Bassanese Bites: Great debate – September 09 2024

Global markets

Global equities declined sharply last week, reflecting further weaker than expected US economic data and anti-trust concerns around tech darling Nvidia.

As the saying goes, the faster they rise, the harder they fall – and Nvidia is no exception. The sharp sell-off in this AI glamour stock over recent months has reflected a combination of factors: high valuations, an apparent peaking in sales growth and, most recently, reports that the US Department of Justice (DOJ) is looking into anti-competitive practices, such as limiting the ability of customers to use alternative chips. Also noteworthy in this regard are reports that the use of AI tools such as ChatGPT is waning – has the novelty already worn off?

The stock dropped a lazy 13% last week following new reports of the DOJ investigation – taking its decline since its mid-June peak to 24%. That said, the stock is still up 4% from its early-August low, though there’s every chance that low could be taken out in coming weeks.

Of course, the falling back to earth of one high-flying stock need not cause an overall market meltdown, unless it becomes reflective of a broader re-appraisal of the whole AI frenzy that, along with the US soft landing scenario, has helped propel equity markets higher since late 2022.

The other factor hurting stocks last week was further signs of softness in the US economy, with weaker then expected reports for manufacturing, job openings and employment growth. That said, the ISM services sector survey remained solid and weekly jobless claims also held at a reassuringly low level. All up, to my mind US economic data remains sufficiently mixed that the Fed is still likely to only cut rates by 0.25% at next week’s meeting.

Note the Bank of Canada cut rates last week as widely expected, though only by a further 0.25%.

Global week ahead

A highlight this week will be the debate between US Presidential contenders Harris and Trump. With polls still apparently tight, the debate could be…….

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