Market Commentary

Week In Review 

12 August | India Industrial, Inflation & Manufacturing 

India's inflation dropped to 5.48% in November, while industrial production rose 3.5% in October. Manufacturing grew 4.1%, driven by metals, electrical equipment and petroleum.

12 August | U.S. Monthly Budget

The U.S. budget deficit was estimated at $381 billion. Total receipts for fiscal year 2024 increased by 11%, driven largely by higher individual income tax revenues. However, total outlays rose by 14%, with education spending seeing the largest increase. The 12-month rolling deficit reached $2.1 trillion, surpassing the deficits of fiscal years 2022 and 2023. Despite these figures, the Congressional Budget Office (CBO) estimated that sequestration would not be necessary for 2024.

14 August | U.S. Inflation

U.S. consumer prices rose moderately in July, with the annual inflation rate slowing to below 3% for the first time in nearly 3.5 years. This easing in inflation has increased the likelihood of the Federal Reserve cutting interest rates in the upcoming month.

14 August | U.K. Inflation

 The UK inflation rate, measured by the Consumer Price Index (CPI), stood at 2.2% in July 2024, matching the Bank of England's target and remaining steady from the previous month. This was slightly lower than economists' expectations. While overall inflation was stable, services inflation, a key focus for the Bank of England, saw a slight increase. The data was viewed positively by the market, with an increased likelihood of an interest rate cut in the near future.

14 August | Eurozone GDP

In the second quarter of 2024, the euro area's seasonally adjusted GDP grew by 0.3%, matching expectations. In the third quarter, GDP rose by 0.4% from the previous quarter. 

14 August. | Japan GDP

Japan's GDP grew 3.1% year-on-year in Q2 2024, surpassing the 2.1% forecast, and rose 0.3% quarter-on-quarter in Q3, above the expected 0.2%. Growth is shifting towards domestic demand, with consumer spending up 0.9% and private investment increasing. However, exports contracted for the first time since 2020. Jun Saito from the Japan Center for Economic Research expects modest overall growth in 2024, with the yen potentially strengthening, which could affect export value.

14 August | India Trade

On August 14, 2024, India updated tariff values for some imported goods. In July, the trade deficit widened to $23.5 billion, higher than the expected $21.35 billion, due to weak exports. In August, non-petroleum and non-gems & jewellery exports were expected to rise to $26.76 billion, while imports in the same category were projected to increase to $40.65 billion.

14 August | Indonesia Trade

In August 2024, Indonesia's exports grew 7.13% to $23.56 billion, and imports rose 9.5% to $20.67 billion, resulting in a trade surplus of $2.89 billion (down 6.96% from last year). Non-oil and gas exports had a surplus of $4.34 billion, while oil and gas saw a deficit of $1.44 billion. The country’s palm oil exporters were also required to allocate 250,000 tonnes per month to the domestic market. Major trade partners included China, the U.S. and Japan.

15 August | U.S. Industrial

U.S. industrial production rose 0.8%, following a 0.9% drop in July, driven by a 10% increase in motor vehicle production. Capacity utilization rose to 78%, still 1.7% below the long-term average. Manufacturing output grew 0.9%, while mining output increased 0.8%. Utilities output remained unchanged. Exports of goods rose by $4.4 billion to $179.4 billion. The Manufacturing PMI slightly increased to 47.2%, indicating continued contraction.

15 August | U.K. GDP

 The UK’s GDP grew by 0.2%, with services up 0.1%, production rising 0.5%, and construction increasing 0.4%. For Q3 2024, GDP growth is estimated at 0.1%, a slowdown from 0.5% in Q2 and 1.0% in Q3 2023.

16 August | Switzerland Industrial

Switzerland's industrial production jumped 7.3% year-over-year in Q2 2024, reversing a 2.0% decline in Q1. Manufacturing rose 6.8%, mining increased 1.2%, and electricity supply grew 12.5%. The secondary sector expanded 6.4%, and construction output rose 0.8%. In June, industrial production grew 5.6%, slower than May’s 8.6% increase.

16 August | Eurozone Trade

In June 2024, the euro area’s trade surplus rose to €22.3 billion, up from €18.0 billion a year earlier, driven by higher exports of machinery and chemicals. Exports fell 6.3% to €236.7 billion, and imports dropped 8.6% to €214.3 billion. From January to June 2024, the euro area posted a €107.5 billion surplus, a turnaround from a €3.0 billion deficit last year. The EU’s surplus also increased to €20.9 billion in June, with exports down 6.1% and imports down 7.7%. Intra-EU trade fell 4.9%, while both the euro area and EU saw slight increases in surpluses from May to June 2024.

 *IEA Oil Report Wednesday*

Week Ahead 

20 August | Switzerland Trade

20 August | Japan Trade

20 August | Eurozone Inflation

20 August | Canade Inflation

21 August | Indonesia Interet Rate

22 August | Mexico GDP

22 August | Japan Inflation 

22 August | Indonesia M2

23 August | Singapore Inflation

*U.S. Fed Jerome Powell Speech*

Capital Market(s)

The rapid expansion of generative artificial intelligence is driving significant infrastructure spending particularly in europe where digital enablers crucial to AI development such as semiconductor equipment makers in the Netherlands & power regulation technology firms in Germany are set to benefit. Wallstreet firms have  highlighted the potential for a trillion-dollar investment in AI-related capital expenditures over the coming years with a notable increase in spending already observed this year. European companies particularly those producing advanced semiconductor equipment like ASML are expected to see a substantial boost in long-term earnings reflecting the critical role they play in the global AI hardware ecosystem. However, the ultimate return on investment remains uncertain hinged on the successful application & scalability of AI technologies.

Conclusion

In conclusion, the rapid growth of generative artificial intelligence is driving significant infrastructure investments globally, particularly in Europe, the U.S., and Japan. Key sectors, such as semiconductor manufacturing in the Netherlands and power regulation technology in Germany, stand to benefit, with companies like ASML and major U.S. and Japanese firms expected to see substantial long-term growth. Goldman Sachs forecasts a trillion-dollar investment in AI-related capital expenditures in the coming years, with increased spending already observed. However, the ultimate return on investment depends on the successful application and scalability of AI technologies, making the potential rewards substantial but uncertain. Companies and investors who can navigate these challenges will be well-positioned for the future.