Eurozone inflation registers a small surge

30th December 2023 – 6th January 2024 | Another week in the markets

S&P 500	Nasdaq	VIX	DJIA	Russell 1000	NYSE
4,697.24	14,524.07	13.35	37,466.11	2,579.06	16,758.24
-1.52%	-3.25%	7.23%	-0.59%	-1.64%	-0.56%
Nifty 50	Gold	Silver	Brent crude	USD-INR	EUR-INR
21,710.80	$2,052.60	$23.38	$78.90	83.14	90.95
-009%	-0.93%	-2.66%	2.36%	-0.06%	-0.93%

Source: MarketWatch 

Hello Saturday,

This week, Eurozone inflation registers a small surge bolstering rate-cut possibilities,Indian government provides security to container ships as tensions simmer in Red sea and Tesla recalls more than 1.6 million electric vehicles in China

• Eurozone inflation for December rose lower than anticipated keeping rate-cut talk on track. The consumer price index, which assesses the cost of goods and services, rose 2.9% year-on-year
• India’s Defence Ministry will be providing security to Indian container ships passing through the Red Sea in light of the escalated tension between the US, British and French fleets on one side and Yemen-backed Houthi rebels
• In a major setback for Tesla, the company will be recalling over 1.6 million electric vehicles from China. The recall will put a stop, albeit temporarily, to Tesla’s lofty ambition in the region
• Netflix is aiming to monetise games on its platform. The company is eyeing this strategy in hopes of keeping users hooked when they are waiting for seasons of their favourite shows
• India’s forex reserves jump to $623.2 billion. The reserves were at an all-time high in October 2021, when they clocked in a figure of $645 billion 

Taking stock | Eurozone expectations | Choppy waters, frayed nerves | Tesla troubles | Netflix’s new ambitions | Forex fuel | Invest wisely | Another week in the markets

Taking stock

It isn’t turning out to be a great start to the new year. A nine-week winning streak of the market came to an end this week. All three major US indices eked out gains on Friday but ended the week on a disappointing note after a major drawdown in tech stocks. The S&P500 index was down 1.5% weekly. Dow Jones ended the week with a 0.6% decline, and Nasdaq slumped by 3.2%. 

Eurozone expectations

Eurozone inflation for the month of December rose by a less-than-anticipated figure fuelling talk that a rate cut might materialise in the coming quarters. 

The consumer price index of the region rose by 2.9% on a year-on-year basis, marginally higher than the 2.4% reported in November, as per data released by the EU statistics body Eurostat. Economists are treating this as a welcome development considering that market consensus had chalked up inflation to rebound by 3%. 

Meanwhile, core inflation — which strips away food and fuel prices — delivered a positive surprise coming in at 3.4% in December contrasted with the reading of 3.6% in November. The core inflation numbers were once again lower than the market expectation of 3.5%

Market experts said that cooler-than-expected inflation readings could help nudge the ECB into entertaining the possibility of a rate cut amidst disinflationary signals. The ECB, just as its American counterpart— the Federal Reserve– is targeting the 2% inflation rate. 

Data sourced from Refinitiv indicated that money markets are pencilling in a rate cut in April.

Choppy waters, frayed nerves

Taking a proactive stand, the Indian government will now be providing security to Indian container ships sailing through the Red Sea. This is an extension of the Indian government’s commitment to safeguard vessels involved in India’s import and export activities. Earlier in December, Union Defense Minister Rajnath Singh vowed to take action against the attackers of Indian shipping vessels.

For weeks now, the Red Sea has been the focal point of tensions between the US, British and French fleets and the Yemen-backed Houthi rebels. 

Attacks were launched in December in the Red Sea in response to the Israeli bombardment in Gaza. Yemeni rebels in the past week have significantly notched up their attacks in the Bab-el-Mandeb strait, which lies between the Arabian peninsula and the Horn of Africa.

Container traffic passing through the strait holds enormous importance for the world’s supply chain, especially crude oil shipments. Gridlocks and blockages on this route are widely expected to ratchet up transportation costs, which would contribute to second-order inflationary effects on food, fuel and other commodities around the globe.

The Red Sea trade route is all the more critical as a little more than 12% of the global trade is channelled through it. Besides, it is a key nodal point for vessels from Asia travelling through the Bab-el-Mandeb strait. Further, oil shipments from the Persian Gulf are transported from the strait to Europe and North America.

Tesla troubles

Electric vehicle manufacturer Tesla seems to going through a spell of trouble in China. The company is recalling over 1.6 million of its cars, effectively putting its brand value through a wringer.

Model S, Model 3 and Model X along with domestic Model 3 and Model Y which were manufactured between August 26, 2014 and December 20, 2023 have been recalled. These models were recalled over problems in the autosteering capability.

In a statement issued by China’s State Administration for Market Regulation, the watchdog marked out that the company will also be recalling 7,538 imported units of Model S and Model X produced between October 26, 2022 and November 16, 2023 because of door latch concerns.

Unfortunately, for Tesla investors, the recall has not been an isolated event. Apart from recalls in China, the company also had to undertake recalls of over 2 million units in the US after autosteering problems came to the fore in December.

Tesla, one of the Magnificient Seven, has delivered stellar returns in the last few years

Source: Google Finance

Netflix’s new ambitions

Netflix is making a pivot towards paid gaming and is currently laying the groundwork for monetising from this segment. 

As of today, Netflix games are free to play for all subscribers. The games’ strategy has been primarily deployed to keep bringing back users who are likely to reduce engagement with the platform while waiting for new seasons of their series to surface.

Plans under discussion include charging for more layered games, in-app purchases and unveiling ad-supported tiered access for subscribers.

As per Apptopia, a data intelligence firm, fewer than 1% of Netflix subscribers around the globe were engaging with its games as of October 2023. This might not be as much of a dampener given that Netflix reiterated often that its gaming strategy is a long-term market acquisition bet.

Throughout the last few years, Netflix has gone on an acquisition spree and purchased several gaming studios, with a focus on creating games, suited to its shows and movies. For instance, the game, “Too Hot to Handle: Love is a Game” was launched in December 2022, and was aligned with its reality show, “Too Hot to Handle”. The game was downloaded seven million times.

According to market analysts, the streaming platform has shelled out close to $1 million on acquiring gaming studios and building its business.

Forex fuel

India’s forex reserve for the week ending December 29, 2023 zoomed up by $2.759 billion to $623.2 billion. In the prior week, forex reserves had jumped up by a handsome $4.471 billion to $620.441 billion.

Gold reserves — a sizable portion of the forex reserve — were also up by $853 million to $48.328 billion in the week ended December 29, 2023. Foreign currency assets also jumped by $1.869 billion to $551.65 billion, according to data released by the Reserve Bank of India.

India’s forex kitty has gone down considerably from the highs registered in October 2021, when forex reserves stood at a neat $645 billion. Recently, the reserves have been witnessing an erosion as the Rupee has been under pressure due to the unsustainable ratcheting of crude oil prices and rising trade deficit.

Invest wisely 

The global economy is often buffeted by several geo-political and central bank developments. While inflation seems to be turning a curb for the better, the new geo-political tensions emerging in the Red Sea will play the role of the market grinch. However, responding with panic and fear is a surefire way of losing capital and destroying wealth. In such a crisis-ridden global paradigm, one needs a reliable and trustworthy partner who can help you navigate the market swings serenely and with conviction. The Appreciate app is one such partner, which can help you confidently invest in the US markets and steadily maximise your returns.

Warm regards,
Another week
in the markets