a dream no longer out of reach.
The Chief of General Staff of the Israeli military stated that Israel may soon end the conflict with Hezbollah.
The chairman of the U.S. Federal Budget Committee warned of a fiscal crisis, suggesting that the U.S. debt bubble could trigger a reckoning.
Market Close Report:
U.S. Stocks: The Dow Jones Industrial Average fell by 0.33%, the S&P 500 Index rose by 0.21%, and the Nasdaq Composite increased by 0.76%.
European Stocks: The Euro STOXX 600 Index closed up by 0.03%. The German DAX 30 Index closed up by 0.34%.Bond Market: The yield on the 10-year U.S. benchmark Treasury note fell by 4.18 basis points to 4.2038%. The yield on the two-year U.S. Treasury note decreased by 0.99 basis points to 4.0680%.
Commodities: WTI crude oil futures declined by 0.62%, trading at $70.33 per barrel. Brent crude oil futures fell by 0.53%,报价 at $74.56. COMEX gold futures rose by 0.71%, trading at $2,748.80 per ounce. COMEX silver futures increased by 0.02%, trading at $3.845 per ounce. COMEX copper futures gained 0.67%, trading at $4.3655 per pound. Palladium surged by 10%.
News Details
Global Highlights
The 16th BRICS Leaders' Meeting Kazan Declaration. The declaration stated that there is an agreement to jointly shape the New Development Bank into a new type of multilateral development bank for the 21st century and support its further expansion; it instructs the finance ministers and central bank governors of the BRICS countries to continue researching cooperation in local currencies, payment tools, and platforms, and to submit a report during the next BRICS chair's term.
Tesla's stock soared by 22%, marking the largest increase in a decade, turning the year-to-date return positive. Elon Musk's net worth surged by $33.5 billion in a single day, sparking a Wall Street debate on the future market, with opinions ranging from a nearly 40% drop to a rise exceeding 40%?
Wedbush analyst Ives assigned a target price of $300 for Tesla, expecting a rise of over 40% from Wednesday's closing price, stating that price cuts are completely in the past and are key to improving profit margins during Tesla's future AI transformation. J.P. Morgan analyst Brinkman raised the target price by nearly 4% to $135, which is still nearly 37% lower than Wednesday's closing price, arguing that the causes of third-quarter performance such as "selling carbon" revenue and working capital gains are unsustainable. Goldman Sachs believes that Tesla's earnings report is a gradual positive signal, but questions remain about whether Tesla can achieve its FSD performance and vehicle delivery growth targets by 2025, as well as the sustainability of its gross margins. Morgan Stanley stated that this strong earnings report may mark the "bottom" of profit expectations and sentiment in the automotive industry, but whether concerns about Tesla's growth have truly been alleviated remains to be seen.
Musk promised to launch autonomous taxi services next year; can this "pie in the sky" become a reality? Analysis suggests that California and Texas have very strict regulatory requirements for autonomous vehicles, and Tesla still faces challenges in officially launching Robotaxis next year. Previously, Alphabet's Waymo spent several years and millions of miles of testing before obtaining an operating license from Californian authorities, highlighting the difficulty of "getting certified."
In the United States, the October Markit manufacturing PMI continued to contract, while the service sector remained robust, inflation improved, and employment was weak. Due to strong demand in the service sector, U.S. business activity maintained steady growth for most of October, with expectations rebounding to a high not seen in over two years. However, manufacturing has been in contraction for the third consecutive month, albeit with a slight slowdown in the rate of contraction. Although input costs remain high, the composite selling price index fell to its lowest point in over four years this month. The composite employment index has been in contraction for the third consecutive month.The number of initial unemployment claims in the United States unexpectedly declined last week, while the number of continuing claims rose to the highest level in three years due to the impact of hurricanes. For the week ending October 19th, the initial jobless claims in the U.S. were 227,000, lower than the expected 242,000, and down from the previous week's 241,000. The number of continuing claims for unemployment benefits increased to nearly 1.9 million in the previous week.
The eurozone's October manufacturing PMI remained sluggish, with Germany's manufacturing sector performing better than expected, while France's economy is accelerating its contraction. In October, the eurozone's manufacturing production continued to be sluggish, and the growth of the service sector slowed down. Germany's manufacturing decline eased slightly, but unemployment increased; France saw a significant drop in the total amount of new business, and business activity is accelerating its contraction.
OpenAI has disbanded its AGI (Artificial General Intelligence) preparation team, with the head of the team resigning, and its safety policies are once again being questioned! The AGI preparation team was responsible for advising the company on how to handle increasingly powerful AI technologies and whether the world today is ready to manage these technologies. The head of the AGI preparation team stated that he would have a greater impact by conducting related research externally. Previously, OpenAI had already disbanded its "super alignment" team, which was responsible for focusing on the long-term risks of AI. Meanwhile, the 2024 Nobel Prize winner in Physics and "Father of AI," Geoffrey Hinton, has also expressed dissatisfaction with OpenAI's CEO Altman, claiming that Altman is more concerned with profits than safety.
OpenAI has released a new model, sCM: Image generation speed is increased by 50 times, and real-time video generation will no longer be a dream. sCM will usher in a new phase of real-time, high-quality, cross-domain generative artificial intelligence for video, images, 3D models, audio, etc., requiring only two steps of sampling, with a 50-fold increase in speed, and performance approaching or even surpassing diffusion models. If further system optimization is carried out, the speed could be even faster.
The chairman of the U.S. Federal Budget Committee warns of a fiscal crisis: The U.S. debt bubble may trigger a reckoning. MacGuineas stated that if Treasury auctions fail, the market reaction would be very rapid.
Overseas Macro
The leading indicator of the U.S. housing market, new home sales, reached a new high in over a year, with inventory at its highest since 2008, and home prices remained unchanged year-over-year.
BlackRock: Investors underestimate the risk of deadlock. BlackRock believes that a competitive situation could be detrimental to the market but has not been factored into pricing.
Is the U.S. stock market entering a "lost decade"? Others come forward to oppose Goldman Sachs! Long-term Wall Street bull Yardeni Research says that investors should be cautious about views that worry about the market, and the next few years will be a period of prosperity, with the U.S. stock market even entering the "Roaring 2030s." Compared to Goldman Sachs' prediction of a 3% increase, there is a greater possibility that the S&P 500 will rise by 11% annually in the future.
The biggest enemy of the U.S. stock market bull market is——Japan? The huge real interest rate difference between Japan and the U.S. is one of the culprits of the continuous expansion of the U.S. tech stock valuation bubble. As the Bank of Japan ends its negative interest rate policy and the Federal Reserve begins a rate-cutting cycle, tech stocks, which are the backbone of the U.S. stock market, are facing the risk of downward movement.Harvard professors warn: Private equity funds have already controlled 20% of the U.S. economy. The concentration in the financial industry is rising, and private equity firms "take over" the U.S. economy, forming an independent capital world.
The European Central Bank's "big hawk" turns: There is a possibility of a 50 basis point rate cut in December. The discussion of aggressive rate cuts has been put on the table. ECB board member Holzmann said that a 50 basis point rate cut in December cannot be ruled out. Some officials, such as Centeno, also believe that the ECB may have fallen behind in easing monetary policy and needs a more significant rate cut. However, there is no consensus within the ECB at present.
It is almost certain that the Bank of Japan will "stand still" in October, and the key lies in how to adjust the "inflation outlook". A major focus of this meeting is whether the Bank of Japan will remove the wording "price risks are upward in the 2024 fiscal year". If the wording is removed, it is expected that market expectations for a rate hike in December will weaken.
Japanese manufacturing PMI has been shrinking for four consecutive months, with insufficient demand and low orders! Japan's October manufacturing PMI fell from 49.7 last month to 49, staying below the boom and bust line for the fourth consecutive month; the service industry PMI also fell from 53.1 to 49.3, and the composite PMI fell to 49.4, both contracting for the first time in four months.
In 1992, the Japanese stock market rebounded significantly, starting from a policy expectation reversal. CITIC Construction Investment believes that since 1992, the Japanese government has introduced a series of policies to improve the economy and boost market confidence, and the stock market subsequently started a rebound that lasted for nearly two years. From 1992 to 1994, the Japanese stock market experienced a five-wave process, with the maximum increase reaching 50%. The first two rounds of increases were mainly due to the warming of investor sentiment and policy expectations, and the third round was mainly driven by the recovery of fundamentals.
Exports cooled, and South Korea's GDP almost saw negative growth. South Korea's Q3 GDP increased by only 0.1% quarter-on-quarter, far lower than the 0.5% expected by economists; it grew by 1.5% year-on-year, the lowest growth rate since the third quarter of 2023. The vast majority of economists predict that the Bank of Korea will keep interest rates stable at the next policy meeting and will cut rates twice in the first half of next year.
Overseas companies
Nvidia has reached cooperation with several Indian technology giants to build AI infrastructure. Huang Renxun: India will become an AI exporter. The new data center built by India's second-largest conglomerate, Reliance Group, will use Nvidia's Blackwell chips, and other technology companies such as Tech Mahindra will also use Nvidia's technology. Nvidia has also launched a lightweight AI large model for the Indian market, allowing local companies to develop their own AI models.
SK Hynix's third-quarter revenue and profits both hit historical highs, with strong demand for HBM. SK Hynix's third-quarter HBM sales soared 330% year-on-year, with revenue increasing by 94% year-on-year to 12.57 trillion won, and operating profit reaching 7.03 trillion won, turning from loss to profit year-on-year. The company said that HBM3E 12H will be shipped in the fourth quarter and will account for half of the total HBM3E shipments by the first half of next year.
The UK regulatory authority officially investigates Google's investment in Anthropic AI. Last year, Google promised to invest $2 billion in the AI startup Anthropic and signed a cloud service agreement before financing.Commonalities between Starbucks and Nike: New CEO takes the stage, "earnings take a bath." The American consumer giants in adversity adopt the same strategy: abandon unrealistic old targets, release all bad news, and then rebuild from a low starting point.
"A standout in luxury goods": Hermès' sales increase by 11% in Q3, with demand for Birkin bags remaining strong.
Barclays' Q3 net profit grows by 23% year-on-year, exceeding expectations, and its stock price hits a nine-year high.
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