A look back and forward to w/c 18th September #TradewithDave
In the latest #TradewithDave update we consider some of this week’s big events, and take a look at what’s happening in the week beginning 18th September.
US inflation
We had the latest updates on US inflation in the form of the Consumer Price Index (CPI), and the Producer Price Index (PPI). While mixed overall, both reports showed some upside surprises, with Headline year-on-year CPI and month-on-month PPI both coming in hotter than expected. Despite fears that higher inflation could lead to the US Federal Reserve raising interest rates further, all the major US stock indices have continued to rally. In addition, the probability that the US Federal Reserve will announce ‘no change’ to its key Fed Funds rate this coming Wednesday barely moved. According to the CME’s FedWatch tool, there’s a 97% chance that the upper band will remain at 5.50%. We also had the ARM IPO, the biggest initial public offering in two years. The shares were priced at $51 each, valuing the company at $54 billion. It was considered a great success as the stock rallied 25% to close at $63.59 on the first day of trading.
Tesla – rubber hits the road again
Tesla rallied sharply on Monday, ending the session up 10% following an upgrade from Morgan Stanley. Tesla has recovered substantially this year following a drastic sell-off in 2022 on the back of the US Federal Reserve’s programme of aggressive rate hikes. But it suffered a sharp reversal between mid-July and mid-August. Since then, it appears to have found its footing once again. It is up 170% so far this year, trading above $270 per share. But this remains well below the all-time high of $418 hit in November 2021.
Check out Tesla…
Talking of cars…
The US auto sector is in focus as negotiations between major manufacturers Ford, General Motors and Stellantis and the UAW union appear to have broken down. Tensions between the two sides have been mounting as the switch to Electric Vehicles (EVs) has dramatically changed manufacturing priorities. In particular, the move away from making and installing internal combustion engines, in favour of large battery packs. This has resulted in a reliance on battery factories which tend to be ununionized. At the time of writing, around 13,000 workers across all three auto companies have gone on strike. Without a rapid settlement, this has the potential to contribute to a sizeable hit to US growth. Ford and General Motors are both down around 19% since early July, while Stellantis has lost around 10% over the past two months.
Check out Ford…
Apple suffers a setback
Along with many tech stocks, Apple has made back a significant proportion of the fall in its share price during 2022. It rose around 60% from the beginning of this year to mid-July, when it hit a fresh record high around $198, before pulling back sharply over the following month. We then saw it rally again into early September before it slumped 8.5% in two days. This followed reports from the Wall Street Journal that China had banned the use of iPhones by central government officials. The news was denied this week by China’s Ministry of Foreign Affairs spokesperson Mao Ning. But the White House said they were following events with concern, and that China’s actions appear to be ‘aggressive and inappropriate corporate retaliation. Apple doesn’t disclose iPhone sales by country, but research firm TechInsights estimates that there were more iPhone sales in China than in the US last quarter. Despite this pull-back in the share price, Apple remains the largest company in the world by market capitalisation.
Check out Apple…
🔸 Looking ahead to next week
Keeping an eye on ARM
The ARM IPO has been hailed as a sign that the new listings market is bursting back to life after a difficult year in 2022. Indeed, several other companies have announced their intentions to go public including the grocery delivery company Instacart, marketing data concern Klavigo and posh sandal-maker Birkenstock. There are now hopes that the IPO market will really take off in 2024.
Central Banks
Other important events next week include the release of minutes from the Reserve Bank of Australia’s last monetary policy meeting, CPI updates from the Eurozone, Canada and the UK, and interest rate decisions from the Bank of England, Bank of Japan and Swiss National Bank.
The US Federal Reserve
But the biggest event in the calendar by far is the Federal Reserve’s FOMC meeting which concludes on Wednesday evening. As noted previously, the probability of no change in interest rates stands at 97%. However, this is the first FOMC meeting since July when the Fed hiked rates by 25 basis points. It’s also a quarterly meeting which means we’ll see the release of the FOMC’s Summary of Economic Projections. This is where individual members of the FOMC provide their forecasts for inflation, the Fed Funds rate, GDP and unemployment for the rest of this year and beyond. Everyone will be looking for any changes from the last summary in June to provide clues to the Fed’s thinking. Could they now signal that they have raised rates enough, or will they once again caution that inflation could rise again? On top of this, Fed Chair Jerome Powell also hold a press conference which may give further insight into the Fed’s frame of mind.
US inflation
We had the latest updates on US inflation in the form of the Consumer Price Index (CPI), and the Producer Price Index (PPI). While mixed overall, both reports showed some upside surprises, with Headline year-on-year CPI and month-on-month PPI both coming in hotter than expected. Despite fears that higher inflation could lead to the US Federal Reserve raising interest rates further, all the major US stock indices have continued to rally. In addition, the probability that the US Federal Reserve will announce ‘no change’ to its key Fed Funds rate this coming Wednesday barely moved. According to the CME’s FedWatch tool, there’s a 97% chance that the upper band will remain at 5.50%. We also had the ARM IPO, the biggest initial public offering in two years. The shares were priced at $51 each, valuing the company at $54 billion. It was considered a great success as the stock rallied 25% to close at $63.59 on the first day of trading.
Tesla – rubber hits the road again
Tesla rallied sharply on Monday, ending the session up 10% following an upgrade from Morgan Stanley. Tesla has recovered substantially this year following a drastic sell-off in 2022 on the back of the US Federal Reserve’s programme of aggressive rate hikes. But it suffered a sharp reversal between mid-July and mid-August. Since then, it appears to have found its footing once again. It is up 170% so far this year, trading above $270 per share. But this remains well below the all-time high of $418 hit in November 2021.
Check out Tesla…
Talking of cars…
The US auto sector is in focus as negotiations between major manufacturers Ford, General Motors and Stellantis and the UAW union appear to have broken down. Tensions between the two sides have been mounting as the switch to Electric Vehicles (EVs) has dramatically changed manufacturing priorities. In particular, the move away from making and installing internal combustion engines, in favour of large battery packs. This has resulted in a reliance on battery factories which tend to be ununionized. At the time of writing, around 13,000 workers across all three auto companies have gone on strike. Without a rapid settlement, this has the potential to contribute to a sizeable hit to US growth. Ford and General Motors are both down around 19% since early July, while Stellantis has lost around 10% over the past two months.
Check out Ford…
Apple suffers a setback
Along with many tech stocks, Apple has made back a significant proportion of the fall in its share price during 2022. It rose around 60% from the beginning of this year to mid-July, when it hit a fresh record high around $198, before pulling back sharply over the following month. We then saw it rally again into early September before it slumped 8.5% in two days. This followed reports from the Wall Street Journal that China had banned the use of iPhones by central government officials. The news was denied this week by China’s Ministry of Foreign Affairs spokesperson Mao Ning. But the White House said they were following events with concern, and that China’s actions appear to be ‘aggressive and inappropriate corporate retaliation. Apple doesn’t disclose iPhone sales by country, but research firm TechInsights estimates that there were more iPhone sales in China than in the US last quarter. Despite this pull-back in the share price, Apple remains the largest company in the world by market capitalisation.
Check out Apple…
🔸 Looking ahead to next week
Keeping an eye on ARM
The ARM IPO has been hailed as a sign that the new listings market is bursting back to life after a difficult year in 2022. Indeed, several other companies have announced their intentions to go public including the grocery delivery company Instacart, marketing data concern Klavigo and posh sandal-maker Birkenstock. There are now hopes that the IPO market will really take off in 2024.
Central Banks
Other important events next week include the release of minutes from the Reserve Bank of Australia’s last monetary policy meeting, CPI updates from the Eurozone, Canada and the UK, and interest rate decisions from the Bank of England, Bank of Japan and Swiss National Bank.
The US Federal Reserve
But the biggest event in the calendar by far is the Federal Reserve’s FOMC meeting which concludes on Wednesday evening. As noted previously, the probability of no change in interest rates stands at 97%. However, this is the first FOMC meeting since July when the Fed hiked rates by 25 basis points. It’s also a quarterly meeting which means we’ll see the release of the FOMC’s Summary of Economic Projections. This is where individual members of the FOMC provide their forecasts for inflation, the Fed Funds rate, GDP and unemployment for the rest of this year and beyond. Everyone will be looking for any changes from the last summary in June to provide clues to the Fed’s thinking. Could they now signal that they have raised rates enough, or will they once again caution that inflation could rise again? On top of this, Fed Chair Jerome Powell also hold a press conference which may give further insight into the Fed’s frame of mind.