📈 5 Things You Need to Know to Start Your Week

30th September, 2024

September 30, 2024

Five Things to Start Your Week

Good Evening Investors,

Our Alpha Portfolio is at +8.59% YTD.

  • Leading: Silver at +29.8%

  • Lagging: Check Point Tech at -0.29%

Market Snapshot

Last week’s global heat map reveals notable divergences across sectors and regions.

Chinese tech stocks are experiencing a strong rally, with Alibaba up 18.44%, JD.com soaring 35.32%, and Pinduoduo surging 32.02%, signalling investor optimism on a potential recovery in Chinese consumer demand and regulatory easing.

In contrast, Taiwan's TSMC dipped slightly by 1.18%, reflecting some consolidation after its recent strength in semiconductors.

Japan's Toyota (TM) fell 3.85%, continuing a weak trend in the automotive sector as concerns over global demand persist.

Meanwhile, energy stocks in Australia are surging, led by BHP (+13.62%) on the back of strong commodity prices, while Vale in Brazil climbed 8.05%.

However, European energy names like TotalEnergies (TTE) dropped 6.45%, showing divergence within the sector likely due to mixed signals on oil prices and energy demand.

The banking sector in India is under pressure, with HDFC Bank and ICICI Bank down 5.12% and 4.66%, respectively, likely driven by concerns over rising interest rates and their impact on loan growth.

Macro Trade Idea:

Long Commodities, Short Indian Financials:

  • Long BHP (+13.62%) and Vale (+8.05%) to capitalise on the strength in commodity prices, driven by continued demand for raw materials and inflationary pressures supporting mining profits.

  • Short Indian Financials (HDFC Bank -5.12%, ICICI Bank -4.66%), as rising interest rates and economic uncertainty could weigh on banking profitability and loan growth in the near term.

Stocks Slide

Most global stock markets started the week on a downbeat note, with US futures pointing to losses and European indexes falling. The moves come before a crucial week for the US, seeing Federal Reserve Chair Jerome Powell discussing the economic outlook as well as the latest patch of payrolls data.

Both could be key for the prospects of another large interest-rate cut in November. A solid US jobs report could spur a rotation from the market’s most profitable names into stocks with weaker earnings, according to Goldman Sachs.

This Week’s Alpha Picks

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China Surge

The drop comes despite Chinese stocks extending one of their most remarkable turnarounds in history on Monday, soaring for a ninth straight day as government stimulus entices investors back to one of the most beaten-down markets worldwide. The CSI 300 Index jumped 8.5% Monday, the most since 2008, as traders rushed to buy shares in the last session before a week-long holiday. Iron ore, meanwhile, is reaping the rewards of China’s actions, spiking more than 11%.

Newsworthy

This is what’s caught our eye over the weekend.

And finally, here's what Ali’s interested in this week

On September 20th, Microsoft made headlines by striking a deal with Constellation Energy to restart a long-dormant nuclear reactor at Three Mile Island, shut down since 2019. Microsoft, in need of reliable, clean energy for its expanding data centre footprint, gets a steady stream of nuclear power. On the other hand, Constellation secures a guaranteed customer in Microsoft, bolstered by incentives like tax credits from the Inflation Reduction Act, which sweetens the economics of the deal.

Now, the market’s reaction is telling. Shares of Constellation have soared over 20% since the announcement, a clear signal from investors. But let's not overlook the inherent risk here. Constellation isn’t in the business of building new nuclear reactors—it’s in the business of operating existing ones. Restarting a nuclear plant after several years offline presents both financial and operational risks. It could cost more than anticipated if the engineering or operations go awry. Yet, despite this uncertainty, the stock market has effectively endorsed the move.

And this points to something bigger. The Three Mile Island reactor isn’t an isolated case. Across the US, there are nuclear sites with the potential for expansion—if demand and economics line up. What this market reaction seems to be signalling is a broader interest in seeing Constellation, and perhaps others, pursue more of these deals.

That’s critical because nuclear power, despite its promise of clean energy, comes with steep costs. We haven’t built much nuclear in the US in decades, and the expertise, workforce, and supply chain needed for large-scale nuclear projects are thin on the ground. If nuclear power is going to have a real renaissance, we need to bring the cost down, and the only way to do that is through repetition—building more and more reactors to refine the process, reduce costs, and regain that lost expertise.

In essence, the market seems to be saying, “Keep going.”

Ali is the Editor of The Insider Memo, Follow him on X @ASAInsights

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