Qualcomm

Beyond Apple...  When a tech giant like Apple, with a market cap of nearly $2.8 trillion sneezes, the whole market catches a cold. The S&P500 fell for the third day to 4451 yesterday, while Nasdaq 100 slipped below its 50-DMA. Apple selloff also affected suppliers and other mega cap stocks. Qualcomm for example fell more than 7%, while Foxconn remained little impacted by the news.   Zooming out, the US small caps were also under pressure yesterday, the Russell 2000 fell below its 100-DMA and came close to the 200-DMA, as the latest data showed that the US jobless claims fell to the lowest levels since February, defying the latest softness in jobs data. Other data also showed that the labor unit cost didn't fall as much as expected in Q2. But happily, the US treasuries were not much affected by the latest jobless claims data. The US 2-year yield fell below 5%, although the US dollar index extended its advance toward fresh highs since last March.   The selloff in the Japanese yen slowed against the US dollar. The USDJPY pushed below the 147 mark this morning despite a slower than expected GDP print in Japan in the Q2. Capital expenditure fell 1%, private consumption declined 0.6%, making the case for a softer Bank of Japan (BoJ) more plausible. But the Japanese officials dared traders to continue buying the USDJPY to 150, saying that they would intervene.   The EURUSD sees more hesitation into the 1.07 mark, and into next week's European Central Bank (ECB) meeting. The base case is a no rate hike, and yesterday's morose growth figures came to cement the no change expectation. But the economic weakness may have little impact on inflation. Any bad surprise in German inflation due this morning could convince some ECB doves that the European policymakers may announce another 25bp hike when they meet next week.  

Tesla fuels market rally By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank    Tesla jumped 10% yesterday and reversed morose mood due to the Apple-led selloff. Tesla shares flirted with the $275 per share on Monday, thanks to Morgan Stanley analysts who said that its Dojo supercomputer may add as much as $500bn to its market value, as it would mean a faster adoption of robotaxis and network services. As a result, MS raised its price target from $250 to $400 a share.   Tesla rally helped the S&P500 make a return above its 50-DMA, as Nasdaq 100 jumped more than 1%. Apple recorded a second day of steady trading after shedding almost $200bn in market value last week because of Chinese bans on its devices in government offices, and Qualcomm, which was impacted by the waves of the same quake, recovered nearly 4%, after Apple announced an extension to its chip deal with the company for 3 more years. Making chips in house to power Apple devices would take longer than thought.   Speaking of chips and their makers, ARM which prepares to announce its IPO price tomorrow, has been oversubscribed by 10 times already and bankers will stop taking orders by today. The promising demand could also encourage an upward revision to the IPO price, and we could eventually see the kind of market debut that we like!    Today, at 10am local time, Apple will show off its new products to reverse the Chinese-muddied headlines to its favour before the crucial holiday selling season. The Chinese ban of Apple devices in government offices sounds more terrible than it really is, as the real impact on sales will likely remain limited at around 1%.   In the bonds market, the US 2-year yield is steady around the 5% mark before tomorrow's much-expected US inflation data. The major fear is a stronger-than-expected uptick in headline inflation, or lower-than-expected easing in core inflation. The Federal Reserve (Fed) is torn between further tightening or wait-and-see as focus shifts to melting US savings, which fell significantly faster than the rest of the DM, and which could explain the resilience in US spending and growth, but which also warns that the US consumers are now running out of money, and they will have to stop spending. So, are we finally going to have that Wile E Coyote moment? Janet Yellen doesn't think so, she is on the contrary confident that the US will manage a soft landing, that the Fed will break inflation's back without pushing economy into recession. Wishful thinking?   But everyone comes to agree on the fact that the Eurozone is not looking good. The EU Commission itself cut the outlook for the euro-area economy. It now expects GDP to rise only 0.8% this year, and not 1.1% as it forecasted earlier, as Germany will probably contract 0.4% this year. The slowing euro-area economy has already softened the European Central Bank (ECB) doves' hands over the past weeks. Consequently, the EURUSD gained marginally yesterday despite the fresh EU commission outlook cut and should continue gently drifting higher into Thursday's ECB meeting. There is no clarity regarding what the ECB will decide this week. The economy is slowing but inflation will unlikely to continue its journey south, giving the ECB a reason to opt for a 'hawkish' pause, or a 'normal' 25bp hike. 

Tesla surged 10.2% post a major investment bank's upgrade, while Meta gained 3.3% on its powerful AI system news. Oracle, however, tumbled 9% in after-hours trading due to sluggish cloud sales growth. Strong loan and financing data spurred an intraday Hang Seng Index recovery after a morning dip, alongside gains in iron ore and copper. The weaker US dollar boosted G10 currencies, particularly AUD and JPY. The Yuan strengthened against the dollar, influenced by positive credit data and government support. Additionally, the EU Commission lowered the euro zone growth forecast.       US Equities: Tesla surged 10.2% after a major US investment bank upgrading the stock, assigning an additional USD500 billon to the valuation for a supercomputer that Tesla is developing. Meta gained 3.3% on news that the company is developing a powerful AI system (WSJ). The Nasdaq 100 added 1.2% to 15,461 while the S&P 500 climbed 0.7% to 4,487. Fixed income: The 3-year auction tailed by 1bp (i.e. awarded yield 1bp higher than the level at the auction deadline) and kept traders cautious ahead upcoming hefty supply in 10 and 30-year auctions and corporate issuance and CPI data on Wednesday. The 2-year ended unchanged while the 10-year closed at 4.29%, 2bps cheaper from Friday. China/HK Equities: The Hang Seng Index pared much of the sharp loss in the morning and recovered to end the day 0.6% lower at 18,096. The initial nearly 2% decline was driven by an earnings miss by Sun Hung Kai Properties and departure of the head of the cloud division and former CEO Daniel Zhang from Alibaba. The stronger-than-expected bounce in China’s loans and aggregate social financing data, released during the lunch break, triggered a sharp recovery. Southbound flows however registered a large net sale of HKD10.3 billion by mainland investors. In A-shares, the CSI300 added 0.7%. FX: The retreat of the US dollar brought strong gains across the G10 board, led by AUD and JPY. AUDUSD broke above 0.64 to highs of 0.6449 before settling around 0.6430, while Japanese yen saw strong gains on the back of weekend Ueda comments that brought forward expectations of policy normalization. USDJPY dropped to lows of 145.91, coinciding with fresh recent peaks in JGB yields, before a rebound back to 146.50+ levels as US CPI is awaited. Yuan also strengthened with USDCNH taking a look below 7.30 from highs of 7.36 amid verbal warnings from authorities, better-than-expected credit data as well as the continued appreciation bias in PBoC’s daily fixings.   Commodities: Crude oil held onto its gains near the recent highs with Brent still close to $90/barrel despite a small sell-off in Monday’s session. However, Monday’s price action came despite a weaker USD. With focus still on supply tightness concerns, today’s OPEC and EIA monthly reports will be on watch. Strong performance in metals led by iron ore up 3.5% and copper up close to 2.5% with China credit data boosting sentiment and a strong move in the yuan as well. Gold finding is hard to clear $1930 hurdle and the move in yields remains key with hefty corporate supply and US CPI ahead. Macro: China’s new Yuan loans in August surged more than expected to RMB 1,360 billion. This increase is attributed to greater regulatory encouragement for banks to lend and favorable seasonal factors. This, together with the front-loading of local government bond issuance, brought aggregate social financing to RMB 3,120 billion in August, up from July's RMB 528.5 billion. US NY Fed inflation expectations rose higher for one-year to 3.6% from 3.5%, while the long-term five-year also rose 0.1ppt to 3.0% from 2.9%. However, the three-year expectations dipped to 3.8% from 3.9%. Macro events: US NFIB small business survey (Aug), US 10-year T-note auction ($35 billion), UK payrolls (Aug), Germany ZEW survey (Sep) Company Events: Apple's iPhone 15 launch In the news: China’s PBoC asks banks to get approval for dollar purchases over USD50 million (Reuters) EU Commission cuts euro zone growth forecast as Germany in recession (Reuters) Representatives from eight core member institutions of the China National Forex Market Self-regulatory Mechanism met on Monday to discuss about maintaining the stability of the renminbi (Xinhua). Strong demand pushes Arm to close IPO order book early (FT) Qualcomm strikes new Apple deal on 5G chips (FT) US and Vietnam unveil billions in semiconductor and AI deals (FT)    

BoE between a rock and a hard place.  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   As widely expected, the Federal Reserve (Fed) maintained its interest rates unchanged at this week's meeting and President Jerome Powell cited that the recent surge – especially in the long end of the US yield curve – helped tightening the financial conditions in the US. Powell repeated that the Fed is proceeding carefully but that they are 'not confident that inflation is on path toward 2%' target'. US policymakers redefined the US economic outlook as being 'strong', from being just 'solid'.  In summary, the latest Fed decision was not dovish, unsurprisingly hawkish, and did not impact appetite in US bonds which got a boost from the Treasury's announcement of a slightly lower-than-expected quarterly refunding auction size for the 3, 10 and 30-year maturity bonds next week. Cherry on top, the US Treasury said that they now expect one more step up in quarterly issuances for the long-term debt, whereas the expectation was multiple more step ups.   The US 10-year yield sank to 4.70% after the Fed decision and Treasury's much-awaited issuance calendar reveal, the 30-year yield fell to 4.90%. The fact that the US will borrow slightly less than previously thought and slightly less on the long-end of the curve doesn't mean that the fiscal outlook improved. Though lower-than-expected, the $776bn that the US Treasury is planning to borrow this quarter is a record for the last 3 months of a year. And the net interest payments on the US federal debt are rising at an eye-watering speed. In numbers, the federal debt rose more than a third since the end of 2019, and the interest expenses on that debt rose by almost 40%. That's a detail for Janet Yellen who thinks that the surge in US yields is explained by the positive economic outlook, but the market won't allow the Treasury to borrow like its pockets have no bottom if the Fed is not part of it.   Bad news, good news the sharp decline in October ISM manufacturing PMI and the softer-than-expected ADP read helped boosting sentiment in US Treasuries, as they somehow softened the otherwise strong US economic outlook. The JOLTS data unexpectedly rose but no one was out looking for reasons to sell Treasuries yesterday, so that basically went unheard. The official US jobs data is due Friday and any strength in NFP, or wages could reverse the optimism that the US economic growth will... slow. And as bad news is sometimes good news for the market, the S&P500 rebounded more than 1% and closed the session at a spitting distance from the all important 200-DMA, while the rate-sensitive Nasdaq jumped almost 1.80%.   AMD, Qualcomm gain, Apple to report On the individual level, AMD jumped almost 10% yesterday. Even though the company gave a soft guidance for Q4, they said that they expect to sell more than $2bn worth of AI chips next year. That's a lot, that's more than a third of the actual revenue they make. Qualcomm jumped nearly 4% in afterhours trading, as the world's largest seller of smartphone chips gave a better-than-expected prediction for this quarter, saying that the inventory glut in mobile-phone industry may be receding.   Today, Apple will post its Q3 earnings, after the bell. We have reservations regarding the results as the iPhone15 sales are not as brilliant as investors hoped they would be, and Huawei is apparently eating Apple's market share in China. Apple's overall revenue is seen down by around 3%. Ouch. The good news is that the morose expectations could be easier to beat. Otherwise, we could see Apple tank below the $170 per share, into the bearish consolidation zone, and become vulnerable to deeper losses.  BoE not to raise rates, but its inflation tolerance The Bank of England (BoE) is the next major central bank to announce its rate decision today, and the Brits are not expected to raise the interest rates at today's MPC meeting, but they are expected to increase their tolerance faced with above 2% inflation, instead. That's not good for central bank credibility, even less so when the BoE's credibility is not at its best since the start of this tightening cycle. If investors sense that the BoE will let inflation run hot, by lack of choice, sterling could take a significant hit.   Gold and oil  Appetite in gold eases as Israelian attacks are perceived as being less aggressive than what they could be. De-pricing of Mid-East risks could send the price of an ounce to, or below the 200-DMA, near the $1933 level. Upside risks prevail, but fresh news should gradually lose their shocker impact and the $2000 per ounce level will likely attract top sellers more than anything else.   US crude rebounded near the $80pb yesterday, as the decline toward the psychological $80pb level brought in dip buyers. We could reasonably expect the US crude to correct toward $85pb as geopolitical tensions loom, and supply remains at jeopardy.