AI growth driver
Amazon (AMZN-NASQ) doubled down on its investment in AI firm Anthropic to boost innovation for the company’s large language model (LLM) and cloud services business. Meanwhile, Microsoft (MSFT-NASQ) stated that Azure AI workloads will drive around 10% revenue growth in the coming year.
U.S. stocks look expensive
After measuring US stocks against the 10-year average of earnings, the Apollo Academy stated that stock prices are very expensive at the moment. Specifically, the cyclically adjusted price earnings ratio at 38 is near all-time highs, significantly above its long-term average of 17.
China demand weighs on luxury sector
Luxury groups including Cartier owner Compagnie Financiere Richemont SA (CFRZ-TRQX), Gucci parent Kering and LVMH reported third-quarter sales drops in the Asia-Pacific region outside Japan, which is dominated by China. A Financial Times article quoted Richemont’s chief Nicolas Bos as saying that the Chinese consumer slowdown “is probably a mid- to long-term phenomenon”, while Kering warned profits would halve this year.
Shifting to pro-cyclical stocks
Nvidia (NVDA-NASQ) is the latest big tech stock to underwhelm, initially falling -3.2% despite reporting strong earnings growth amid lofty expectations. It was going to take spectacular results to lift the stock from record highs. However, the dip may also suggest the market wants to shift into pro-cyclical sectors like financials, which should benefit from deregulation, Trump’s pro-US policies, and higher-for-longer rates, assuming growth holds up.
SA retail picking up
After several stagnant quarters, Business Day reported that local consumers spent R214 billion on fast-moving consumer goods (FMCG) and technology and durable products in Q3 2024, marking 4.1% year-on-year growth, according to the latest NIQ retail spend barometer.
M&A activity still cooking
SuperGroup (SPG-JSE) has received an non-binding, indicative proposal for SG Fleet. At the proposed offer price, this would reflect more than 90% of SPG’s market cap. In the mining sector, Anglo American (AGL-JSE) is set to sell its Australia coal mines for up to $3.8 billion. Total proceeds include the already-announced sale of Anglo American’s interest in Jellinbah for about $1.1 billion.
Trading Update : 29 November
Retail sectors are getting into the festive spirit, with promising signs in the US and SA markets that consumers are ready to spend. The US market is also looking strong after some sanity prevailed in President-elect Trump’s administration picks, with equities and treasuries cheering Trump’s pick of Scott Bessent for Treasury Secretary.
Some sanity prevails
Following a string of questionable Cabinet picks, equities and treasuries advanced, with traders welcoming Donald Trump’s pick of Scott Bessent for Treasury Secretary as a measured choice that would inject more stability into the US economy and financial markets. According to a Bloomberg report, Bessent, who runs macro hedge fund Key Square Group and is seen as a fiscal hawk, has indicated he’ll back Trump’s tariff and tax cut plans but investors expect him to prioritise economic and market stability over scoring political points. The nomination eased concerns over the incoming president’s protectionist policies, which had threatened to stoke inflation, worsen trade tensions and amplify market volatility.
Records keep tumbling
US stocks notched a fresh all-time high on Tuesday as traders looked past President-elect Donald Trump’s threat to slap additional tariffs on China, Canada and Mexico. The S&P 500 Index (VOO-NASQ) rose 0.6% to post its 52nd record of 2024 and its seventh consecutive session of gains — its longest winning streak since September.
US retail bullish
While shoppers spent 4% less on clothing, accessories and footwear during the first 10 months of 2024 compared with the same period a year ago, according to Consumer Edge data, signs are emerging that the turnaround is gaining momentum as Gap (GAP-NASQ) rose +12.8% after boosting guidance for the full year.
U.S. inflation edges up
According to a Bloomberg report, the personal consumption expenditures price index excluding food and energy, which is the Fed’s preferred measure of underlying inflation, is projected to have risen by 0.3% in October from September, and by 2.8% from a year earlier, in what would be the largest advance since April. Despite the development, Federal Reserve Bank of Minneapolis President Neel Kashkari said it is still appropriate to consider another interest rate cut at the central bank’s December meeting while speaking on Bloomberg Television.
AI growth driver
Amazon (AMZN-NASQ) doubled down on its investment in AI firm Anthropic to boost innovation for the company’s large language model (LLM) and cloud services business. Meanwhile, Microsoft (MSFT-NASQ) stated that Azure AI workloads will drive around 10% revenue growth in the coming year.
U.S. stocks look expensive
After measuring US stocks against the 10-year average of earnings, the Apollo Academy stated that stock prices are very expensive at the moment. Specifically, the cyclically adjusted price earnings ratio at 38 is near all-time highs, significantly above its long-term average of 17.
China demand weighs on luxury sector
Luxury groups including Cartier owner Compagnie Financiere Richemont SA (CFRZ-TRQX), Gucci parent Kering and LVMH reported third-quarter sales drops in the Asia-Pacific region outside Japan, which is dominated by China. A Financial Times article quoted Richemont’s chief Nicolas Bos as saying that the Chinese consumer slowdown “is probably a mid- to long-term phenomenon”, while Kering warned profits would halve this year.
Shifting to pro-cyclical stocks
Nvidia (NVDA-NASQ) is the latest big tech stock to underwhelm, initially falling -3.2% despite reporting strong earnings growth amid lofty expectations. It was going to take spectacular results to lift the stock from record highs. However, the dip may also suggest the market wants to shift into pro-cyclical sectors like financials, which should benefit from deregulation, Trump’s pro-US policies, and higher-for-longer rates, assuming growth holds up.
SA retail picking up
After several stagnant quarters, Business Day reported that local consumers spent R214 billion on fast-moving consumer goods (FMCG) and technology and durable products in Q3 2024, marking 4.1% year-on-year growth, according to the latest NIQ retail spend barometer.
M&A activity still cooking
SuperGroup (SPG-JSE) has received an non-binding, indicative proposal for SG Fleet. At the proposed offer price, this would reflect more than 90% of SPG’s market cap. In the mining sector, Anglo American (AGL-JSE) is set to sell its Australia coal mines for up to $3.8 billion. Total proceeds include the already-announced sale of Anglo American’s interest in Jellinbah for about $1.1 billion.
Sector focus: Healthcare
After President-elect Trump announced RFK Jnr, who is vocally anti vaccines, as his nominee for Secretary of Health and Human Services, healthcare companies like Merck (MRK-NASQ) and AstraZeneca (AZNL-NASQ) have come under severe pressure. However, Moderna bucked the trend, jumping +7.5% after affirming that vaccines aren’t going away anytime soon, resulting in a relief rally. While investors cannot ignore the changing political landscape, opportunities remain in the US healthcare sector as the ageing and wealthy population provides a very strong thematic tailwind
Petro Wells
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