Flying cars and falling chips

Good morning, everyone, and welcome to the Moving Markers podcast on Monday, the 19th of October, with me, Bernadette, and Echo. Joining me on today's podcast are my colleague Jan Bopp and our Head of Technical Analysis, Mental Puccinsie. Before we get into today's podcast, I'd just like to let you know that our latest view beyond podcast went live this weekend. China's Golden Week is often viewed as a pulse check on the health of the world's second-largest economy. And this year, the results have reignited debate over consumer confidence, policy stimulus, and the outlook for growth. So in this episode, we examine what the latest Golden Week trends reveal while exploring the bigger investment questions around China's property market, technological ambitions, export outlook, and the impact of escalating trade tensions. So look out for the podcast. It's called China's post-Golden Week reality check. And as usual, you'll find it on the Moving Markets channel. But now, back to the latest financial markets news. Let's get started. Good morning, Jan. Thanks for joining me here today. Good morning, Bernadette. It was another dramatic week for markets, wasn't it? So why don't we start with Tesla, the company unveiled its next-generation roadster, and the presentation look more like science fiction than a car launch? Yeah, it's certainly turned. That's Bernadette. Tesla showcased a roadster prototype developed with SpaceX technology, including air thrusters. Yes, you hear me right. During the demonstration, the car raised up a curved ramp, clung to it upside down, launched off, flipped in mid-air, and hovered before landing. Yes, we're talking about a car. And yes, it was impressive. Tesla claims the two-seater can accelerate from zero to 60 miles per hour, and just under a second. Yeah, and I catching spectacle certainly, but investors seemed less impressed, didn't they? Yes, and look to be frank, my younger me was expecting flyer cars already 26 years ago. Now, the launch sparked excitement, also because of renewed speculation about the merger between Tesla and SpaceX. But the roadster is expected to be a niche low volume model financially. It won't really move the needle. Also, I'm not sure if it's allowed to fly over traffic jams in every jurisdiction. Texas may be. So Tesla shares finished roughly 2% lower. Yeah, and that weakness fitted into a much larger story, didn't it? The technology sector had a difficult week overall with investors increasingly questioning whether the AI trade can continue delivering the same momentum that we've seen over the past year. Yeah, and look, it's really not the first time investors are getting concerned. But the magnificent seven they fell around the 2% on the day with made it down nearly 4%. And really are losing about one and a half percent Apple was the loan exception ending modestly higher. It looks like the $2,000 foldable iPhone is going well. However, at the end of the day, the NASA posted its worst week since the tariff driven market turbulence of April last year falling 4.5% over the week and is now nearly 7% below the record high reach earlier this month. AI linked stocks and in particular chip makers, they were down 11% last week for the brand of the selling. And while equities were under pressure, bonds became fashionable again, after months of rising yields and concerns about persistent inflation, investors seemed eager to return to government debt. Yeah, that's one of the week's most important stories, I think. The equities investors reduced risk and that money went into treasuries that US 10 year treasury yield is only trading slightly above the 5% mark, recording its biggest weekly decline since August last year. And what's particularly interesting is that this happened despite inflation data giving policy makers little reason to relax US consumer and producer prices both came in on the firm side last week. Yeah, exactly. I mean, we've talked about this on this very podcast last week under normal circumstances that could have pushed yields higher. Well, it did so right after the data release, but it didn't take long to change course for investors to refocus on slowing AI momentum and attractive bond valuations after yields have recently climbed above 5.3%. The highest level in more than two decades and we're seeing something similar in the UK income seeking investors can currently and significantly more from government bonds and from the stock market, which is quite a contrast to what many were used to for years. Yes, UK equities currently over a dividend yield of about 3.1%, compared with roughly 5.4% on 10 year gills. And that's the wider scale since 2007, even though UK companies mostly mining and banking stocks paid almost 30 billion pounds in dividends during the third quarter, up more than 14% from a year ago. Okay, looking forward, the moods improved somewhat this morning futures pointing higher and investors appear willing to test the waters again after last week sell off. Yes, they do US index futures are rebounding this morning with as some P500 futures up about 0.8% nest stack futures, up roughly 1.3%. Some investors appear willing to buy into last week's weakness after the shop pullback in semiconductor shares. Also, historically in this weakness ahead of US midterm elections, which will take place in two weeks was usually good time to buy because markets tend to perform well after the world. That's historically coming back to today Asian markets are also mostly higher this morning, helped by encouraging economic data from China. That's right that China kicked off the macro calendar was stronger than expected third quarter growth data and an increasing confidence that Beijing can actually achieve its annual target. And we've obviously had lower oil prices after US President Donald Trump waived sanctions and tariffs on Russia that may lead to more Russian fuel exports. That's also helping. Looking ahead to this week, it seems to be dominated by company results and the earnings calendar is very crowded. Absolutely, yes, we have 76 S&P 500 and 69 stock 600 companies reporting technology names, including Netflix meter Tesla and SpaceX are reporting investors will also hear from industrial and defense companies such as GE and Honeywell alongside consumer focused businesses, including proctor and gamble American express and United Airlines. And many, many more alongside earnings investors will be watching UK inflation and labor market data US housing indicators and Fridays global PMI surveys and with that back to you. Thank you very much for bringing us up to speed young looks like we're going to be kept on our toes this week. Absolutely and thanks for having me on the show today Bernadette. So why don't we focus on US equities while the S&P 500 decline less than 2% last week. It was the information technology sector with a 6% decline that dragged the market lower. What's your view on the tech sector? Yes, so we have already been highlighting this for a long time so the US equity market is basically splitting to camp so either technology outperforms or the rest of the market. And last week we saw the opposite of technology on the performance and the rest of the market performed quite well. Nevertheless, when we look at the nominal and the relative performance of information technology, we still see that it's in a solid medium to long term uptrend and we view last week's correction rather a short term setback and the medium to long term uptrend has not changed for the sector. But what about investor sentiment events are going into this short term setback? Have investors been euphoric? Yes, this is always a very important question how investors are feeling and how they're positioned because as you remember, as you know, there is always a buyer needed to buy equities or someone who is on the sidelines to push price higher. And here basically we see that long term investors buying mutual funds and ETF exchange rate funds, they have been actually been selling for the past few weeks so investors have been quite cautious. So from that point of view, we would rather think that going into this correction, investors have been rather on the cautious side and not too euphoric and on Friday, I think we saw some small signs of panic hatching. So the weeks, the implied volatility rose at one point more than five points for today. Of course, investors wanted to prepare maybe for the weekend and then of course today we have an odd date. So today is the 19th of October and it's the day investors remember because on the 19th of October 1987, it was the black Monday where U.S. equities crashed. So there was some signs of panic catching on Friday and usually this is the sign of these are contrary in sign. So if everyone expects a crash, usually there is no crash. I'm glad to hear that, but what would be needed to make you turn cautious on information technology, then? So yes, we're basically watching still the lows of the summer. So let's say if the same kind of stocks drop below the lows of the summer, then we would have to say yes, maybe this spectacular run is over and they don't only go into a short on foundation, but maybe more time is needed into next year. for the time. I'm being a command investor to stay the course. - Very interesting, thanks, as ever for joining the Monday podcast, Mentor. - I hope you'll be here. Thank you very much. - Well, that brings us to the end of today's show. I hope you enjoyed it. Thank you again to Jan and Mentor. Thank you all for listening. Please come back and join me again tomorrow when I'll be back with more of our experts to keep you in the loop on what's moving markets. Meanwhile, good luck today and in the week ahead and goodbye for now. (upbeat music) The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. 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