12th April 2024 – 19th April 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,967.23 | 15,282.01 | 18.71 | 37,986.40 | 2,721.15 | 17,458.77 |
| -3.05% | -5.52% | 8.09% | 0.01% | -3.05% | -1.02% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 22,147 | $2,406.70 | $28.74 | $87.39 | 83.47 | 88.97 |
| -1.65% | 1.97% | 2.77% | -3.06% | -0.16% | -0.02% |
Source: MarketWatch
Hello Saturday,
This week, China orders Apple to remove WhatsApp, Telegram and Signal from its app store in the latest wave of censorship demands, IMF warns that an unrelenting surge in the debt levels of China and the US holds profound consequences in store for the global economy and Jio Financial Services’ reports net profit jump of 6% sequentially.
- China tells Apple to give the boot to WhatsApp, Telegram and Signal over national security concerns
- Car sales in the European Union stomach the biggest drop in 16 months
- IMF red flags China’s and US’ debt, says “profound impact” on the global economy if not checked
- Wipro reports an 8% contraction in net profit to ₹2,835 crore for Q4FY24
- Jio Financial Services reports a net profit of ₹311 crore for Q4, a jump of 6% on a Y-O-Y basis
Taking stock | Chinese crackdown | Sales sink | IMF injunction | Wipro disappoints | Jio Financial’s charges ahead! | Invest wisely | Another week in the markets
Taking stock
Israel-Iran conflict weighed on the markets as the tech-heavy Nasdaq slipped by 5.5% leading to one of its worst falls since 2022. The S&P 500 fell 3% for the week, and the Dow Jones moved up marginally.
Chinese crackdown
China stepped up its digital crackdown this week by ordering Apple to remove commonly used communication apps like WhatsApp, Signal and Telegram from its app store. The iPhone and iPad manufacturer was also asked to boot out Meta’s Threads from its app store as well.
Free speech and anti-censorship activists have indicated that these apps provide a platform for Chinese civilian dissenters to come together and mobilise, effectively creating avenues for people to challenge the might of the Chinese government.
Currently, there are over 14,000 apps that are blocked in China, as per the Wall Street Journal. Apps like Reddit, Spotify, ChatGPT and more do not have access to Chinese users and vice versa.
Meanwhile, an Apple spokesperson told the media that it was obligated to follow the laws in the countries in which it operates, even though it might not be in agreement with them.
Apps like WhatsApp, Telegram and Signal are commonly accessed in China through virtual private networks. These VPNs help users overcome the Great Chinese Firewall, and get access to news that is often censored by Chinese authorities at home.
Beijing has always viewed the booted messaging apps with suspicion, believing that their frequent use can trigger social unrest, and animate opposition against the state authorities.
A source told the WSJ that the Cyberspace Administration of China directed Apple to remove these apps because these apps were sharing political content which showed the Chinese President in a problematic light.
Sales sink
Easter holidays and a persisting softening in demand in the EU led to a 5.2% fall in total car sales in March compared to the same period, a year ago. This is the second biggest monthly drop since November when car sales plummeted by 6.1%, as per the European Automobile Manufacturers’ Association.
Analysts indicated that the Easter holiday contributed to tempering sales while cautioning that this year will be a testing period for the auto industry as high borrowing rates will hurt customers.
Car sales across the industry pricing spectrum took a beating. Volkswagen group reported a 9% drop in their March sales compared to the year-ago period. Mass-market car manufacturer Stellantis reported a 13% fall, whereas Renault group’s sales declined by 2.1%
Even high-end luxury car makers Mercedes-Benz and BMW reported drops of 1.7% and 6.7% in March sales.
While car registrations fell in all of the EU’s member countries, Germany reported the highest, that is, a 6.2% decrease in car sales. Reflecting a global trend, the registration of fully electric cars also slumped by 11%.
IMF injunction
The International Monetary Fund red-flagged the US and China’s indebtedness while warning that a surge in their debt levels will have “profound” effects on the world economy. The organisation, in its twice-yearly report on government borrowings, said that many rich countries are on the path to reducing their debt levels vis-a-vis the size of their economies but the same cannot be said for China and the US.
The IMF warned that if these countries continue to borrow at the same pace, the debt of the US government relative to its economic output will rise by 70% by 2053, while Chinese debt will more than double by the same year.
The IMF also pointed out that the borrowing by both countries will contribute to a rise in the global government debt-to-economic output ratio to 98.8% in 2029 from 93.2% in 2023. The organisation also pointed out that the UK and Italy are also contributing to the rise in overall debt levels.
As per the IMF’s projections, the US debt level will stand at 133.9% of the annual GDP in 2029, from 122.1% in 2023, and China’s debt will rise to 110.1% of the GDP in the same year from 83.6% in 2023.
The fund also said that there have been “large fiscal slippages” in the US during 2023, as government spending ramped up to 8.8% of the GDP from 4.1% in 2022. The IMF, in its projections, has chalked up the US budget deficit to exceed 6% in the medium term.
Exacerbating the scenario not just for the US but for the global economy is the upcoming series of US Treasurys worth $386 billion set to be auctioned in May. The IMF has observed that a rise of just one percentage point in the US yields leads to a corresponding rise for developed countries and a hike in debt yield of up to 90 bps for other rich countries.
Wipro disappoints
IT-services major Wipro reported a disappointing end to FY24 with an 8% contraction in net profit to ₹2,835 crore compared to the last quarter of FY23. The net profit was up 5.2% on a Q-O-Q basis, and markedly above the Bloomberg estimates of ₹2,771 crore.
Revenue for the quarter also fell by 4.2% from the same quarter in the previous year to ₹22,208 crore. The revenue was, more or less, in line with the Bloomberg estimate of ₹22,228 crore.
Continued pressure on discretionary spending kept revenue growth flat on a sequential basis.
In terms of its guidance, the company said that it expects the revenue to remain in the range of $2.62 billion to $2.68 billion in Q1FY25. Wipro, unlike Infosys or HCLTech, gives guidance only for the quarter and not for the whole year. TCS, on the other hand, does not give any guidance at all.
Infosys, which declared its results a day before Wipro has projected a revenue growth of 1 to 3% in constant currency terms.
Jio Financial charges ahead!
Jio Financial Services reported a sequential net profit increase of 6% in the last quarter of FY24. Compared to the December quarter net profit of ₹294 crore, the asset management firm declared a net profit of ₹311 crore in the latest quarter.
The consolidated revenue for the company stood at ₹418 crore, a marginal increase of 0.9% from the previous quarter’s earnings of ₹414 crore.
Annually, the company’s consolidated net profit leapt multiple times from ₹31 crore in the last FY to ₹1,605 crore in the FY24.
A few days back, Jio Financial announced a 50:50 joint venture with BlackRock for a wealth management and broking business. Media reports indicate that senior executive hiring is currently in process for the asset management company.
Invest wisely
Building wealth and prosperity is not a linear, smooth ride, no matter how much we want it to be. Volatility, market disturbances and economic shocks are part of the ride, and go a long way in making investors wiser. It is not just the intellect alone but the investor’s temperament and the capacity to brave bad news that builds capital for posterity. This is where the Appreciate app can help you multiply your wealth and prosperity. With our rich research prowess and deep data troves, we can help you navigate the complexities of the US stock market with conviction, clarity and confidence.
Warm regards,
Another week
in the markets
