Weekly: Chinese stocks surged; A turbulent October on deck？

Last Week's Recap

The US Market - The Dow set a record high

• The blue-chip Dow climbed to a fresh record on Friday as a subdued inflation report stoked hopes for more Federal Reserve rate cuts, which also boosted the major averages to post weekly gains.

• The broad index is tracking to add more than 1% in September. That would mark its eighth positive month of 2024, with all besides April bringing gains.

• The Fed's favored inflation gauge showed core inflation ticking up to 2.7% from 2.6%, but the six-month annualized rate eased to 2.4% from 2.6%. The 3-month rate is just 2.1%. After the inflation data, odds of a 50-basis-point rate cut on Nov. 7 edged above 50%.

• Further, new weekly claims for jobless benefits fell to 218,000, the lowest since May, indicating a strong labor market, while the final reading of second-quarter gross domestic product came in at a robust 3%.

• The yen strengthened around 1.7% against the dollar on Friday following the election of former defense minister Shigeru Ishiba as Japan’s next prime minister. The dollar was last trading at 142.4 yen.

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The US Sectors & Stocks - Chinese stocks skyrocketed, KWEB jumped 26.8%

• The basic materials sector in the S&P 500 notched its best weekly performance of 2024 with 4.7% to lead the 11 sectors, followed by the consumer cyclical, which rose 3.3%.

• Chinese stock sand related names skyrocketed as China’s central bank cut its 7-day reverse repurchase rate to 1.5% from 1.7%, as well as lowered the reserve requirement ratio for banks by 50 basis points. China Internet ETF (KWEB) jumped 26.8% last week.

• Two China-focused ETFs notched their biggest weekly gains ever, underscoring the boost tied to economic support measures unveiled this week by the country’s central bank. The iShares MSCI China ETF (MCHI) and the iShares China Large-Cap ETF (FXI) both climbed more than 18% so far this week.

• Micron Technology (MU) surged after it reported stronger-than-expected fiscal Q4 earnings, while revenue jumped 93% to $7.75 billion. The memory-chip giant also guided well above expectations for the current quarter. Robust AI data center demand fueled its Q4 results and Q1 outlook. Micron CEO Sanjay Mehrotra predicted "a substantial revenue record with significantly improved profitability in fiscal 2025."

• Meta Platforms (META) unveiled a low-cost virtual reality headset and showcased a prototype of high-tech augmented reality smart glasses at its annual Connect developer conference. During his keynote speech, CEO Mark Zuckerberg said the Meta AI chatbot had surpassed 500 million monthly active users. Meta edged to a fresh high on Thursday.

• Super Micro Computer (SMCI) crashed 12% on Thursday as a report that the Justice Department is investigating the server maker for alleged accounting irregularities. That follows an August short-seller report claiming accounting manipulation.

• The Justice Department sued Visa (V) on Tuesday, alleging that the Dow Jones payments giant monopolizes the U.S. debit card market. Visa's general counsel called the lawsuit "meritless" and said the company is ready to "defend ourselves vigorously." Visa stock fell.

Hong Kong Market - HSI skyrocketed 13%

• Hong Kong stocks surged for the fifth day amid record trading volume, reclaiming the 20,000 floor and registering the best week in 26 years as a buying spree went into overdrive after Beijing injected fresh fuel into the Chinese economy. The Hang Seng Index (HSI) recorded a weekly gain of 13%, making it the index’s best week since February 1998, according to FactSet data.

• The PBOC said the RRR cut was intended to help “create a good monetary and financial environment for China’s stable economic growth and high-quality development.”

• Miniso said it would take up a 29.4% stake in Yonghui for 6.3 billion yuan ($893.1 million) at 2.35 yuan ($0.33) apiece, or a 3.1% premium to Yonghui's closing price on Sept. 20. Nomura said the sudden acquisition of Yonghui brings notable uncertainties with no immediate synergy and the bold move may be too aggressive.

Singapore Market - STI was down 1.42%

• Singapore stocks fell last week with the STI down 1.42%. Singapore REITs with China assets led the gains following the announcement of significant stimulus measures to lift the economy. CapitaLand China Trust gained 14% this week.

• The NIO stock gained 15.2% this week.China’s waning economic growth and sluggish consumer sentiment have impacted NIO’s high-end car sales. However, China’s central bank’s array of stimulus measures to revive economic growth should improve consumers’ purchasing power and give them the means to purchase NIO’s luxury vehicles like the all-new ES8.

• DBS Group Chief Executive Piyush Gupta said on Wednesday it is in the process of increasing ownership in its China securities joint venture to 91% from 51%. The comments came a day after China introduced aggressive measures to prop up its ailing economy and capital markets.

Australian Market - The ASX closed at a record level

• Australian shares just managed to seal a record closing high on Friday, with a strong rally in mining shares managing to offset losses in almost every other sector. The ASX 200 closed just above flat for the week following two consecutive weeks of gains.

• Most of the market’s gains were made by the big miners which reacted very positively to China’s stimulus pledges during the week, which has injected a lot of optimism into the outlook for many minerals, particularly iron ore, copper and lithium.

• One of the more extreme movements was in $STAR ENTERTAINMENT GRP LTD/T(SGR.AU)$ shares, which shed an alarming 44% to a record low after the troubled casino group endured its first day of trading in a month after a share suspension.

The Week Ahead

Macro Factors - Jobs report and Tesla delivery numbers

• The third quarter's final month, often regarded as the weakest month of the year for stocks, has been surprisingly good for investors. The major market averages were on track as of Friday to close it out with a robust advance, helped by the Federal Reserve’s big rate cut last week. However, investors are on edge heading into October, the most volatile month for stock. Typically made worse during a U.S. presidential election year — and contrarian sentiment that has many worried about a market pullback or even a correction.

• In the week ahead, the September jobs report is expected to provide further clues on how quickly the labor market is cooling. The U.S. economy is expected to have added 145,000 jobs this month, up from 142,000 jobs in August, according to a Dow Jones estimate. Meanwhile, the unemployment rate is forecast to have held steady at 4.2%.

• Federal Reserve Chairman Jerome Powell speaks at the National Association for Business Economics annual meeting in Nashville, Tenn. The theme for this year's confab is "Finding Harmony in the Noise: Transitioning to a New Normal."

• Tesla is expected to announce its third quarter delivery numbers. Analysts expect Tesla delivered about 462,000 cars in the quarter, up from 443,956 in the prior quarter and a 6% increase from the sales seen in the same quarter a year ago. The company's highly anticipated robotaxi reveal is slated for Oct. 10.

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