Trump plans to scale back some steel, aluminum tariffs- FT
Market Scorecard
Sob! Yesterday, US shares had their biggest one-day drop in more than two years after hotter-than-expected inflation data. Now we are faced with the grim prospect of aggressive rate hikes by the Fed. In one session, we gave back all of the market gains of the last week.
US inflation eased to 8.3% in August, but that was higher than economists anticipated. Core CPI, which excludes energy and food prices, increased 6.3% in August from a year earlier, up from the 5.9% rate in both June and July, mostly thanks to rising housing costs.
In company news, Twitter (NYSE:TWTR) shareholders voted in favour of Elon Musk's buyout offer, but he's still trying hard to back out of the deal. Elsewhere, JP Morgan (NYSE:JPM) warned that investment banking revenues in the third quarter will be down by 50% from last year.
At market close, the JSE All-share lost 2.15%, the S&P 500 crashed by 4.32%, and the Nasdaq was thrashed down 5.16%.
One Thing, From Paul
I admit it, I was wrong about US inflation. I've been on "team transitory" all along, believing that it would fall months ago, after supply-chain problems and the Ukraine situation had been solved.
Yesterday's US CPI report was very disappointing. Despite falling gasoline prices (off 10.6% in August), prices for food and accommodation remained elevated, rising 0.8% and 0.7%, respectively. Core CPI actually rose, where I had really thought it would come down in line with long-term expectations.
Investors who manage much more money than we do, think that the Federal Reserve will have to get even more aggressive with monetary policy. So they are selling stocks, or at least not buying them.
Anyway, we will see what the September CPI report says. It will be issued at this time in October. Inflation will fall eventually, I promise, because it's a measure of year-on-year price changes. Just hold tight.
Byron's Beats
Visual Capitalist make some pretty cool pictures. Yesterday they did a set of images that Vestact clients should find very interesting. How Big Tech Revenue and Profit Breaks Down, by Company.
They cover Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), which are all very important holdings in our portfolios. Below is the one for Microsoft, updated for the June quarter. I always appreciate seeing revenues divided by segment but this takes it to a new level. Go check it out, the others are just as useful.
Michael's Musings
Travelling is a great way to shake things up, get out of your comfort zone, and broaden your general views on life. I've just spent two weeks in Europe, catching the tail end of summer there. I was visiting friends and family.
The trip was a reminder that the grass isn't always greener on the other side. We arrived to a train strike, and were unable to get to our booked accommodation. Walking through parts of Rome, the rubbish and dirt on the street reminded me of Hillbrow. We were also required to wear a face mask on trains! On our departure home, the airport was understaffed, so there were massive queues everywhere. Thankfully our plane was delayed or we would have missed it.
The weather was amazing, but Europeans are very anxious about soaring energy prices as the winter approaches.
South Africa has many problems, but travelling reminded me that we are not so bad off after all.
Bright's Banter
Last week, Ireland's data privacy regulator nailed Meta (NASDAQ:META) with a record fine of EUR 405 million after investigating Instagram's handling of children's data. Meta has already announced that it will appeal the decision. This may look like a lot of money, but it's not as big as some of the others we have seen.
The infographic below shows that in July last year, Amazon had to pay $740 million to Luxembourg's data watchdog for "non-compliance with general data processing principles," whatever that means. My understanding of their privacy laws is that they aim to give users more control over their data and fines companies that don't make this possible.
What I am more interested in knowing is what goes into setting these fines. The GDPR framework was instated in May 2018 and has already resulted in fines issued of over $2 billion. To me this looks like a targeted effort to victimise big US technology companies.
Infographic courtesy of: Statista
Signing Off
Asian markets have tumbled in the wake of the broad sell-off on Wall Street yesterday. Equity indices in Japan, Hong Kong, mainland China, and South Korea all slumped. Shanghai is the best of the lot, only down 0.8%.
Bitcoin was clobbered by more than 10% overnight. The US Dollar picked up on the prospect of further interest rates increases. It will take R17.41 to buy just one buck this morning.
US equity futures are slightly in the green. It's early days, but perhaps we can hope for a bit of a bounce in the trading day ahead. As 18th-century English poet Alexander Pope wrote, "hope springs eternal".