What could drive the market higher?

Thoughts of the Day

With the US Stock indices, the S&P500 and the Nasdaq, hovering close to all-time highs, it’s natural to ask what else could drive it higher? If the probability of the US Federal Reserve cutting interest rates should rise, especially if caused by a fall in inflation, it is highly likely that new highs will be tested. 

As such, the Fed’s preferred measure of inflation, the Personal Consumption Expenditure Index (PCE), that will be released later this week will be key to risk sentiment this week. Expect the market to be in a holding pattern till then.

This is an abridged version of our CIO’s daily writeup for the day, to view the full version, please login or subscribe to a membership plan.

Tradertainment

Scientists Connect 16 Mini Brains Made of Human Tissue to Create a “Living Computer”
Switzerland-based startup FinalSpark claims to have built a unique computer processor made from 16 mini brains made from human brain tissue, Tom’s Hardware reports — and they are positioning this “living computer” as an alternative to silicon-based computing.

And now, other researchers can remotely access the startup’s biocomputer, the Neuroplatform, to conduct studies on, say, artificial intelligence, which typically requires enormous resources.

“One of the biggest advantages of biological computing is that neurons compute information with much less energy than digital computers,” FinalSpark scientist and strategic advisor Ewelina Kurtys wrote in a company blog post earlier this month. “It is estimated that living neurons can use over 1 million times less energy than the current digital processors we use.”

The startup takes brain organoids, small samples of human brain tissue derived from neural stem cells, and places them in a special environment that keeps these organoids alive. They then hook up these mini brains to specialised electrodes to perform computer processing and digital analog conversions to transform neural activity into digital information.

Week Ahead

Monday:

  • Nothing noteworthy

Tuesday:

  • Canadian Inflation (Headline Consumer Price Index: +2.6% Year-on-Year expected vs +2.7% prev)

Wednesday:

  • Australian Inflation (Monthly CPI Indicator: +3.8% Year-on-Year expected vs +3.6% prev)

Thursday: 

  • US GDP (GDP Growth Rate: +1.3% Quarter-on-Quarter expected vs +3.4% prev)

Friday: 

  • US PCE Price Index (Headline: +2.6% YoY expected vs +2.7% prev, Core: +2.6% YoY expected vs +2.7% prev)
Our Trading plan is only available for members, please subscribe to a membership plan to stay updated on Vee’s trades.

What Happened Yesterday

Market Movements as of New York Close 21 Jun 24 (23 Jun for Crypto)
  • The US stock market opened lower from Thursday.  It tried to climb higher in the early session but attempts made were futile. The S&P 500 was down -0.16% on the day (high: +0.09%, low: -0.39%), the Dow Jones edged +0.04% (high: +0.31%, low: -0.19%) while the Nasdaq fell -0.26% (high: +0.25%, low: -0.55%).
  • The crypto market traded lower along with tech stocks. Bitcoin is down -2.62% and Ether is down -2.78%.
This is a partial analysis of what happened yesterday, for a more detailed analysis, subscribe to a membership plan.

Headlines & Market Impact

Cash is leaving China again, pressuring yuan

Notable Snippet:  A sliding yuan and extensive outflows of cash from the mainland into Hong Kong show China’s domestic investors are shelving expectations for any immediate recovery in their home markets and fleeing to the closest better-yielding assets.

The yuan has dropped to seven-month lows this week, alongside a reversal in equity investment flows into China.

Analysts said Hong Kong’s stockpile of yuan deposits has also grown as mainland investors use their limited offshore investment channels to seek higher yields and companies prepare to pay annual dividends, adding to the pressure on the currency.

“Sentiment on China soured over the past month as the market has rallied ahead of improvement in macro data which continues to disappoint,” said Gary Tan, a Singapore-based portfolio manager at Allspring Global Investments.

Tan, whose funds are underweight on Chinese stocks, said sentiment had come a long way from a time when mainland markets were considered “uninvestable”, however, and he expected that would improve further.

But investor patience has worn thin after months of waiting for authorities to roll out more stimulus, mainly to support a sinking property sector.

We have further analysis of our headlines! Subscribe to a membership plan to view them.

US business activity inches up in June; price pressures abating

Notable Snippet:  U.S. business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained.

S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, nudged up to 54.6 this month.

That was the highest level since April 2022 and followed a final reading of 54.5 in May. A reading above 50 indicates expansion in the private sector. Both the services and manufacturing sectors contributed to the gain in activity.

The economy is slowing following 525 basis points worth of interest rate hikes from the Federal Reserve since 2022 to tame inflation. The loss of momentum together with easing inflation pressures are keeping a rate cut this year on the table.

The S&P Global survey’s measure of new orders received by private businesses increased to 53.4 this month from 51.7 in May.

The prices paid for inputs dropped to 56.6 from 57.2 in May. The output prices gauge fell to a five-month low of 53.5 from 54.3 in May. The moderation was in both manufacturing and the services sector, where the rise was among the slowest over the past four years.

The survey’s flash manufacturing PMI edged up to 51.7 this month from 51.3 in May. Economists polled by Reuters had forecast the index for the sector, which accounts for 10.4% of the economy, dipping to 51.

Its flash services PMI increased to 55.1, a 26-month high, from 54.8 in May. That exceeded economists’ expectations for a reading of 53.7.

We have further analysis of our headlines! Subscribe to a membership plan to view them.

Apple Intelligence won’t launch in EU in 2024 due to antitrust regulation, company says

Notable Snippet: Apple said Friday it won’t release three recently announced features, including its flagship “Apple Intelligence” AI product, in the European Union in 2024 due to “regulatory uncertainties” stemming from the bloc’s Digital Markets Act antitrust regulation.

Apple said in a statement that the features — Apple Intelligence, iPhone Mirroring, and enhancements to its SharePlay screen-sharing product — won’t be available to EU customers due to Apple’s belief “that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security.”

The EU passed the DMA in 2023, spurred by concerns that a handful of major technology companies such as Amazon, Apple, Alphabet, Meta, Microsoft and TikTok parent ByteDance were acting as “gatekeepers” in preventing smaller firms from competing. Among other things, DMA requires that basic functionalities work across competing devices and ecosystems.

The interoperability requirements apply to iPhones and iPads. But Macs are affected by the DMA because iPhone Mirroring allows users to replicate the screen of an iPhone on the screen of a Mac.

The loss of the company’s AI product could be a disappointment to consumers. Apple Intelligence can proofread writing or even rewrite it in a friendly or professional tone. It can create custom emoji called Genmoji, search through an iPhone for specific messages from someone, summarise and transcribe phone calls and show priority notifications. The company also announced a partnership with OpenAI and a roadmap to other models being added to the platform.

We have further analysis of our headlines! Subscribe to a membership plan to view them.

Sentiment

FX

Stock Indices

Best,
Phan Vee Leung
CIO & Founder, TrackRecord