🏘 US Home Price Growth Slowed In July Amid High Mortgage Rates

⏺US home price growth slowed in July as high mortgage rates kept potential buyers away and supply increased. The national home price index rose 5% from a year earlier, down from June's 5.5% rise, according to S&P CoreLogic Case-Shiller data. After seasonal adjustment, prices in July rose 0.2% from the previous month, reaching a record for the 14th time in a row.

⏺The July index covers the three-month period beginning in May, when 30-year mortgage rates peaked at 7.22%. Borrowing costs have fallen since then, but housing affordability remains an issue. At the same time, the supply of homes on the market has increased, with active listings up 14% in July compared to last year.

⏺The US Federal Reserve cut interest rates for the first time this month, hinting at further cuts that could lower mortgage rates and revive the housing market. The likelihood of further rate cuts is high, and this could lead to an acceleration in home prices towards the end of the year or the beginning of next year, when purchasing power improves.

⏺In July, the price index for the 20 largest U.S. cities rose 5.9% from a year earlier, down from June's 6.5% rise. New York again saw the largest increase at 8.8%, followed by Las Vegas and Los Angeles with increases of 8.2% and 7.2%, respectively.

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📈Chinese Market Rose To A 4-Month High On Economic Support Measures

🔴Chinese market rose sharply after the head of the People's Bank of China (PBOC) Pan Gongsheng announced new stimulus measures aimed at improving the economic situation as well as the investment climate in the country.

⏺During a press conference following PBOC meeting on September 24, he announced, in particular, a reduction in the reserve requirement ratio (RRR) for banks by 50 bps. This will allow liquidity to flow into the market in the amount of 1 trillion yuan ($142.15 billion). The head of the Chinese Central Bank made it clear that the base rate (LPR) could also be lowered by 0.2–0.25 percentage points.

⏺This is a clear attempt to cope with the slowdown in economic growth, especially given the weak performance in areas such as manufacturing and consumer spending. Given low inflation pressures and fiscal constraints, more gradual steps of this nature can be expected in an attempt to stabilize the situation without over-committing.

⏺While market participants said the policy measures were better than expected, many still question whether they will help revive consumer demand enough to halt the country's longest deflationary period since 1999. It will likely take more than just monetary policy to help the economy get back on its feet and effectively address the housing downturn.

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⚡️AI Market Could Reach Almost $1 Trillion In Three Years

⏺Generative AI is a major driver of the current wave of change, and experts estimate that the market for AI products and services could reach between $780 billion and $990 billion by 2027.

⏺The overall AI-related hardware and software market is expected to grow 40% to 55% annually for at least the next three years. Fluctuations in supply and demand will create volatility along the way, but the long-term, sustainable trajectory looks set to continue.

⏺The rapid development of AI will continue to transform the technology sector. That being said, larger models will continue to push boundaries, while smaller models will create new, more focused capabilities in specific verticals and domains.

⏺Experts believe AI workload demands will also drive innovation in storage, compute, memory and data centers. And as the market becomes more competitive and complex, companies will need to adapt quickly to capture their share of the potential trillion-dollar market.

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☄️Boeing Is Losing $100 Million To $150 Million A Day Due To Union Strike

⏺Boeing is caught between a rock and a hard place as the strike between it and the International Association of Machinists (IAM) union continues into its second week.

⏺On Monday, September 23, Boeing increased its offer to the union, which represents 33,000 workers. However, the company did not approach the union leadership, but instead sent its “best and final” proposal directly to the workers, which did not please the IAM.

⏺Boeing's latest offer raised wages to 30% from 25% in the previous offer, doubled the signing bonus to $6,000 and increased 401k contributions, among other things. However, as was the case with the first offer, participants remained uninterested in the company's latest offer, which was sent out through the media.

⏺Boeing's insistence on reaching out directly to union members speaks to the challenges the company faces. Boeing is already forced to conduct a significant reassessment of its financial performance. Every day Boeing goes on strike, they lose between $100 million and $150 million.

⏺Without union members working at Boeing's assembly plant in Renton, Washington, the company will be unable to deliver its cash cow, the 737 Max jet. Boeing can still supply its 787 Dreamliners from its nonunion South Carolina plant, but the number of the planes is limited. Boeing delivered 70 737 Max planes in the second quarter, but only nine of its larger Dreamliners.

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🥈 Silver Rose To Its Highest Level Since 2012

⏺Exchange prices for silver soared to their highest level since 2012. On Thursday, September 26, silver futures for December delivery on the Comex exchange rose 3.1% to $33.02. The precious metal was last traded at this level in December 2012. Since the beginning of the year, silver prices have risen almost 37%.

⏺Silver hit a multi-year high amid an overall increase in investor demand for precious metals. On September 26, gold prices also rose to a new historical high, exceeding $2,700 per ounce for the first time in history. The growing interest in precious metals was fueled by expectations of further interest rate cuts by the Federal Reserve, as well as increased demand.

⏺The US Federal Reserve immediately cut the rate by 50 bp. based on the results of the September meeting. The regulator has kept it at 5.25–5.5% per annum since July 2023. The US rate was at its highest in more than 20 years for more than a year. According to the CME FedWatch tool, traders are now pricing in a Fed rate cut of a total of 75 bps. until the end of 2024.

⏺Silver has been one of the best performers among major commodities this year, as the Fed's pivot to looser monetary policy last week and the prospect of more rate cuts bode well for non-interest bearing precious metals

⏺The rise in silver prices was also supported by the possibility of increased industrial use as China takes steps to boost its economy. In addition, the inflow of funds into silver-backed exchange-traded funds increased, the publication reported.

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⚡️Threat Of Dock Workers' Strike Could Paralyze US Ports

⏺About 45,000 dockworkers at all major ports in the eastern United States and the Gulf Coast are threatening to go on strike early next week. Negotiations that have been going on since June have reached a dead end. Cargo owners are in a hurry to avoid the consequences.

⏺The International Longshoremen's Association is threatening a strike if an agreement is not reached with the United States Shipping Alliance on wages and automation by October 1. This is already affecting the operation of ports: working hours are increasing and surcharges are being introduced for interruptions. ILA leader Harold Daggett confirmed that dockers would continue to work on some military cargo and cruise ship sites.

⏺Retailers brought their goods in advance, which may soften the economic impact of the strike. However, delays may negatively impact some cargo, such as perishable foods and pharmaceuticals. The ports that could be affected handle more than 90% of the pharmaceutical products imported into the United States. Analysts warn the fallout will spread around the world as port congestion reduces shipping capacity and increases freight rates.

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⚡️Global Stocks Hit Record Levels Boosted By Chinese Stimulus And Lower US Inflation

📊STOXX 600 index in Europe rose 0.5%, while DAX, CAC 40 and FTSE 100 indices rose 0.3-1.2%. S&P 500 is also up after hitting a record on Thursday. PCE index showed a further decline in inflation pressures in August, which increased expectations of a second US Federal Reserve rate cut by 50 basis points in November.

💵USD fell 1.5% to 142.60 yen after Shigeru Ishiba won the election as Japan's prime minister. Ishiba supports the normalization of the Bank of Japan's policies.

💸Shares in China rose on stimulus, posting their best week since 2008, with the MSCI world index up 0.4%, Chinese blue chips up 4.5% and the Hang Seng index up 3.6%. China's central bank has cut interest rates and injected liquidity into the banking system, with more fiscal measures expected to be announced before China's week-long holiday starting Oct. 1.

🛢Oil prices fell 0.1% to $71.50 a barrel following news of Saudi Arabia's plans to increase production.

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🎲 Casino Stocks Were The Big Winners This Week

⏺Shares of casino stocks with exposure to Macao had a great week this week after China announced economic stimulus plans. According to data provided by S&P Global Market Intelligence, shares of Melco Resorts & Entertainment jumped as much as 31.5%, Las Vegas Sands was up 22.2%, and Wynn Resorts rose 21.9% this week.

⏺The Chinese government said this week it would implement "necessary fiscal spending" to get the country's economy on track to meet a 5% GDP growth goal. The plan is to reduce reserves banks must hold, cut interest rates, and provide loans for investors to buy stocks. In total, the package could be over $300 billion, but economists don't think it will move the needle much for the Chinese economy.

⏺Economists may not think the stimulus is enough to drive change, but that didn't stop investors this week who were looking for any way to get exposure to China's potential growth. Macao clearly offers that. Macao has seen steady growth over the past two years and stocks have been relatively undervalued. So far this year, gambling revenue in Macao is up 33.4% and has grown double digits every single month

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📱Apple Is Scrapping Its Big Plans To Release Movies In Theaters

⏺Apple is rethinking its movie strategy following disappointing box office performances for several big-budget films. Apple has canceled plans to release Lone Wolves, the action-comedy starring George Clooney and Brad Pitt, in thousands of theaters around the world. Instead, the film debuted in a limited number of theaters before becoming available on the Apple TV+ streaming service on September 27.

⏺Apple plans to take a similar approach with its next few films, including the World War II drama Blitz. The change in film strategy is part of a larger reboot at Apple's Hollywood studio, led by Zach Van Amburg and Jamie Erlicht. Having spent over $100 million, and in some cases over $200 million, on several of the aforementioned films, Apple will now focus on producing just over 10 films per year, most of which will be produced for less than $100 million

⏺The tech giant intended to spend $1 billion annually on films for theaters. This means that Apple's commitment to spend this amount will not change, but the composition of the company's film slate and release strategy will change
Apple will still aim to make one or two major motion pictures a year with films that are exclusively greenlit for higher budgets, such as Formula 1. However, films like Lone Wolves, for which Clooney and Pitt collectively earned tens of millions of dollars, will be shown on the Apple TV+ streaming service.

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☄️Quant Hedge Funds Trapped in Short Squeeze After China Glitch

⏺Some firms suffered heavy losses because they shorted index futures for their so-called Direct Market Access strategies, said the people. Some saw their losses exacerbated by a Shanghai Stock Exchange glitch that left them unable to sell holdings to meet margin requirements.

⏺The losses come as many quants are still recovering from record drawdowns suffered during China’s stock market meltdown in February, when their favored small-cap stocks crashed, prompting regulators to push for the DMA products to be phased out. Now they have been caught wrongfooted again after China’s latest economic stimulus measures sparked the biggest weekly equity rally since 2008.

⏺Still, Friday’s drawdowns in the DMA products were smaller than the losses seen in February, and any forced liquidations should be rare, said the people. Some brokerages have agreed to extend deadlines for the quant clients to add margins for bets on index futures

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☄️Japanese Stocks May Fall On Monday

⏺Japanese stocks are likely to fall on Monday after Shigeru Ishiba's surprise victory in the ruling party leadership race fueled expectations of higher interest rates.

⏺Nikkei 225 Stock Average futures fell 6% in Osaka after Ishiba's election. The Nikkei 225 jumped 2.3% ahead of the final result as traders bet on a win by Sanae Takaichi, who opposes higher bets. Analysts say the stock market is likely to see big swings in the near future until there is more clarity on Ishiba's policies.

⏺The yen rose sharply after Ishiba's victory. A stronger currency is likely to drag down exporters, while banks are likely to be supported by optimism that their profits will increase amid higher rates.

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🗓 Coming Up Next Week

Monday 30.09
⏺China Composite PMI
⏺UK GDP
⏺Germany CPI
⏺FED Powell Speech

Tuesday 01.10
⏺China - Markets Closed
⏺US, Japan, Germany, UK, Eurozone PMIs
⏺Eurozone CPI

Wednesday 02.10
⏺China - Markets Closed
⏺US ADP Nonfarm Employment

Thursday 03.10
⏺China - Markets Closed
⏺Japan, Australia, Germany, UK, Eurozone PMIs
⏺US Services PMI

Friday 04.10
⏺China - Markets Closed
⏺US Nonfarm Payrolls

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EU Indices Face Serious Risks, Including From US Elections

⏺Goldman Sachs and BlackRock warn that the rally in European stocks faces serious headwinds. Fund managers are feeling pressure from worsening earnings forecasts and the upcoming US election. But the opinion on the impact of China's stimulating policies on economic growth is ambiguous

⏺European stocks face a number of headwinds to continued gains in 2024 after hitting another record high last week.

⏺Investors should be prepared for increasing risks associated with the region's weak economy and its impact on corporate earnings. The US elections add an additional layer of uncertainty, warn financial managers at Goldman Sachs Group Inc. and BlackRock Inc.

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⚡️Powell Indicated Further, Smaller Rate Cuts

⏺Fed Chairman Jerome Powell pointed to a further, more minor rate cut and called for attention to the fact that the regulator is not adhering to any given course. The Fed chairman also stressed that the recent half-percentage-point interest rate cut should not be interpreted as a sign that further steps will be as aggressive. In fact, this indicates that the next steps will be smaller, the head of the US Central Bank assured.

⏺At the same time, Powell expressed confidence in the strength of the US economy and believes that inflation continues to decline. He stressed that he and his colleagues will seek to balance lower inflation with support for the labor market and will allow data to guide future actions.

⏺He said that if economic data remains stable, there will likely be two more rate cuts this year, but in smaller increments of a quarter of a percentage point. This contradicts market expectations for more aggressive easing.

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⚡️There Is A Sharp Rise In The Popularity Of Buyback In The USA

⏺In the US, buybacks have surged in popularity in 2024, despite growing concerns about a potential increase in the buyback tax to 1%. Companies are frantically announcing plans to buy back their own shares this year, despite a 20% rise in the S&P 500 index to a record high and a 1% tax on stock buybacks.

⏺The volume of announced buybacks this year has already exceeded $1 billion. This figure by the end of the year may exceed the previous record of $1.2 billion, set in 2022. According to analysts, this level could be reached as early as October or by the end of November.

⏺The 1% tax does not apply to large, large companies pursuing large-scale stock buyback plans. They likely concluded that market conditions now look favorable for stocks, especially after the Fed's first four-year rates. Chairman of the regulator Jerome Powell said yesterday that the economy remains in good shape and the central bank wants to avoid consequences on the labor market.

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⚡️US Port Strike Adds Uncertainty For Fed

⏺A strike by port workers on the US East Coast and Gulf Coast that began on Tuesday adds to the uncertainty for the Fed. The regulator is preparing to make a decision on the rate at its next meeting on November 6-7.

⏺David Altig, executive vice president and chief economic adviser at the Atlanta Federal Reserve Bank, noted that one factor helping to curb inflation now is falling commodity prices, which could be at risk if the flow of imports is stopped for long during the dockers' strike.

⏺Ports from Maine to Texas were closed after the International Longshoremen's Association called its first strike since 1977. Many analysts expect the strike to be short-lived as it could seriously impact trade, putting pressure on both sides to reach an agreement.

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⚡️US Companies Are Creating More Jobs Than Expected

⏺Private sector payrolls increased by 143,000 in September, following an upwardly revised gain of 103,000 in August, according to the ADP Research Institute in collaboration with the Stanford Digital Economy Lab. Economists had forecast growth of 125,000 jobs.

⏺This represents a recovery from five straight months of slow growth, especially compared to the previous month's performance, which was the weakest since March 2023. However, the three-month average fell to 119,000, one of the lowest levels since 2020.

⏺Most other data points to a slowing labor market. Unemployment has risen steadily in recent months and some measures of job growth have slowed, prompting the Federal Reserve to cut interest rates more than usual in September to stem further weakness.

⏺Fed Chairman Jerome Powell on Monday described the labor market as strong but said conditions have "clearly cooled over the past year." The ADP data comes ahead of the government's monthly jobs report on Friday, which is forecast to show a second month of modest wage growth in September. It is assumed that unemployment will remain at 4.2%.

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⚡️Hurricane Helen Drew The Attention Of Chip Makers To Quartz Supplies

⏺Global semiconductor makers are closely monitoring supplies of high-purity quartz, a critical material for the industry, after Hurricane Helen shut down production at two North Carolina mines that supply much of the world's supply.

⏺Taiwan Semiconductor Manufacturing Co., the world's largest chipmaker, and Germany's Infineon Technologies AG said they were monitoring the situation but did not expect significant impacts on their operations. South Korean Samsung Electronics Co. and SK Hynix Inc. they also do not predict serious consequences. TSMC's supplier, Topco Scientific Co., a quartz processor, is conducting inventory reviews and is in close contact with all suppliers.

⏺Production from the mines of Sibelco and Quartz Corp. was suspended on September 26. The hurricane severely damaged the cluster, causing flooding and power and communications outages. The storm killed at least 166 people in six states. The mines, located near Spruce Pine in northern North Carolina, provide more than 80% of the world's supply of high-purity quartz. According to BloombergNEF, the mines produce about 20,000 tons of this mineral annually.

⏺The impact of this event on the global chip manufacturing sector is unclear, as semiconductor companies typically have inventories of critical components and production in North Carolina is expected to resume.

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⚡️Goldman Expert Expects Rally In US Market From The End Of October

⏺U.S. stocks are likely headed for a year-end rally that could push the S&P 500 above 6,000, said Scott Rubner of Goldman Sachs Group Inc.
He's bullish on U.S. equities for the year-end rally that begins Oct. 28 and is concerned his 6,000-point target is too low

⏺The expert pointed to seasonal factors - as his calculations show, since 1928, the S&P 500 has tended to grow by an average of about 4% from October 27 to the end of the year. On top of this, stocks tend to rise after US presidential elections as investors switch from cash to stocks after the risks associated with the vote fade.

⏺The bank's tactical specialist Rubner's year-end target differs from the 5,600 estimate from Goldman Sachs chief U.S. equity strategist David Kostin. On Wednesday, the index was trading at around 5,700

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💸Chinese Shares In Hong Kong Snapped 13-Day Gains On Bubble Fears

⏺Hang Seng China Enterprises Index, which shows their dynamics, fell by 4.9% to its minimum on October 3. By the end of the trading day, the fall slowed to 1.6%, Hang Seng China Enterprises stood at 7914.16 points.

⏺Investors are optimistic that the current rally in Chinese stocks is different from previous short-lived surges, with global money managers increasingly betting on growth in a once-shunned market. However, brisk trading last week had traders wary of a bubble forming while equity benchmarks reached overbought levels. Thus, the Hang Seng China relative strength index reached a record level of 91 points, while traders consider the 70 point mark as a signal of overbought.

⏺Following the rise in Chinese stocks, it is normal to see profit taking ahead of the weekend, as well as before mainland Chinese markets open next week. Investors may not attach much importance to the current decline in shares, considering it a temporary phenomenon. Continued growth will depend on whether Beijing takes concrete measures after the holidays.

⏺The rally in Chinese stocks was facilitated by the fact that the Chinese authorities introduced a number of measures aimed at supporting the real estate sector and the stock market. Cities in China have relaxed home buying rules, and the People's Bank has lowered mortgage rates. The stimulus package also included lowering interest rates, supporting stock liquidity and easing reserve requirements for banks.

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