16 September 2024 | Weekly Snapshot

Did you know?

When it comes to cloud infrastructure, Amazon’s ‘AWS’, Microsoft’s ‘Azure’ and Google’s ‘Cloud’ continue to take market share from the ‘other’ group. This is an example where national champions progressively operate within a ‘winner takes most’ industry.

Market Movements

The ASX rose 1.08% this week, after falling -0.95% the week before. Mineral Resources rebounded +25.06% over the week, after falling -23.66% the previous week. Mineral Resources received Foreign Investment Review Board (FORB) approval for the sale of its 49% stake in the Onslow Iron haul road. Steadfast Group fell 10.7% following a report on the ABC’s Four Corners program.

Over the week, materials outperformed rising 4.17%, and closely followed by Real Estate up 4.04%. The materials sector’s gains were supported by strong performances from major players such as Rio Tinto and BHP, reflecting the resilience of the metals and mining sectors amid fluctuating global commodity prices, also contributing were the gains seen in mining and resource companies involved in lithium and other critical minerals, such as Mineral Resources, which posted strong gains bolstered by improved outlooks in commodity prices.

The S&P500 rose 4.02% over the week, following a fall of -4.25% the previous week. Warner Brothers Discovery Inc, the media and entertainment company, rallied 17.59% over the week after announcing a multi-year partnership with Charter Communications Inc. Moderna Inc was one of the worst performers down around 6.9% after the Company cut its R&D expense by US$1.1 billion by 2027 and projected 2025 sales below expectations.

With the S&P up 4.02%, and Nasdaq up 5.95% it was the best week of 2024. Following the previous week which was the worst since early 2023 with recent swings in equity markets noticeably larger the past 6 weeks or so. Our ASX 200 was up 1.08% last week, testing all-time highs.

Portfolio Movements

Apple announces new “best ever” iPhone 16, iPhone 16 Pro, Apple Watch Series 10, and AirPods 4

• Apple unveiled new versions of the iPhone, AirPods and Apple Watch at their new product lunch. The new iPhone 16 Pro has a 6.3-inch display, and the Apple 16 Pro Max has a 6.9-inch display, larger than those of previous models. The new models also have the “thinnest borders on any Apple product,” Apple said, calling them “by far our best iPhone displays ever.” And has “the best iPhone battery life ever”.
• The new Apple Watch Series 10 was launched with the thinnest design ever and the biggest display yet. “Today we’re building on the advanced technologies pioneered with Apple Watch to make it even more useful, essential and intelligent,” said CEO Tim Cook.
• The new Airpods 4 were also launched with Apple saying it used 3D modelling and laser topography to develop the shape of its “most comfortable AirPods ever.” The new headphones are a massive improvement in audio quality, and the “best sounding AirPods ever.” according to the company.

ASML presents at Goldman Sachs tech conference

• ASML presented at the Goldman Sachs tech conference reiterating that it continues to see 2025 as a strong year, saying it was unlikely to only reach the lower end of its 2025 guidance range.
• They suggested their long-term story of structural technological domination in the semiconductor industry remains fully intact and believes that EUV shipments may not see a large impact from recently announced Intel capex cuts and see limited further downside risk on China services restrictions, with long-term trends driven by global end-demand for chips.
• ASML expects lithography intensity to increase once again after the Gate-All-Around transition, expressed confidence that latest technology, High NA (Numerical Aperture), will present a compelling value proposition for customers.

APRA looking to phase out AT1 Hybrid securities

• The prudential regulator announced its highly anticipated report into the future of AT1 hybrid securities yesterday, saying its intention is for banks to phase out their use of hybrid capital, concluding the high ownership of hybrids among retail investors is a risk to financial stability, and that retail investors don’t property understand or appreciate the risks of holding loss absorption capital. The review was conducted following the AT1 debacle in Europe 2 years ago when Credit Suisse went under.
• Aussie banks and ASX investors have been using hybrid capital since the early 1990s without any issues. Australian banks currently rely on $43 billion of ASX-listed hybrids to provide a capital buffer required by regulators to protect depositors and bondholders from losses.
• APRA said large banks should replace this with a combination of common equity and tier-two bonds, which rank above hybrids but below senior bonds in the capital structure.
• The transition period will begin on January 1, 2027, and all hybrids will be phased out by 2032 although Insurers can continue to issue hybrids. It’s fair to say investors were not expecting this as part of the review.

The Week Ahead

• Tuesday: US Retail Sales will be released, consensus is expecting -0.2% Month on Month (MoM) compared to the prior 1.0%, and Industrial Production of 0.2% MoM compared to the prior reading of -0.6%
• Wednesday: US Housing Starts are expected to show 1,320K, compared with the prior reading of 1,238k, while MBA Mortgage Applications are expected to show growth of 1.4%
• Thursday: The US Federal Reserve meet for its September FOMC meeting. Slightly hotter inflation and still low initial claims data last week seemed to underpin the case for a 25-basis point cut, although a couple of reports in the financial press on Friday have suggested the door for a larger 50 basis point move is still open. Initial Jobless Claims are expected to show 230K people applied for unemployment benefits for the first time, compared to the prior reading of 230K.
• Friday: The Bank of Japan meet to set its Target Rate that currently sits at 25bps, with former policymakers signalling that the central bank may hike rates further or faster than many expect