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M&A speculations and China's central bank in focus

After the recent highs, stock markets in New York had a cautious start to the new week. The focus was mainly on company news, for example, the possible takeover of Intel by Qualcomm. In Asia, China's central bank attracted attention with several economic stimulus measures, while Australia's central bank left the key interest rate unchanged, as expected.

Date: 24 September 2024
Author: Alessandro Fezzi, LGT Research Content & Publications
Reading time: 5 minutes

Stock markets in the Asia-Pacific region mostly rose on Tuesday, led by Chinese stocks, after China's central bank governor Pan Gongsheng announced a series of measures to ease monetary policy. The central bank will cut the reserve requirement ratio for banks by 50 basis points, but did not provice a specific timetable. It also announced that it would cut the interest rate on seven-day reverse repos from 1.7% to 1.5%. Other measures include a reduction in down payments for second homes and long-term funding of the equivalent of USD 142 billion. Hong Kong's Hang Seng Index rose 2.3% at opening, while the CSI 300 in mainland China was up 1%. Property stocks led the gains in the CSI 300, while materials stocks were the biggest gainers in Hong Kong.

The Australian central bank kept its benchmark interest rate unchanged at 4.35%, in line with expectations. The Australian S&P/ASX 200 stock market index then fell by 0.3%. In Tokyo, the Nikkei 225 was up 1.4% after a public holiday, while the Topix rose by 1%. This is the first time since 3 September that the Nikkei has crossed 38,000. In Seoul, the Kospi remained unchanged, while the small-cap index Kosdaq gained 0.8.

M&A speculation keeps Wall Street at record levels

On US stock markets, the Dow Jones Industrial set a new record high at the start of the week. At the close, the Dow was up just under 0.2% on the previous day at 42,124.65 points. The market-wide S&P 500 gained 0.3% to end the day at 5718.57 points. On the Nasdaq, the indices also rose by around 0.3% on Monday. In addition to the prospect of further interest rate easing by the Fed, corporate news was also the focus of attention at the beginning of the week. A multi-billion takeover could be on the cards in the chip sector. According to a report in the Wall Street Journal, chipmaker Qualcomm is said to be bidding as much as USD 90 billion for Intel. This acquisition would make Qualcomm the leading supplier of PC and server processors, forming a new alliance in the battle against Nvidia. According to media reports, asset manager Apollo is also said to be offering Intel a multi-billion-dollar investment at the same time.

Fed members expect different pace of interest rate cuts

Raphael Bostic, president of the Atlanta Fed, said in an interview that the Fed will move aggressively to return to a neutral interest rate. He said inflation is falling and the labour market is cooling - much faster than he could have imagined at the beginning of the summer. Bostic also noted that the Fed is now in a better position following last week's rate cut because it can slow the pace of easing if inflation rises again or accelerate it if the labour market slows further. His colleague Neel Kashkari, President of the Federal Reserve of Minneapolis, said in a TV interview that the Fed would probably take smaller steps after the interest rate turnaround and the easing by 50 basis points, unless the economic data situation changes significantly. The first strong step was necessary to adjust interest rates to a recalibration of Fed policy, in which the focus is no longer on overheated inflation but on a weakening labour market. While Bostic currently has one vote on the FOMC (Federal Open Market Committee) monetary policy committee, Kasharki will not be among the voting members again until 2026. The yield on ten-year US government bonds is currently slightly higher at 3.75%.

European companies are more pessimistic

According to the latest survey results from S&P Global, sentiment among companies in the eurozone deteriorated more sharply than feared in September. The resulting Purchasing Managers' Index fell from 51.0 to 48.9 points, while economists had assumed a moderate decline to 50.5. For the first time since February of this year, the PMI is now below the 50-growth threshold again. The sharp decline in incoming orders since the beginning of the year has been particularly noticeable.

British companies also gave more negative assessments in the series of surveys. The Purchasing Managers' Index fell for the first time since June, dropping more sharply than expected from 53.8 to 52.9 points. Analysts had forecast an average of 53.5 points. S&P Global pointed to weaker consumer confidence and a continued reduction in inventories.

German exports outside the EU under pressure

German companies exported fewer goods to non-EU countries in August. Exports to China even plummeted by more than 15%, and German exporters shipped 3.2% less to the US than in the same month last year. 7.6% fewer German exports went to Switzerland. Overall, exports to non-EU countries fell by 4.8% last month to EUR 55.2 billion.

Corporate and economic calendar

Corporate news in focus: No relevant company results are due today.

Economic data in focus: Ifo Business Climate Index Germany, Consumer Confidence and S&P/Case-Shiller House Price Index USA.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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