Your bite-sized weekly update (26 June)

What happened in the past week?

All about the Fed

By now, you would probably have come to realise that what really drives the market these days is what the US Federal Reserve (Fed) says and does. 

It was then not a surprise that everyone was focused on what Fed Chairman Jerome Powell had to say in his testimony to the US Congress and Senate this week. 

When he mentioned ‘demand destruction’, it led an initial bounce as investors became more confident of a potential scenario where interest rates may not go up as much by year end. 

These hopes were further boosted when the final reading of the University of Michigan consumer sentiment survey showed a 5-year inflation expectation of 3.1%. This was back to where it was for most of the year and lower than the initial reading of 3.3%. 

Higher inflation expectations were a big reason behind the Fed’s move to a 0.75% rate hike last week. And the revision gave investors more hope that the Fed may not hike rates as much in the coming months. 

With the optimism, US indices closed the week recovering most of the losses from the previous week. 

A little support package for Singaporeans as inflation bites

Inflation was also a hot topic in Singapore, after core inflation hit 3.6% in May, the highest in more than 13 years.

With all the talk about inflation these days, it was not a surprise that the Singapore government announced a support package to help Singaporeans cushion the impact. 

Minister for Finance Lawrence Wong shared that 1.5 million Singaporeans will receive up to S$300 cash in a special GST Voucher (GSTV) payment in August. 

The support package comes as the government expects “price increases to continue in the coming months”.

More regulatory easing in China

More regulatory easing appears to be coming out of China, after the government approved plans for a ‘healthy’ development of the payment and fintech sectors. 

There was also more good news for the electric vehicle sector, after it was announced that the National standing committee will increase support for automobile and related consumption by about 200 billion yuan this year.

In other news….

In the US

🌱 Elon Musk said Tesla's new car factories are 'losing billions of dollars' as they struggle to increase production in Texas and Berlin because of a shortage of batteries and China port issues.

🌱 Elon Musk said Tesla will lay off 3.5% of its workforce, calling the amount “not super material”. He was giving more clarity on planned job cuts at Tesla that were announced earlier this month. 

🌱 Berkshire Hathaway bought an additional 9.6mn shares in Occidental Petroleum, raising its stake to 16.3%

🌱 Zendesk agreed to be acquired by a group of buyout firms that will value the company at US$10.2 billion, a few months after it turned down a US$17 billion acquisition believing it was worth more. 

🌱 JetBlue increased its takeover offer for Spirit by $2 to $33.50 per share. Spirit plans to decide by the end of the month whether to stick with its deal to merge with Frontier Group or to accept JetBlue’s bid. 

In China

🌱 Li Auto emerged as one of the first customers of a new long-range battery that Contemporary Amperex Technology Ltd (CATL) unveiled on Thursday and plans to start mass producing in 2023. The “Qilin” battery has a range of more than 1,000 km on one charge. 

🌱JD.com posted its slowest growth ever in ‘618’ shopping event. Total sales rose 10.3% over the 18 days during the first major shopping festival since a recent Covid-19 outbreak, sharply down from the 2021 event’s growth of 27.7%.

In Singapore

🌱 Singapore has awarded 3 more in-principle approvals for its digital payment token (DPT) licence, which allows companies to offer crypto services

🌱 Keppel DC Reit entered into conditional transactions to acquire 2 data centres in Guangdong, China, for a total price of about 1.6 billion yuan (S$338.3 million)

What to look out for in the week ahead

We’ll be entering a new month and the second half of 2022 in the coming week. 

What this also means is that China will be releasing its Purchasing Manager Index (PMI), which will be closely watched as investors look for more signs about the extent of an economic slowdown.

Gentle reminder that subscription for the July issuance of the Singapore Savings Bonds will also be closing on 27^th June. Do check out our writeup if you are still undecided on whether to take it up!