Your weekly summary with the most important news for your investments:
Results of the main stock market indexes.
Sovereign rate changes.
Monetary policies in central banks.
Last week, the main US stock indexes fell an average of -1.3% as a result of a drop in Apple's price, which fell -6% after the Chinese government's announcement to prohibit the use of its products by state employees, marking a fundamental change for the company. This in an environment where the leaders of the G20 countries met with the absence of the leaders of China and Russia without being able to reach an agreement to condemn Russia's acts of war against Ukraine. In this same environment, the 10-year sovereign rate climbed to 4.27% (+9 basis points) after several Federal Reserve (FED) officials chose to send anti-inflationary messages ahead of the monetary policy meeting to be held on September 20, where the Fed will be publishing its estimates for the evolution of the monetary policy rate and inflation for the year 2024. In the meantime, market players will be waiting for the valuation that will be set for both the microprocessor producer Arm, a subsidiary of Japan's Softbank, and Instacart, where apparently the valuation of both have been deflating despite the pre-existing demand for both initial placements.
Let's start with a brief summary of the macroeconomic environment after the publication of the FED's Beige Book last week where the issuing institute remains concerned about wage inflation by mentioning the following:
"Although hiring slowed, most districts indicated that labor market imbalances persisted as the availability of skilled workers and the number of applicants remained limited. Worker retention improved in several districts, but only in certain sectors such as manufacturing and transportation."
This week, not only the inflation data for the previous month will be published, but we will also have data related to industrial production and retail sales that will be the basis for the monetary discussions that will take place next week. For now, headline inflation is expected to have changed its trend to 3.6% (from 3.2%) while core inflation is expected to have closed at 4.4% (from 4.7%). This in an environment where the unemployment rate climbed to 3.8% (from 3.5%) and wage inflation closed the month at 4.3% with no signs of an expected decline.
However, even though core inflation, that which excludes food and energy prices, is easing, last week Fed Governor Cristopher Waller argued that:
"I don't think one more increase would necessarily throw the economy into a recession if we felt we needed to do one."
Meanwhile, the Boston Fed president noted that:
"The risk that inflation will remain high for longer must now be weighed against the risk that an overly restrictive stance of monetary policy will lead to a slowdown greater than necessary to restore price stability. This phase of our policy cycle requires patience."
Therefore, market agents estimate that the FED will keep the rate unchanged at 5.5% on September 20, pending the evolution of the economy. This is because, in essence, as the underlying inflation rate falls, the real rate of the economy will rise, generating a stronger deceleration. Doing a simple exercise today, the real rate has already climbed into positive territory in the order of +1.1% (with the understanding that the overnight rate is at 5.5% and the core inflation reading is at 4.4%). The Fed's problem will be if the price of oil continues to rise during the rest of the year, as the price measured by WTI has accumulated an annual increase of +8.3%, closing at around US$88 per barrel, even though the holiday period in the United States has come to an end.
In the international context, the European Central Bank (ECB) will be making a monetary policy decision on Thursday, where authorities are at a crossroads between high inflation and the macroeconomic contraction in Germany. In fact, this morning the European Commission projected higher inflation and lower growth for this and next year on the understanding that:
"The EU economy has lost momentum since the spring. Economic activity stagnated in the second quarter and survey indicators point to further weakening in the coming months," according to Paolo Gentiloni, European Commissioner for the Economy.
However, the Central Bank of Chile opted for another cut in its monetary policy rate to 9.5% (-75 basis points) and the Central Bank of Brazil is also expected to adopt pro-cyclical measures next week, given the disinflation of its economy.
On the corporate front, as we close the third quarter of the year, according to Factset, both sales and earnings will grow by +1.6% and +0.5%, respectively, compared to the same quarter of the previous year. Meanwhile, tomorrow, Apple will be introducing new products in anticipation of the year-end holidays, seeking to reverse the fall in its share price the previous week. At the same time, several media outlets have already described a possible interest on the part of Apple to buy Disney. This is because Apple would have enough liquidity today to pay Disney's market capitalization, which last Friday closed at US$149 billion. Another possible buyer, which has such funds available, could be Berkshire Hathaway, whose investment fund already has a large stake in Apple.
In conclusion, it is to be expected that the FED will opt to leave its rate intact at the next meeting as the real interest rate of the US economy generates the soft landing expected by macroeconomic authorities.
Monday (September 11)
Caseys General Stores, Inc.
Atlas Lithium Corporation
Consumer Inflation Expectations Report
Tuesday (September 12)
InnovAge Holding Corp.
Ispire Technology Inc.
Cognyte Software Ltd.
Evolution Petroleum Corporation, Inc.
Urban One, Inc.
Red Book Year-over-Year Change Report
Wednesday (September 13)
Freedom Holding Corp.
Burford Capital Limited
Cracker Barrel Old Country Store, Inc.
Value Line, Inc.
Core Inflation Index Monthly Change Report
Core Inflation Index Annual Change Report
Inflation Index Monthly Change Report
Inflation Index Annual Change Report
Thursday (September 14)
The Lovesac Company
Vizsla Silver Corp.
Retail Sector Monthly Sales Change Report
Producer Price Index Monthly Change Report
Friday (September 15)
QuantaSing Group Limited
Hywin Holdings Ltd.
Preliminary consumer sentiment report, Michigan.
Now you have more information about your investments. See you next week with more news.
*This is an illustrative example and does not represent an investment recommendation.