05th August 2023 – 11th August 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,464.05 | 13,644.85 | 14.84 | 35,281.40 | 2,445.98 | 16,143.38 |
| -0.31% | -1.90% | -13.22% | 0.62% | -0.42% | 0.45% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 19,428.30 | $1,945.70 | $22.75 | $86.73 | 83.03 | 90.91 |
| -0.45% | -1.64% | -4.13% | 0.67% | 0.42% | -0.15% |
Source: MarketWatch
Hello Saturday,
This week, Moody’s downgrades ten US banks, a labour dispute in Australia endangers 10% of the global LNG supply, and Lyft launches in-app advertising.
- Credit rating agency Moody’s downgrades the credit rating of ten small and mid-sized US banks on account of shrinking profit margins and funding risks.
- Natural gas prices spike on fears of a potential labour strike at three major LNG facilities in Australia, which could impact 10% of the global supply, pushing Asian and European buyers to compete for cargoes.
- As part of Lyft’s latest efforts to turn its struggling business around, the company launches display ads in its app, and aims to look beyond ride-hailing for revenue.
- Fashion company Tapestry’s deal to buy Capri for $8.5 billion will give rise to an American luxury fashion conglomerate capable of competing with European rivals like LVMH and Kering.
- Google proposes copyright laws to the Australian government that will allow AI systems to scrape online data; Australia is currently reviewing AI regulations.
Taking stock | Lender bender | Gas down under | Lyftoff? | Capestry | Proprietary propriety | Invest wisely
Taking stock
The tech-heavy Nasdaq logged its worst two-week stretch since December, as big tech and semiconductor stocks saw a sell-off. The Producer Price Index (PPI) data came in hotter than expected and pushed Treasury yields higher, impacting rate-sensitive tech stocks. For the week, the Nasdaq lost 1.90%, the S&P 500 slipped 0.31%, while the Dow gained 0.62%.
Lender bender
Credit rating agency Moody’s cut the ratings of ten small and mid-sized US banks by one notch on Monday. Some of these banks are: Pinnacle Financial, Old National Bank, Commerce Bank, Amarillo National Bank, and Fulton Financial. It also placed the ratings of six banking giants under review, including BNY Mellon, Northern Trust, and State Street.
Confidence in the banking sector was already shaky after the collapse of Silicon Valley Bank and Signature Bank earlier this year, and now growing profitability pressures and increased funding risks have led Moody’s to reassess its ratings.
To avoid a run on deposits this year, small and mid-sized banks have been forced to pay higher interest on deposits to customers. Hence, their margins have been shrinking despite a rising interest rate environment.
Source: CNBC
Moody’s also changed its outlook to negative for several major lenders, including Fifth Third Bancorp and Capital One. After the agency’s announcement, bank stocks fell, as did the broader market — Goldman Sachs tumbled 2.1%, Wells Fargo lost 1.3%, and the SPDR Regional Banking ETF fell 1.3%. The sell-off is expected to be short-term, as was the case after Fitch’s last downgrade, as per experts.
Gas down under
Australia is the world’s largest Liquefied Natural Gas (LNG) producer and exporter, exporting 80.9 million metric tons in 2022. Its share of the global LNG market is massive, at an estimated 20.2%, which is why a potential labour strike in the country’s major LNG facilities is a global threat.
Workers at Chevron and Woodside Energy Group’s Australian facilities, which together account for about 10% of global LNG production, are planning to organise a strike after negotiations over wages and working conditions have gone unresolved for months. With Europe soon heading into its second winter since the Russia-Ukraine war, benchmark European natural gas prices surged to a nearly two-month high on Wednesday due to fears of supply chain disruptions.
About three-quarters of Australia’s LNG exports are committed to Asian buyers — China, India, Japan, and South Korea — and barely any to Europe. However, the Australian labour strike could lead prices to spike if European and Asian buyers are pushed into a possible bidding war to secure LNG from other major exporters, including the US and Qatar.
Lyftoff?
Ever since David Risher joined Lyft as its new CEO earlier this year, he has been eyeing a turnaround for the struggling business. To this end, he has lowered prices, cut hundreds of jobs, and explored strategic options to build a consistent revenue stream beyond its core ride-hailing service. In that same vein, the company added new advertising products to its app this week.
On average, users check the app about nine times per ride, according to Lyft. And to capitalise on this, the company will begin displaying ads throughout the user experience — as users wait for rides, when they are matched with drivers, and during their trips. Uber already rolled out this feature last year, and earlier in June, it announced it would begin selling in-app video ads, too, something that Lyft also plans to roll out by the end of this year.
Capestry
This week, the luxury fashion industry saw another high-value merger when Tapestry struck a deal to buy Capri Holdings for $8.5 billion. Tapestry owns brands like Coach and Kate Spade, while Capri is the parent company of luxury brands like Michael Kors, Versace, and Jimmy Choo.
Capri shareholders will receive $57 per share in cash, which represents a premium of almost 65%. After the merger was announced, shares of Capri soared 56%, while those of Tapestry slid 16%.
This deal will lead to the formation of an American luxury fashion conglomerate, which may be able to take on European giants like LVMH and Gucci’s parent company Kering. But in recent years, these giants have been striking deals of their own too. In 2021, LVMH bought luxury jewellery retailer Tiffany & Co., and last month Kering announced it would be acquiring a stake in Valentino.
Competitive edge aside, the newly formed fashion house is expected to generate sales of over $12 billion a year according to Tapestry, and lead to cost savings of about $200 million within the next three years.
Proprietary propriety
Google has recommended modifying copyright laws to allow AI systems to mine publishers’ works in a recent proposal to the Australian government, which is currently reviewing AI regulations.
The tech company has proposed that unless publishers explicitly decline consent, generative AI should be able to scrape content from online sources. Generative AI is trained using millions of existing data points, and if data scraping is continued, it could completely break down copyright.
This would particularly hamper the interests of small content creators, according to experts. Big publishers and news companies, such as News Corp, are already reportedly in conversations with AI companies such as OpenAI to receive payments for their proprietary content.
Invest wisely
Just as a labour strike in Australia can impact global LNG prices, your investment portfolio can benefit from stock market gains in the US. Great investment opportunities are no longer restricted by borders, as long as you use the right tools. So download the Appreciate app to access US securities hassle-free, and diversify your portfolio to maximise gains.
Warm regards,
Another week
in the markets
