Euros, governments and bonds collapse. The strategies of Apple and Nvidia and Elon Musk’s 56 billion salary
In the last week the S&P 500 and Nasdaq 100 indices have climbed to unprecedented heights, marking new historical records, while the indices of medium and small capitalization companies have fallen. In this context, a lively competition has emerged for the second position in terms of market capitalization globally, with Apple and Nvidia in a tight battle for position.
In Europe, the STOXX 600 gained 1%, driven by the historic (the first of the Lagarde era) interest rate cut of 0.25% by the ECB, an expected move despite a slight increase in inflation forecasts. .
In the commodities sector, the gold market has experienced a significant shift. The Chinese central bank’s decision to stop gold purchases, after 18 months of intense acquisitions which had supported the price of the precious metal, caused a decline of more than 3.5% in Friday’s session (to which must be added the downward pressure resulting from the strengthening of the dollar post NonFarm Payrolls). Furthermore, the latest trading session marked gold’s worst daily performance in the last 52 weeks (indeed a daily loss of this magnitude had not been seen since November 8, 2020), highlighting the volatility and uncertainty that still permeates the commodities sector. first. This movement interrupts a trend of strong demand that had seen gold reach its all-time high in May, exceeding $2,450 an ounce. China’s keeping gold reserves unchanged signals a possible caution in continuing purchases at high prices, reflecting a potential cooling in demand.
The decline in gold and oil after the OPEC+ decision is counteracted by natural gas which saw an increase of 13% due to competition for limited supplies between Asia and Europe. Bitcoin, for its part, closed the week at $69,500.
In this scenario, the new week opens with a decidedly lively and dense Monday session, starting with the post-election collapse of the Euro. As the US dollar continues its rise, fueled by labor market data released on Friday, the Euro has come under downward pressure. The European parliamentary elections, awaiting final verdicts, have delivered a decisive rejection to the governments in France and Germany, with direct consequences on market expectations. In France, the unfavorable result for Macron’s party prompted the president to call new elections, a move that reflects political volatility and increases uncertainty about the country’s fiscal and political stability.
This instability also reverberated in bond markets, where we saw a marked widening of peripheral sovereign yield spreads versus German bunds. The nervousness is palpable, as demonstrated by the sharp rise in the yield of the Belgian and French 10-year bonds and by a considerable, although more limited, increase in the Italian BTP. At the time of writing, BTP shows an increase of 4.85% in today’s session, reaching around 138 basis points.
Pressure on the single currency which is clearly evident in the monthly percentage change in the Euro/US Dollar exchange rate, where a return to negative values is observed for the first time since 10 May. This detail highlights a reversal of recent bullish trends and new pressures on the single currency.
On the same day today of intense market activity, Apple and Nvidia, two technology giants fighting for second place in the ranking of the most capitalized companies in the world, have implemented different strategies to attract investors. While Apple aimed to make a splash with new announcements at its Worldwide Developers Conference (WWDC), Nvidia played the stock split card to make its shares more accessible and stimulate further buying. In particular, Nvidia implemented a 10:1 stock split, bringing the price of each share to around $120, a move that could also facilitate its inclusion in the prestigious Dow Jones index.
Apple, for its part, is preparing to demonstrate its competitiveness in the artificial intelligence sector by presenting a series of new features called “Apple Intelligence”. This move comes at a crucial time, as Samsung Electronics Co., Apple’s main competitor in the smartphone market, already integrated Google’s artificial intelligence capabilities into its devices earlier this year. After almost 17 years since the historic launch of the iPhone, expectations for Apple’s conference are high, representing almost a crucial moment, with the company embarking on a new chapter driven by artificial intelligence.
Volatility is also expected for Tesla this week, with a key event grabbing investors’ attention. The annual shareholders meeting will be held on Thursday, during which twelve proposals will be put to the vote. Among these, one of particular relevance stands out: the ratification of Elon Musk’s compensation as part of the CEO’s compensation package. Although the outcome of the vote is advisory in nature, any rejection would represent a significant embarrassment for both Tesla’s Board of Directors and Musk himself. Adding further tension, Musk raised the possibility of developing products outside of Tesla if he fails to increase his stake in the company, an option his current salary deal would allow him.
With Tesla recording one of its worst performances since the beginning of the year, with a decline of 28% and a drawdown of 56% from its all-time highs, the situation becomes further complicated. Elon Musk’s threat to develop products outside the company if he fails to increase his stake raises significant questions about his future commitment to Tesla. This uncertain scenario could have a significant impact on investor behavior and negatively influence the value of the shares in the coming days, accentuating the volatility of the stock in an already critical period for the company.
This week presents itself as a crucial time to evaluate which factors will influence the markets the most. On the one hand we have the artificial intelligence sector, with tech giants like Apple and Nvidia pushing new innovations, and on the other hand there are the monetary policy decisions of the Federal Reserve, with particular attention to US inflation data and to updated economic projections.
Wednesday will prove particularly significant with the release of the latest inflation figures and the statement from the Federal Reserve, followed by the press conference of its president, Jerome Powell. Despite market expectations of no changes in interest rates, the focus will be on the dot plot — a graph showing the interest rate projections of members of the Federal Open Market Committee. This document will provide crucial insights into future rate expectations, essential for understanding the direction of monetary policy.
Markets currently expect a single quarter-point rate cut in 2024, reflecting a climate of uncertainty and expectation. Powell’s press conference could offer additional details and nuances that will influence investor decisions.
*eToro market analyst
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