Brace yourselves for Volatility…

Thoughts of the Day

The US Consumer Price Index data that will be released later today is another inflation data point that will influence the possibility and timing of interest rate cuts this year. If inflation continues to moderate lower towards the US Federal Reserve’s 2% target, we will likely get a dovish message from the Fed’s when they conclude their policy meeting a few hours later. 

The Fed is almost certainly going to keep interest rates unchanged, but the tone of their statement will be important. The Fed Chair Powell will likely be grilled about his thoughts on the timing of interest rate cuts, and the market expects him to stick to his script that future decisions will remain highly dependent on how data evolves. However, expect the market to be volatile if the market digests his answers.

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Not only is Microsoft using OpenAI’s algorithms, now even Apple is doing so as well.

Day Ahead

  • US Inflation – Consumer Price Index (Headline: +3.4% YoY expected and prev, Core: +3.5% expected and +3.6% prev)
  • Federal Reserve Interest Rate Decision (expect interest rates to be kept at 5.5%)
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What Happened Yesterday

Market Movements as of New York Close 11 Jun 24

The Chinese Consumer Price Index showed that prices rose +0.3% Year-on-Year (vs +0.4% expected) in May as it did in April. The Producer Price Index showed that prices declined -1.4% YoY (vs -1.5% expected), less than the -2.5% YoY decline in April. Reaction in the USDCNH was muted.

The US stock market opened lower from Monday. The stock market faltered at open before rising gradually through the rest of the New York session, allowing the S&P 500 and Nasdaq to close at record highs yet again. Apple closed at record highs of 207.15 (+7.26%) after it unveiled its AI features the day before. The S&P 500 rose +0.27% (high: +0.35%, low: -0.29%), the Dow Jones slipped -0.31% (high: -0.19%, low: -1.09%) while the Nasdaq spiked +0.71% (high: +0.72%, low: -0.57%).

The crypto market traded weaker despite the lack of market news. Bitcoin is down -3.15% while Ether is down -4.59%.
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Headlines & Market Impact

Japan May wholesale inflation accelerates more than expected

Notable Snippet:  Japan’s wholesale prices in May rose 2.4% from a year earlier, marking the fastest annual increase in nine months, central bank data showed on Wednesday.

The rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, exceeded a median market forecast for a 2.0% gain.

It accelerated sharply from a 1.1% gain in April.

The yen-based import goods price index rose 6.9% in May from a year earlier, accelerating from a 6.6% gain in April, a sign the yen’s declines were pushing up the cost of raw material imports.

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Exclusive: MediaTek designs Arm-based chip for Microsoft’s AI laptops, say sources

Notable Snippet:  Taiwanese chip design giant MediaTek (2454.TW) is developing an Arm-based personal computer chip that will run Microsoft’s (MSFT.O) Windows operating system, according to three people familiar with the matter.

Last month, Microsoft unveiled a new generation of laptops that feature chips designed with Arm Holdings tech which provide enough horsepower to run the artificial intelligence applications executives said were the future of consumer computing. The MediaTek chip is geared toward this effort.

The MediaTek PC chip is set to launch late next year after Qualcomm’s (QCOM.O) exclusive deal to supply chips for laptops expires, two of the people said. The chip is based on Arm’s ready-made designs, which can significantly speed development because less design work is needed using ready-made, tested chip components.

Executives at Arm have said one of its customers used the ready-made components to build a chip in roughly nine months for a design that is already complete, which MediaTek’s is not. For experienced chip design businesses, advanced chips typically take considerably more than a year to construct and test, depending on the complexity.

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Hamas responds to Gaza cease-fire plan seeking some changes. U.S. says it’s ‘evaluating’ the reply

Notable Snippet: The foreign ministries of Qatar and Egypt — who have been key mediators alongside the United States — confirmed that they had received Hamas’ response and said mediators were studying it.

“We’re in receipt of this reply that Hamas delivered to Qatar and to Egypt, and we are evaluating it right now,” White House national security spokesman John Kirby told reporters in Washington.

Hamas spokesman Jihad Taha said the response included “amendments that confirm the cease-fire, withdrawal, reconstruction and (prisoner) exchange.” Taha did not elaborate.

But while supporting the broad outlines of the deal, Hamas officials have expressed wariness over whether Israel would implement its terms, particularly provisions for an eventual permanent end to fighting and full Israeli withdrawal from Gaza in return for the release of all hostages held by the militants.

Even as the U.S. has said Israel accepted the proposal, Israeli Prime Minister Benjamin Netanyahu has given conflicting signals, saying Israel will not stop until its goal of destroying Hamas is achieved.

U.S. Secretary of State Antony Blinken has been in the region this week trying to push through the deal — his eighth visit since Hamas’ Oct. 7 attack on southern Israel ignited Israel’s campaign in Gaza. On Tuesday, he continued pressure on Hamas to accept the proposal, saying that the U.N. Security Council’s vote in its favour made it “as clear as it possibly could be” that the world supports the plan.

“Everyone’s vote is in, except for one vote, and that’s Hamas,” Blinken told reporters in Tel Aviv after meeting with Israeli officials, hours before Hamas announced its reply. He said Netanyahu had reaffirmed his commitment to the proposal when they met late Monday.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord