I. Performance and Valuation of Global Equity Indices
Data source: Bloomberg, 2024/10/14-2024/10/20, compiled by Tiger Brokers
II. Key Market Themes
i. The U.S. economy continues to strengthen, and Fed officials suggest a slowdown in rate cuts—can rate cut trades persist?
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Last week, the U.S. released September retail consumption data, with a month-over-month increase of 0.43%, significantly surpassing market expectations of 0.3%. Excluding gasoline and automobiles, retail sales rose 0.7% month-over-month, with significant increases in the food services and beverage sectors. Additionally, initial jobless claims last week recorded 241,000, better than the market's expected 260,000.
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At the same time, Fed officials made positive remarks this week. Fed Governor Waller stated, "As long as the labor market doesn't suddenly deteriorate and inflation declines as expected, the Fed needs to be more patient with rate cuts." Moreover, Atlanta Fed President Bostic also commented, "We're not in a hurry to return to neutral rates immediately."
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As a result, the market almost completely reversed its previous panic. U.S. bond yields gradually climbed, the dollar strengthened, and Treasury prices began to retreat. Currently, the probability of a 25bps rate cut in November has risen to 90%, and the chance of no rate cut in December has exceeded 20%. However, before the next FOMC meeting, there will still be a PCE report, a non-farm payroll report, a PMI, and a critical presidential election. We believe that uncertainty remains high, and while rate cuts may slow, rate cut trades are not over.
Data source: CME Group, compiled by Tiger Brokers
ii. ASML faces setbacks, and TSMC could be the biggest winner—AI earnings season looks promising!
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Recently, lithography giant ASML $阿斯麦(ASML)$ released its Q3 financial report, with revenue and net profit slightly exceeding expectations, but the order backlog saw a cliff-like drop, reaching only €2.63 billion, less than half of expectations. Meanwhile, the company significantly lowered its 2025 performance guidance. The market reacted harshly, with ASML’s stock plunging 16% on the day and dropping another 6% the next day.
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ASML’s CFO pointed out that "weakened demand for EUV and in the Chinese market" were the two main factors behind the 2025 guidance revision. Demand in mainland China is returning to normal from previous short-term surges. However, the market is more concerned about the EUV issue, as it is directly tied to the demand for AI growth and traditional semiconductor recovery, putting pressure on the entire semiconductor sector. Currently, strong AI demand for HBM is driving memory manufacturers to upgrade equipment, supporting EUV demand for this year and next.
Data source: Bloomberg, compiled by Tiger Brokers
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The problem lies with three advanced process foundries. Intel $英特尔(INTC)$ is struggling financially, leading to capital expenditure cuts; Samsung $三星电子(SMSD.UK)$ lags in top-tier processes, and a decline in related business could reduce EUV demand. Both are negatively affecting ASML's guidance for next year. In contrast, TSMC is set to further monopolize the market, becoming the sole foundry for AI logic chips from companies like NVIDIA $英伟达(NVDA)$ . TSMC's $台积电(TSM)$ performance will become the true indicator of AI growth.
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The next day, TSMC released an impressive financial report. Both volume and price increased, and its revenue, gross margin, net margin, and future guidance all significantly exceeded market expectations! TSMC’s stock jumped nearly 10% in one day, pushing its market cap into the trillion-dollar range. We believe that as the other two gradually exit the competition, TSMC has effectively achieved a de facto monopoly in AI chip manufacturing, with the company's gross margin guidance hitting the market's highest expected value of 59%. TSMC’s strong performance has kicked off the AI earnings season on a positive note!
Data source: Bloomberg, compiled by Tiger Brokers
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