New highs again!

Thoughts of the Day

Despite the jump in US bond yields (+0.15% for the 10-year bond yield) on Friday after the “stronger” than expected US jobs data, and the diminished hopes of an interest rate cut from the US Federal Reserve, the US stock markets have continued to grind higher on a no-news day.

That is what a bull market does. It goes up when there’s no news. The market has now pushed hopes for a rate cut further down the road and the futures market is pricing for a 50% probability of the first cut being in the September meeting. However, that’s not stopping the buy on dips mentality that has prevailed for months now. 

It’s working, and we shall keep doing what works for now.

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This is an exciting piece of news for those who are interested in the aerospace industry. Certification (from Brazil’s ANAC and subsequently the U.S. Federal Aviation Administration) is one of the most important steps for this entire flying taxi industry to take off and once it comes underway, we will see these electric vertical take-off and landing (eVTOL) aircraft in our skies very soon. In fact, the company said that it is 6x more cost-efficient than riding a helicopter per passenger. 

Here is a link to see more about this company’s electric-flying taxi.

Day Ahead

Nothing noteworthy.

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What Happened Yesterday

Market Movements as of New York Close 10 Jun 24

The US stock market opened lower from Friday. It rose gradually through the New York session, allowing the S&P 500 and Nasdaq to close at record highs once again. The S&P 500 rose +0.26% lower (high: +0.35%, low: -0.29%), the Dow Jones increased +0.18% (high: +0.20%, low: -0.34%) while the Nasdaq popped +0.39% (high: +0.47%, low: -0.32%).

Trading was muted in the crypto market with Bitcoin down -0.16% and Ether down -1.07%.
This is a partial analysis of what happened yesterday, for a more detailed analysis, subscribe to a membership plan.

Headlines & Market Impact

Taiwan’s energy crunch could ‘throw a wrench’ into the global semiconductor industry

Notable Snippet:  “Concerns over potential power shortages and the deterioration of power quality and reliability could pose operational risks for the semiconductor industry,” Chen Jong-Shun, assistant research fellow at Chung-Hua Institution for Economic Research, told CNBC.

There were three major outages in Taiwan in the past seven years, and the island has experienced a slew of smaller disruptions in the past year.

As recently as April, in Northern Taiwan alone, multiple power shortages were recorded over three days, according to local reports.

In 2022, there were 313 power outage incidents. A big power outage that year affected more than 5 million households, while another massive blackout in 2017 hit almost 7 million households.

“Taiwan has struggled to meet its power infrastructure goals due to land constraints, overly ambitious and rigid policies, and a lack of understanding and ability to address power shortages,” Chen added

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Microsoft is outsourcing its best AI, tech CEO says — and that’s good news for Google

Notable Snippet:  Microsoft is handing over the development of all of its best artificial intelligence tools and software to OpenAI, according to one tech CEO — which could be a boon for archrival Google.

Todd McKinnon, CEO of identity security firm Okta, told CNBC on Friday that as Google looks to defend its position in search, it is “probably doing the best job of actually not having to outsource their R&D.”

He noted that the so-called transformers that power today’s generative AI technologies “all came from Google.”

“It’s so bizarre,” McKinnon told CNBC. “Imagine working at Microsoft. OpenAI is over there making all the exciting stuff. It’s almost like Microsoft is going to turn into a consulting company.”

Still, Google has a mountain to climb if it’s going to achieve commercial success with its own AI investments.

Microsoft has effectively become the leader in the push toward foundation AI models given its investment in and partnership with OpenAI. This has raised concerns that Google’s position in search could be undermined, as internet users increasingly turn to ChatGPT and other AI chatbots for their search needs.

Google’s own AI efforts, meanwhile, have been beset by a number of public blunders.

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ECB could wait several meetings between rate cuts, Lagarde says

Notable Snippet: European Central Bank interest rates are not on a linear downwards path and policymakers could at times wait more than one meeting before cutting them again, ECB President Christine Lagarde said in a newspaper interview.

The ECB cut rates from a record high last week but held off committing to any more policy easing given stubbornly high wage growth and yet another increase in inflation projections. “We’ve made the appropriate decision, but it doesn’t mean interest rates are on a linear declining path,” Lagarde told several major European newspapers in a joint interview.

“There might be periods where we hold rates again,” Expansión, Handelsblatt, Il Sole 24 Ore and Les Échos all quoted her as saying on Monday.

When asked if this meant the ECB could hold rates for longer than a single meeting, she said “it’s a possibility”.

Markets now expect little more than one rate cut over the four meetings left this year and see between 3 and 4 reductions through the end of 2025, so in the next 12 policy meetings.

While Lagarde did not explicitly say the ECB would hold interest rates at their current level in July, she argued that further cuts depended on a slew of wage and corporate profit indicators, which will only become available in the run up to the bank’s September meeting.

“We will need more data, including on wages, on how unit profits are growing and absorbing part of the labour costs, and on productivity,” she said.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord