News
Wall Street Breakfast FM-Radio: Oct 11, 2024
Market Overview
The U.S. Consumer Price Index (CPI) for September increased by 2.4% year-over-year, marking the lowest level in three and a half years, but it exceeded expectations. The number of initial unemployment claims in the U.S. last week unexpectedly rose to a 14-month high. Federal Reserve's voting member Bostic stated that a pause in rate cuts in November is not ruled out.
The U.S. CPI depressed the U.S. stock market, with small-cap stocks sensitive to interest rates falling by 1% at one point, while the Dow and S&P detached from their peaks. Nvidia rose by 1.6%, AMD fell by 4%, and Tesla's stock price dropped by 3.6% at one point.
Chinese concept stocks defied the market trend, with the index rising by 1.5% at one point. Popular Chinese concept stocks experienced mixed gains and losses, with Ctrip's stock price surging by more than 5%, while Li Auto's stock price fell by nearly 4%. The offshore renminbi appreciated by over 100 pips, breaking through 7.09 yuan.
The yield on the 10-year U.S. Treasury bond rose slightly, reaching the highest level in ten weeks. Weak U.S. initial claims data increased market bets on a 25 basis point rate cut in November, with the yield on the two-year U.S. Treasury bond falling by nearly 5 basis points. The U.S. dollar reached its highest level in eight weeks.
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Oil prices rose by more than 3.5% due to concerns over conflicts between Israel and Iran, as well as the impact of hurricanes in the southern United States. Gold halted its six-day losing streak, while silver rose by more than 2%. Bitcoin's price once fell below $59,000.
During the Asian trading session, the three major A-share indexes closed with mixed results, with the ChiNext index falling by 2.95%. The China-listed stocks surged, government bonds rose significantly, and Hong Kong stocks opened and traded higher, with the Hang Seng Index closing up by nearly 3%.
News Highlights
Emphasizing the principle of equal treatment, the draft of the Private Economy Promotion Law is open to public opinion for comments.The U.S. CPI for September exceeded expectations across the board, rising 2.4% year-on-year, the lowest since February 2021, slowing down from the previous value of 2.5%, but surpassing the expected 2.3%; the core CPI rose 3.3% year-on-year, with both expectations and previous values at 3.2%. Several high-ranking officials of the Federal Reserve have stated they are not concerned about the September CPI, but this year's voting member, the President of the Atlanta Fed, said they are absolutely open to the idea of pausing interest rate cuts in November. The "New Fed Wire": The mixed September CPI in the U.S. indicates that the path to cooling inflation continues to be bumpy.
In the week ending October 5th, the number of first-time claims for unemployment benefits in the U.S. surged to 258,000, reaching the highest level in over a year.
The Robotaxi launch is imminent, marking a watershed moment for Tesla.
AMD has introduced the MI325X AI accelerator, with Lisa Su stating that the AMD AI accelerator, which competes with NVIDIA's Blackwell, will be mass-produced and shipped in the fourth quarter, outperforming NVIDIA. AMD's stock price initially rose and then fell, dropping more than 5% during trading. Analysts say the new product does not significantly change the near-term financial outlook, and the MI325X cannot effectively challenge NVIDIA's dominant position.
Morgan Stanley interprets NVIDIA's closed-door meeting: Inference computing will boost long-term demand for AI chips.
Market closing report:
U.S. stocks: The Dow Jones Industrial Average fell by 0.14%, the S&P 500 Index fell by 0.21%, and the Nasdaq fell by 0.05%.
European stocks: The Euro STOXX 600 Index closed down by 0.18%. The German DAX 30 Index closed down by 0.25%. The French CAC 40 Index closed down by 0.42%. The UK FTSE 100 Index closed down by 0.06%.
A-shares: The Shanghai Composite Index rose by 1.32%, the Shenzhen Component Index fell by 0.82%, and the ChiNext Index fell by 2.95%.Bond Market: The U.S. 10-year benchmark Treasury yield rose by 0.20 basis points, to 4.0746%. The two-year U.S. Treasury yield fell by 4.96 basis points, to 3.9719%.
Commodities: WTI November crude oil futures closed up $2.61, a 3.56% increase, at $75.85 per barrel. Brent December crude oil futures closed up $2.82, a 3.68% increase, at $79.40 per barrel. COMEX gold futures closed up 0.81%, at $2647.3 per ounce. COMEX silver futures closed up 2.1%, at $31.375 per ounce. LME copper futures closed up $48, at $9723 per ton.
News Details
Global Highlights
Emphasizing the principle of equal treatment, the draft of the Private Economy Promotion Law is open to public opinion. The draft stipulates the principle of "fair competition" with a focus on equal treatment, while also providing for the strengthening of the protection of the rights and interests of private entrepreneurs.
U.S. September CPI exceeded expectations across the board, rising 2.4% year-on-year, the lowest since February 2021, slowing down from the previous value of 2.5%, but exceeding the expected value of 2.3%; it rose 0.2% month-on-month, in line with the previous value, and the expected value was 0.1%; core CPI rose 3.3% year-on-year, with expectations and previous values at 3.2%; it rose 0.3% month-on-month, expected to be 0.2%, in line with the previous value, and the highest since March.
Several high-ranking officials of the Federal Reserve stated they are not worried about September CPI, but a voting member wavers, not opposing a pause in rate cuts in November. Several senior officials of the Federal Reserve spoke after the release of the higher-than-expected CPI report. Most of them believe that although U.S. inflation has not yet reached 2%, they are confident that inflation is moving in the right direction and are not too concerned about the higher-than-expected September CPI inflation report. However, Atlanta Fed Chairman Bostic, who is not considered hawkish, said that based on the recent mixed data, he is absolutely open to the idea of pausing rate cuts in November.
"The New Fed Wire": The mixed U.S. September CPI continues the bumpy road to cooling inflation. In Timiraos' latest article, he cites industry views that inflation data is disappointing and the road to cooling inflation is bumpy. He also quotes the latest remarks of Atlanta Fed Chairman Bostic, "Perhaps we should pause rate cuts in November." Timiraos points out that investors have been re-evaluating the speed of the Fed's rate cuts, as recent labor market data suggests the U.S. economy may be stronger than expected. Although investors still believe the Fed will cut rates at the two remaining meetings this year, they now believe that the pace of rate cuts next year and the overall magnitude of the rate cut cycle will be smaller than expected a few weeks ago.
Most Wall Street analysts believe that the overall and core U.S. CPI for September exceeded expectations across the board, which may slow the pace of rate cuts, but the trend of inflation decline remains unchanged. The mixed September CPI data reinforced expectations that the Fed will slow the pace of rate cuts, with a significant 50 basis point rate cut being ruled out, but it will not change the Fed's judgment that inflation is still on a downward trend.On October 5th in the United States, the number of initial jobless claims surged to 258,000, reaching the highest level in over a year. One of the reasons for the increase may be the impact of Hurricane "Helen," which led to a significant rise in unemployment benefit applications in Florida and North Carolina. Additionally, the strike at Boeing also affected the data.
Bond traders are increasing their bets that the Federal Reserve will cut interest rates by 25 basis points in November. U.S. inflation for September exceeded expectations across the board, but the initial claims data soared to the highest in a year, and the market is placing more emphasis on the impact of a slowdown in the labor force. The possibility of a 25 basis point rate cut in November has risen to over 80%.
The Robotaxi launch is approaching, and Tesla is facing a watershed moment. The Robotaxi, which is a bet on Tesla's future, is about to make its debut, featuring gull-wing doors, L4 driving technology, and an expected commercialization by the end of 2025. The event may also reveal other new models, the Optimus robot, and progress in FSD technology. Will this launch "make history" or will it be a flop? Wall Street warns that there is a need to be vigilant about Tesla's "sell the fact" stock price downside risk, as the launch may be disappointing. On the eve of the launch, Tesla's stock closed nearly 1% lower on Thursday.
AMD has launched the MI325X AI accelerator, claiming performance superiority over Nvidia.
CEO Lisa Su stated that AMD's AI accelerator, which is positioned against Nvidia's Blackwell, will be mass-produced and shipped in the fourth quarter, with performance surpassing Nvidia. It is expected that the AI accelerator market will reach $500 billion by 2028. In terms of revenue, AMD has already captured a 34% market share in the data center CPU sector, with the latest CPUs outperforming Intel. However, some analysts believe that AMD's new product is unlikely to affect Nvidia's data center revenue. AMD's stock price first rose and then fell, dropping more than 5% during the trading day and closing down 4%.
Why did AMD's stock price plummet despite the launch of a challenge to Nvidia's AI chip? Analysts say that the new product did not significantly change the near-term financial outlook. Investors are looking forward to the return on AMD's AI investment and are still waiting for signs of AMD catching up with Nvidia, which may only be seen when the third-quarter financial report is released. Some comments suggest that AMD's new GPU MI325X cannot effectively challenge Nvidia's dominant position, claiming to be on par with Blackwell, but the actual performance may not be as good as Blackwell.
Morgan Stanley interprets Nvidia's closed-door meeting: Inference computing will boost long-term demand for AI chips. Nvidia stated in a closed-door meeting that with the release of the OpenAI o1 model, a new AI narrative is unfolding, and the growth in inference computing demand has brought new growth opportunities for Nvidia. Morgan Stanley estimates that Nvidia's AI processor market share will continue to increase in 2024 and 2025, and the shipment trend is expected to continue to grow.
Domestic Macro
Have confidence in incremental policies. China News Network published an article by Dong Yu, a special author from Sanlihe, stating that incremental policies will definitely include new investments, and "X trillion" will definitely be there, but some may still need to go through the legal process, so everyone should be a bit patient and not be easily swayed by the rhythm.
A heavyweight announcement before the A-share market on Thursday: The People's Bank of China's 500 billion yuan "swap facility" has been implemented. The announcement stated that the scale of SFISF operations may be further expanded depending on the situation. According to sources close to the central bank, the swap facility term does not exceed one year, and an extension can be applied for upon expiration; the range of collateral may also be expanded in the future depending on the situation.Hua Chuang Fixed Income stated that the scale expansion limit of the swap facility may be linked to the central bank's holdings, with the current central bank holdings of government bonds likely exceeding 2.2 trillion yuan. From a maturity perspective, the current short-term bond scale with a maturity of less than 3 years accounts for a high proportion, with the scale possibly around 1.6 trillion yuan, potentially serving as the primary target for lending out.
What does the establishment of a joint working group by the People's Bank of China and the Ministry of Finance imply? China Galaxy believes that the establishment of a joint working group can be seen as the establishment of a coordination mechanism between monetary policy and fiscal policy. To achieve coordination, there may still be a reserve requirement ratio (RRR) cut of 25-50 basis points (BP) within the year, with the timing possibly chosen when incremental fiscal policies are introduced; the central bank's open market operations in buying and selling government bonds will help the smooth deployment of incremental fiscal tools; and there may still be a possibility of an interest rate cut of 10-20 BP within the year.
Existing mortgage loan interest rates: Major banks have announced a batch adjustment on October 25th! The Industrial and Commercial Bank of China stated that on October 25, 2024, the interest rates of existing housing loans that meet the corresponding conditions will be uniformly adjusted in batches to not be lower than the Loan Prime Rate (LPR) minus 30 basis points. The current mortgage loan interest rates (excluding Beijing, Shanghai, and Shenzhen) that are higher than LPR minus 30 BP will be uniformly adjusted to LPR minus 30 BP; the first home loan interest rates in Beijing, Shanghai, and Shenzhen that are higher than LPR minus 30 BP will also be uniformly adjusted to LPR minus 30 BP.
The Hong Kong real estate market shows signs of recovery, with a significant increase in the sales of new and second-hand homes under the backdrop of interest rate cuts and a warming stock market. In the first week of October, the sales volume of second-hand homes in Hong Kong soared by 60% compared to the previous week, reaching the highest level in six months. Jefferies estimates that the Hong Kong property market is expected to bottom out, with an anticipated single-digit growth in housing prices next year; however, some opinions suggest that the recovery of the Hong Kong real estate market remains challenging due to an oversupply of housing inventory and lackluster economic growth.
Overseas Macro
The auction of 30-year U.S. Treasury bonds was unexpectedly strong, with overseas demand surging to a historical high! As an indicator of overseas demand, the proportion allocated to indirect bidders, usually institutions such as foreign central banks participating in the bidding through primary dealers or brokers, reached an astonishing 80.5%, soaring from 68.7% last month, setting a historical record.
Retail investors continue to pour in, with Indian stock funds recording a record inflow of $3 billion.
Overseas Companies
Berkshire Hathaway's stake in Bank of America has fallen below the 10% threshold for rapid disclosure. Berkshire issued the largest yen bond since 2019.
Faced with a historic breakup crisis, Google may "cut" itself before the U.S. Department of Justice? Google hopes that any remedies can focus on contracts with companies such as Apple and Mozilla (the manufacturer of the Firefox browser). Even so, Google believes that as long as these transactions do not require exclusivity, it should still be allowed to pay distribution fees to these partners.Zuckerberg makes a comeback with the strongest AR glasses, Meta is reported to have spent eight years "polishing" the Orion prototype, which may be available to consumers in two years. Ten years ago, Meta, then known as Facebook, entered the VR field with a $2 billion acquisition of Oculus, and it seems to have only recently established a solid foothold in this area with the demonstration of Orion last month. The media reported that the successful demonstration of Orion last month allowed many Meta employees to breathe a sigh of relief, representing a shift in the company's internal views on Zuckerberg's development of high-cost hardware.
During the industry's low period, Rio Tinto accelerates its layout, acquiring lithium miner Arcadium for a 67% premium at a cost of $6.7 billion. After the acquisition is completed, Rio Tinto will become the world's third-largest lithium supplier. This year, lithium prices have continued to be sluggish due to supply and demand fundamentals, with the global benchmark price for 99.2% of lithium carbonate having fallen by more than 20%, to $10,800 per ton.
Morgan Stanley's重磅 report: Will brain-computer interfaces be the next major medical technology opportunity? Morgan Stanley stated that BCI technology could become an important breakthrough in future medical technology, providing new treatment methods for nearly 10 million BCI candidates (neurological disease patients) and bringing a market opportunity of $400 billion.
Luxury car demand is sluggish, with Mercedes-Benz and BMW's third-quarter sales dropping by 3% and 13%, respectively.
The new official takes office with "three fires," and it is reported that the new CEO of HSBC is brewing a $300 million layoff plan, targeting senior employees.
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