18th October 2024 – 26th October 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,808.12 | 18,518.61 | 20.33 | 42,114.40 | 3,205.73 | 19,456.27 |
| -0.96% | 0.16% | 12.76% | -2.68% | -1.06% | -2.16% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 24,180.80 | $2,760 | $33.88 | $75.46 | 84.10 | 90.80 |
| -2.71% | 0.88% | 0.13% | 3.13% | 0.03% | -0.63% |
Source: MarketWatch
Hello Saturday,
This week, Chinese competition and muted sales hurt Mercedes-Benz’s quarterly earnings, IMF says ballooning government debt presages spending cuts and tax hikes across the globe and Indigo slips in the red with a ₹987 crore loss.
- Mercedes-Benz’s latest earnings take a drubbing as Chinese rivals and low demand dampen sales.
- IMF cautions staggering rise in government debt could push the total government debt to over $100 trillion.
- Indigo declares a loss of ₹987 crore in a traditionally weak second quarter.
- Twitter India’s net profit tanks 90% as ad revenue disappears.
Taking stock | No easy riding here | Debt bubbles | Indigo loses altitude in the second quarter | Twitter tanking | Invest wisely | Another week in the markets
Taking stock
Tech-heavy Nasdaq ended Friday up 0.1% on anticipation of quarterly results by most of the Big Tech firms including Microsoft, Apple, Alphabet, Intel and Meta. The Dow Jones shed 0.6%. The S&P 500 ended the week with a marginal fall of 0.03%.
No easy riding here!
Mercedes-Benz’s latest quarterly earnings were marred by softer pricing and muted sales of its higher-margin models.
The car maker’s profit halved to 1.72 billion euros from 3.72 billion euros recorded in the same quarter last year. Revenue also took a beating, falling 6.7% to 34.53 billion euros.
Chief Financial Officer Harald Wilhelm said in a press conference that the company is keen on reducing costs, which include the materials that go into cars, and the labour costs borne by the car manufacturer.
Wilhelm pointed out that the company has been working towards rescuing its costs over the last five years, and different divisions have steadily worked towards achieving individual cost targets.
Of late, European car makers have been forecasting sombre quarterly and annual earnings citing rising Chinese competition, and declining customer interest in electric vehicles. Compounding the situation further is the slowdown in the Chinese economy fuelled by a real estate slump and a gradual freezing of economic activity.
The automaker said that its annual earnings are likely to be slightly below the 2023 levels and the fourth quarter earnings will likely remain flat, mirroring the third quarter earnings.
Earnings are likely to be hamstrung further as prospects of a trade war with China surface on the horizon. Chinese officials have been busy examining measures such as raising tariffs on imported large-engine vehicles in response to EU plans of slapping 45% tariffs on electric vehicles manufactured in China.
Debt bubbles
The IMF has warned that government debts could most likely balloon up to the annual output of the global economy by the end of this decade. The organisation also said that government debt levels could also rise faster if economic growth remains anaemic or interest payments report a higher-than-expected rise.
In a twice-yearly report, the IMF ominously said that spending cuts and tax hikes of an unprecedented quantum will be required over the next five to seven years to reduce or stabilise debt.
“It’s time for governments to get their house in order,” said Era Dabla-Norris, deputy director for fiscal affairs at the IMF, adding that a strategic pivot for all countries is required to reduce debt risks.
The IMF estimated that without massive changes in budgetary policies, there will be large increases in borrowing by the US, China and other countries which will ratchet the government debt beyond $100 trillion. This roughly amounts to 93% of the world’s annual production of goods and services.
The IMF also drew up an extreme scenario, where the government debt could hit 115% of the global output in 2026, while the US government debt could reach 150% of its GDP. At the beginning of the century, the IMF said, the US debt stood at 60% of GDP and has more than doubled from those levels already.
Besides the US and China, the IMF expects surges in debt in Brazil, France, Italy, South Africa and the UK.
Indigo loses altitude in the second quarter!
Aviation major Indigo delivered a disappointing second quarter with losses running into ₹987 crore. The latest quarterly result contrasts sharply with the net profit of ₹189 crore declared in the same quarter last year, and a far cry from the net profit of ₹2,728 crore reported in the previous quarter.
While net profit took a drubbing, revenue jumped by 14% on a YoY basis to ₹16,790 crore. Indigo said that the earnings were impacted by groundings and fuel costs.
Aviation turbine fuel (ATF) expenses leapfrogged to ₹6,605 crore in the quarter ending September, up from ₹6,416 crore in the first quarter. Fuel prices have been volatile across the globe as thorny and explosive geo-political tensions are taking centre stage.
Further, aircraft and engine rentals rose to ₹763 crore, as against ₹624 crore in the prior quarter. Other subheads like repair and maintenance costs also bumped up to ₹2,744 crore from ₹2,603 crore.
Currency fluctuations further contributed to foreign exchange losses reaching ₹240 crore from just ₹57 crore in the first quarter.
CEO Pieter Elbers said that the preceding quarter was a challenging one and that the company has turned a corner, as the number of grounded aircraft and associated costs are coming down.
Source: Google Finance
Twitter tanking!
Twitter Communications India, the Indian subsidiary of X Corp (formerly Twitter) reported an alarming 90% drop in net profit and revenue, after the dismissal of the company’s global ad sales team under the leadership of controversial CEO Elon Musk.
As per the company filings, the net profit of the company plunged 90% from ₹30 crore in the previous year to ₹3 crore in FY24. Simultaneously, revenue collapsed from ₹208 crore to ₹21 crore this year.
Twitter which has over 25 million users in India contributes to the bulk of the revenue earned by the company.
In the previous fiscal, Twitter India went on a firing spree and handed out the pink slips to over 200 employees. The company also trimmed employee benefit expenses to ₹6 crore from ₹130 crore. Its total expenses fell 89% from ₹168 crore to ₹19 crore.
Musk completed his acquisition of Twitter in October 2022, and subsequently rebranded it as X.
As per Kantar Research, a net 26% of corporate customers relayed plans of cutting back ad spending on X in 2025. This is, by far, the biggest recorded pullback from any major media platform.
Invest wisely
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Warm regards,
Another week
in the markets
