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The week in review: Nvidia skyrockets

Market Activity

The week in review: Nvidia skyrockets

Skyrocketing shares of Nvidia have lifted the U.S. company to a massive market value exceeding entire country stock markets in Europe

June 23, 2024

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Investor enthusiasm for Nvidia’s stock turned the maker of artificial intelligence chips into the biggest U.S. company on Tuesday as it swelled to a market value of more than $3.3 trillion. “In less than a month Nvidia has soared past the market cap of every listed stock combined in first Germany and then in the last week both the UK and France,” said Jim Reid, global head of macro and thematic research at Deutsche Bank Research, in a note emailed Thursday.

Nvidia’s market capitalisation surged to $3 trillion, from $2 trillion, in 30 trading days from April 24, said Reid. “Nvidia has added a trillion dollars of market cap since May 20th,” he wrote. “At 23 trading days, this is the quickest a company has ever added a trillion dollars.”

To help put this surge into perspective, Reid said that billionaire Warren Buffett’s Berkshire Hathaway, “one of the most respected companies in the world, has taken around 135 years since its origins in the 1800s to get from zero” to around $900 billion today.

“Only India, Japan, China and the US itself have entire listed stocks that are collectively bigger” than Nvidia’s $3.35 trillion market value, according to Reid’s note.

If you hear alarm bells ringing, so do we. Surely there is a trade here to sell Nvidia and buy the entire German stock market. Companies come and go. They fall into and out of favour just as fast. Germany we feel should be around for a while and can only grow (given time)!

In the UK

London stocks ended the week on a negative note after data revealed an unexpected slowdown in the UK service sector's growth for June.

The FTSE 100 dropped 0.42%, closing at 8,237.72 points, while the FTS E250 was off 0.27% at 20,442.35 points.

In currency markets, sterling was last down 0.15% against the dollar, trading at $1.2638, while it slipped 0.06% against the euro trading at €1.1820.

Surprisingly strong UK retail sales weren't enough to keep the FTSE 100 in positive territory as weaker-than-expected French and German flash PMIs dragged European indices down. Most of the numbers we’re seeing out of the UK are strong and we see no reason for this not to continue. The election is a foregone conclusion and is unlikely to provide any surprises.

Both the UK blue chip index and European indices managed to see their first weekly gain after four-to-five consecutive weeks of losses.

In Europe

The pan-European STOXX Europe 600 Index ended 0.79% higher, rebounding as worries about political uncertainty appeared to ebb and the outlook for monetary policy easing brightened.

Major stock indexes rose.Germany’s DAX gained 0.90%, France’s CAC 40  was up 1.67%, and Italy’s FTSE MIB climbed 1.97%. The UK’s FTSE 100 Index also rose 1.12%.

As expected, the BoE left its key interest rate unchanged at a 16-year high of 5.25%. Seven members of the Monetary Policy Committee voted to keep rates steady; two backed a cut to 5%. Some members said the decision was finely balanced, potentially signalling that policymakers are drawing closer to reducing borrowing costs this year.

We have said for nearly a year now that we expect the first cut to come at the end of the summer, and we’re sticking to that prediction after the headline inflation rate dropped to the central bank’s target of 2% in May, down from 2.3% the month before. Core inflation, which excludes food and energy, eased to 3.5% from 3.9% in April. However, services inflation of 5.7% was higher than consensus expectations and this continues to be a sticking point.

Private sector business activity in the eurozone unexpectedly slowed in June as services lost momentum and manufacturing contracted more sharply, purchasing managers’ surveys showed. The HCOB Composite Purchasing Managers' Index, combining activity in manufacturing and services, fell to 50.8 from 52.2 in May, according to preliminary figures compiled by S&P Global. (A PMI reading greater than 50indicates expansion.)

In Germany, overall business activity increased slightly, with the slowdown in the rate of expansion reflecting weakness in manufacturing production. In France, a decrease in new orders caused output to contract for a second month in a row.

In the US

In the U.S. stocks were mostly flat on the shortened week (markets were closed Wednesday in observation of the Juneteenth holiday).

The week saw modest signs of a broadening and rotation in the market, with value stocks outperforming growth shares and most of the major benchmarks outperforming the technology-heavy Nasdaq Composite.

We feel this is inevitable at some point. While everyone loves tech, values do have to play a part in stock picking at some point, and right now, they aren’t making a great deal of sense.

The lacklustre retail sales data appeared to push longer-term Treasury yields lower, but Friday’s stronger S&P Global readings brought them back up to end the week modestly higher. 

Issuance in the investment-grade corporate bond market was also heavy early in the week, with expectations for total weekly issuance surpassed by the end of the day Tuesday. Somewhat improved investor sentiment and equity gains supported the performance of high-yield bonds.

In Asia

Japan’s stock markets generated negative returns over the week, with the Nikkei 225 Index falling 0.6% and the broader TOPIX Index down 0.8%. Uncertainty about the future trajectory of the Bank of Japan’s (BoJ’s) monetary policy weighed on sentiment.

The yield on the 10-year Japanese government bond (JGB) rose to 0.97%, from 0.93% at the end of the previous week, as investors sought to digest data showing that inflation had accelerated in May and how this would factor into the BoJ’s decision-making about when to next raise interest rates. The nationwide core consumer price index rose 2.5% year on year in May, following a 2.2% uptick in April, but was slightly short of consensus expectations for a 2.6% increase. 

Chinese stocks retreated as mixed economic data dampened investor sentiment. The Shanghai Composite Index fell 1.14%, while the blue-chip CSI 300 gave up 1.3%. In Hong Kong, the benchmark Hang Seng Index gained 0.48%, according to FactSet.

Industrial production rose a weaker-than-expected 5.6% in May from a year earlier, slowing from April's 6.7%. Fixed asset investment grew 4% in the calendar year to May compared with a year ago but eased from the January to April period as real estate investment declines deepened. Meanwhile, retail sales increased an above-consensus 3.7% in May from a year earlier and outpaced April’s 2.3% gain. The nationwide urban unemployment rate remained steady at 5%.

The week ahead

The last working week of June will be much quieter for UK macro economic data following the Bank of England decision, though the gross domestic product (GDP) update on Friday could be seized upon by political parties ahead of the general election the following week. 

US GDP is also due on Thursday, a day ahead of the release of the core PCE price index, the Federal Reserve's preferred inflation gauge. This will no doubt provide more volatility in a wild American market.

Both the headline and core PCE data have eased significantly from their respective 2022 peaks to the current 2.7-2.8% level, but above the Fed’s 2% target.

Fed Chair Jerome Powell pointed to ‘modest further progress’ in inflation at the recent Fed meeting but added ‘greater confidence’ in inflation is needed before policies are loosened.

Economists expect US headline PCE to come in at 2.6% YoY, versus the 2.7% prior.

Core numbers are forecast at 2.6%, versus the 2.8% prior.

Thank you for being a part of the TPP journey and here’s to a good trading week ahead.

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