09th August 2024 – 16th August 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,554.25 | 17,631.72 | 14.80 | 40,659.76 | 3,028.50 | 18,753.77 |
| 3.93% | 5.29% | -27.34% | 2.94% | 3.88% | 2.66% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 24,541.15 | $2,546.20 | $29.08 | $79.46 | 83.86 | 92.50 |
| 1.76% | 3.06% | 5.61% | 2.45% | -0.11% | 0.92% |
Source: MarketWatch
Hello Saturday,
This week, Muted inflation numbers make a strong case for a September rate cut, A new opponent challenges Nvidia’s might in AI chip field and Hero Moto Corp pins hope on reviving rural sentiment for stronger sales in the coming quarters.
- Consumer Price Index reading for July stood at 2.9%, the lowest since 2021, strengthening the case for a rate cut.
- After overcoming US sanctions, Huawei is readying to launch its processor rivalling Nvidia chips.
- Hero Moto Corp’s consolidated net profit leaps by 47.3% on the back of a sharp recovery in the 110-125 CC segment.
- India’s forex reserves take a marginal tumble to settle at $670 billion by August 9.
Taking stock | Counting down to a rate cut | Is Huawei – the new ‘chip’munk?| Biking ‘Hero’ically | Currency concerns | Invest wisely | Another week in the markets
Taking stock
Putting recessionary fears behind them, the three major indices wrapped up Friday with major gains, eventually turning it into the best week of the year yet. The Dow Jones jumped 2.9% while the Nasdaq moved up 5.3%. The S&P 500 ended the week with 3.9% gains.
Counting down to a rate cut
Cool July inflation figures bolstered hopes that a September rate cut is a near-certainty.
Consumer Price Index figures for July rose 2.9% from a year ago, as per the data released by the Labour Department. The retail inflation figures are at their lowest since 2021, and marginally below the economists’ expectation of 3%. Core inflation or inflation stripped of food and fuel prices stood at 3.2%, the lowest in the last three years.
A persistent and broad slowdown in inflation gives the Federal Reserve more elbow room in handling any creeping weakness in labour demand.
The July CPI report captured housing prices rising at a faster pace compared to June, however, the singular house pricing spike was more than offset by a broad moderation in prices of used cars to medical care. July’s CPI is the third consecutive inflation data release that aligns with the Fed’s goal of capping inflation below 2%.
The beginning of the year, that is, the first quarter was nowhere near this smooth. A run of higher-than-anticipated inflation readings signalled that the Fed’s inflation battle was falling flat. However, Chair Jerome Powell’s insistence that the errant readings were only a statistical bump on the road to controlled inflation yielded results.
As the September rate cut nears, the overarching narrative is shifting from controlling inflation to remedying the undesirable weakness in the labour market, as can be seen from the upsetting rise in the unemployment rate to 4.3% in July from 3.7% at the beginning of the year. Larger fears that the US economy is in recession territory partly contributed to the market meltdown on August 5.
Is Huawei – the new ‘chip’munk?
Step aside Nvidia, there is a new competitor in the AI town!
China’s Huawei Technologies is about to unveil a new AI chip, which, the company claims, is comparable to Nvidia’s H100 in computation muscle. The Huawei chip, named Ascend 910C, is currently running into production delays as the Chinese company has to contend with several structural barriers put in place by the US administration. The US government erected these obstacles to deter China from developing advanced AI chip manufacturing capabilities.
Nevertheless, if Huawei has faced roadblocks from the US government, it has also been a beneficiary of Chinese state support, not least, in the avatar of billions of dollars flowing into the company. Recently, Huawei has emerged as a de facto national champion helming China’s AI ambition, and occupying a key position in Beijing’s endeavours targeting a strategic weed out US technologies from its home soil.
For now, the assembly line for Huawei is slowing down given the US restrictions on integral machine parts used in AI chip manufacturing. Sources told The Wall Street Journal that companies like ByteDance — TikTok’s parent company —, Baidu and China Mobile are discussing prospects of acquiring the Ascent 910C chip. Initial estimates, WSJ said, indicated that the order book could rise over 70,000 chips which will be worth over $2 billion.
Huawei has a no-love-lost equation with the US. In 2019, it was put on the US entity list, which is to say that the US considered the company a national security threat.
Biking ‘Hero’ically!
Hero MotoCorp reported an impressive surge in its consolidated net profit for the first quarter of FY25. Powered by a strong resurgence in sales in the 110-125 CC bikes and a healthy demand for its electronic scooter Vida, the net profit for the motorcycle manufacturer rose by a stellar 47.3% to ₹1,032 crore for Q1 on a year-on-year basis.
The auto major’s revenue also ramped up 15% on a Y-O-Y basis to ₹10,435.6 crore.
The current socio-political turmoil in Bangladesh is a major cause of concern for the company, considering that exports account for 4% of the total revenues, and Bangladesh accounts for 13% of the export revenue. Meanwhile, the company is focusing on exports as it represents a huge opportunity waiting to be tapped. Currently, Hero MotoCorp exports its products to 40 countries and is laying the groundwork for new launches in critical markets. Simultaneously, it is also strengthening its distribution network and incurring higher spending towards marketing and brand-building in these foreign markets.
The company expects new launches and a revival in rural sentiments to help drive annual volume growth of 8% over FY24-26. This, the company believes, will fructify into a mid-teens growth in revenue, operating profit, and net profit over the coming two FYs.
Source: Google Finance
Currency concerns!
In a week marked by global volatility, the Reserve Bank of India’s foreign exchange reserves tumbled to $670.12 billion for the week ending August 9. The central bank, in all likelihood, sold dollars to kill excessive volatility in the exchange rate.
In the week ending August 9, the rupee tumbled by 0.2% against the American dollar as weak July jobs data triggered a risk-off sentiment, and induced a flight away from equities and towards the safer haven of US bonds and treasuries. USDINR stood at 83.95 levels as of August 9.
For the same week, RBI’s gold reserves fell $860 million to $59.24 billion. The central bank’s pronounced position is that it limits intervention in the currency market to curb volatility in the rupee’s exchange rate.
Invest wisely
A critical part of investing is to buy stocks at a cheap valuation, when the market is riddled with overwhelming fear and panic, and to sell them when the markets are saturated with irrational exuberance. Learning to read the signs and signals of the market is truly important. This is where the Appreciate app can be of great help to diligent investors. With our deep research capabilities and macroeconomic indicators, you will always be ahead of the market in decoding the market signals, and ensure that you stay one step ahead of the curve.
Warm regards,
Another week
in the markets
