Author — Martin Young, CEO of Farringdon Asset Management

Global Macro Review

• General Market experienced heightened volatility with retracement seen across all asset classes.

• Oil dropped substantially with a sell off nearly 5% on Tuesday alone due to weak Chinese demand and a supply glut.

US Markets

• US Equities experienced large sell offs on Friday with the Nasdaq declining 5.89% for the week and S&P500 down 4.25%.
• AI related stocks lost heavily while bonds were up sharply.
• Non-Farm payrolls showed acceleration in job market with 142,000 jobs created and unemployment level fell from 4.3% to 4.2%.
• However, job creation is still substantially down leading from concerns that the Fed has not cut rates fast enough.
• Compared to historical job creation level of about 200k, current job creation data shows slowing down.
• Weak US non-farm payrolls data on Friday stirred worry that the Federal Reserve is moving too slowly to support the world’s largest economy.
• US manufacturing data continues to remain sluggish.
• Japan has imposed restriction on Chinese chipmakers leading to NVIDIA experiencing a 10% decline.
• NVIDIA has now experienced the largest decline in market cap of any stock in history.
• The magnificent 7 stocks are now investing more capital than the entire energy sector leading to more scrutiny.
• Farringdon View is that AI companies may not have the capability to generate more profits from adopting AI.
• Market may be set for big drops in the upcoming few years.

Asian Markets

• Asian equities slumped at the start of the new week, weighed down by losses in technology stocks on concerns over US economic growth.
• The MSCI Asia Pacific Index fell as much as 1.8%, to the lowest level in three weeks, with chipmakers Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. among the biggest drags.
• Japan’s Nikkei 225 Stock Average slid more than 3% before trimming its loss as the yen pared last week’s sharp gain.
• While investors try to gauge the size of the Fed’s rate cut next week, the Bank of Japan’s recent move to tighten policy has put upward pressure on the nation’s currency, fanning concerns over carry trades.
• Taiwan’s key stock gauge fell 2%, while Hong Kong benchmarks were poised for a fifth-straight day of losses.
• Chinese stocks are on the brink of falling to a five-year low seen in February as bearish sentiment grips the market amid a lack of earnings and economic recovery.
• The CSI 300 Index closed 1.2% lower on Monday, taking its slide from this year’s high in May to more than 13%.
• A further decline would take the benchmark to levels unseen since early 2019, suggesting years of policy efforts to revive the economy and prop up share prices have proved futile.
• The yuan has also weakened.
• The Chinese market has been stuck in a cycle where stocks would plumb new lows after a brief rebound triggered by short-lived optimism.
• The government’s piecemeal approach to stimulus has failed to fix a crisis of confidence, with deflationary pressure, anaemic consumption and an extended property slump combining to erode hopes of a near-term economic recovery.

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The information contained in this document is for information only and should not be taken as a recommendation to buy or sell. Investors are reminded that past performance is no indication of future performance.