【True Zoom Finance】April 12 Noon Briefing: Fed officials turn 'hawkish' again: No rush, rate cuts this year may be reduced or delayed!
"Boston Federal Reserve Bank President Susan Collins issued a warning that the strong U.S. economy and persistently rising inflation data are not conducive to the Fed cutting interest rates in the near term. The bank may need to delay or reduce rate cuts this year.; The M4 chip will focus on AI! Apple is reportedly planning a comprehensive upgrade of its Mac product line; Signs of the AI engine 'stalling'—can NVIDIA hold onto its 'Iron Throne'?;"
Key News
The M4 Chip Will Focus on AI! Apple Reportedly Plans Comprehensive Upgrade of Mac Product Line
l According to media reports citing sources, in order to revive its sluggish computer business, Apple is preparing to completely overhaul its entire Mac product line, with new Macs equipped with M4 chips featuring AI capabilities.
l Boosted by this news, Apple's stock price surged over 4% on Thursday.
l Since Apple launched its first self-developed chip, the M1, in 2020, the company has successively released Macs with M2 and M3 chips in 2022 and 2023.
l Apple's Mac sales peaked in 2022 but declined by 27% in the last fiscal year (ending September last year). Although Apple launched the M3 chip in October last year, these chips did not offer significant performance improvements over the previous-generation M2 chips.
l Insiders revealed that production of Apple's next-generation M4 chip is nearing completion. The new chip will come in at least three versions, and Apple hopes to use it to upgrade all Mac models.
l Apple plans to gradually release M4-equipped Macs starting from the end of this year through early next year. Specifically, the new iMac, low-end 14-inch MacBook Pro, high-end 14-inch and 16-inch MacBook Pro, and Mac mini will all feature the M4 chip, though the company's plans may still change.
l Apple released new versions of the iMac and MacBook Pro in October last year, while the Mac mini was last upgraded in January 2023.
l Apple plans a comprehensive upgrade of its Mac product line in 2025, launching M4-equipped MacBook Air (including 13-inch and 15-inch models) by spring, updating the Mac Studio around mid-year, and refreshing the Mac Pro later in 2025.
l Apple just released the M3-chip version of the MacBook Air last month, while the Mac Studio and Mac Pro were equipped with M2 chips last year. The M4 chip series includes an entry-level version called Donan, a more powerful Brava, and a high-end version codenamed Hidra. The Donan version of the M4 chip will be used in the entry-level MacBook Pro, new MacBook Air, and low-end Mac mini, while Brava will power the high-end MacBook Pro and more expensive Mac mini.
Signs of the AI Engine 'Stalling'—Can NVIDIA Hold Onto Its 'Iron Throne'?
l After a period of "skyrocketing" gains in the U.S., signs of fatigue are emerging in the AI boom and the stock market rally, with the former engine no longer dominating alone.
l Since the AI frenzy peaked in late February, U.S. AI concept stocks have largely stagnated over the past six weeks. Entering April, the Nasdaq has also shown signs of "running out of steam," with an overall decline so far this month.
l As tech stocks gradually return to normal, cyclical stocks are rising on the back of economic data, balancing the U.S. stock market's gains. Zhao Wei, chief economist at Guojin Securities, told the 21st Century Business Herald that after 2021, global manufacturing experienced a two-year downturn. Since the second half of 2023, global manufacturing has bottomed out and rebounded, with the recovery curve becoming clearer. The global manufacturing PMI index rose from 48.6 in July 2023 to 50.6 in March 2024, staying above the expansion-contraction threshold for three consecutive months.
l Various indicators suggest a clear improvement in market breadth. Ryan Detrick, chief market strategist at Carson Group, said the key to a bull market is sector rotation, and we are now seeing some funds rotate from tech stocks to cyclical stocks. Recently, the number of S&P 500 components hitting 52-week highs reached 118, the highest in three years, indicating improved market breadth.
Fed Official 'Turns Hawkish Again': No Rush—Rate Cuts May Need to Be Reduced or Delayed This Year!
l Boston Fed President Susan Collins warned on Thursday that the strong U.S. economy and persistently rising inflation data are not conducive to the Fed cutting interest rates in the near term. The bank may need to delay or reduce rate cuts this year.
l "I do anticipate that it will be appropriate to begin lowering the federal funds rate later this year," Collins said. "However, recent data suggest that gaining greater confidence in the downward trajectory of inflation before easing policy may take longer than I previously thought."
l Just a day before Collins' remarks, data released by the U.S. Labor Department on Wednesday dashed hopes of a mid-year rate cut: The U.S. CPI rose 3.5% year-over-year in March, the highest since September 2023, exceeding market expectations. This also marked the third consecutive month of unexpected acceleration in U.S. CPI.
l Coupled with continued strong job growth, traders and investors have been scaling back expectations for Fed rate cuts and pushing back the start date for easing. Although officials still believe the Fed may lower the current federal funds rate of 5.25% to 5.5% in some form.
Today's Forex and Commodities News
EUR/USD: Euro Maintains Bearish Bias, Faces Resistance at 1.0750, Focus on German Inflation Data
l The U.S. PPI rose 0.2% month-over-month in March, below the expected 0.3%; year-over-year, PPI rose 2.1%, the largest increase since April 2023.
l The ECB left key rates unchanged at 4.0% for the fifth consecutive meeting on Thursday, as widely expected.
l In early Asian trading on Friday, EUR/USD traded around 1.0728, showing a bearish trend. The dollar's slight rebound on growing speculation of a Fed rate cut in September weighed on the pair. On Thursday, the ECB left rates at record highs as expected but left the door open for a June cut. Investors are awaiting German March inflation data and the U.S. Michigan Consumer Sentiment Index due Friday.
l A measure of U.S. wholesale inflation in March came in below expectations, boosting hopes for Fed rate cuts this year. The U.S. PPI rose 0.2% month-over-month in March, below the expected 0.3%. Year-over-year, PPI rose 2.1%, the largest increase since April 2023. Additionally, data from the U.S. Bureau of Labor Statistics on Thursday showed the core PPI, excluding food and energy, rose 2.4% year-over-year, exceeding market expectations.
l The report had little impact on markets. The CME FedWatch Tool shows traders now expect only two rate cuts this year, likely starting in September. The Fed's meeting minutes released Wednesday noted, "Participants observed that their expectations for inflation to remain elevated were uncertain, and recent data had not increased their confidence that inflation would sustainably decline to 2%."
l In the Eurozone, the ECB left key rates unchanged at 4.0% for the fifth consecutive meeting on Thursday. While the Fed's next steps remain uncertain, it has also hinted at impending rate cuts. LSEG data shows markets are pricing in a 25-basis-point ECB rate cut in June. Growing speculation that the ECB will cut rates before the Fed has put some selling pressure on the euro (EUR), a key factor "weighing" on EUR/USD.
Precious Metals: Spot Gold Hits Another Record High
l On April 11, spot gold set a new all-time high of $2,377/oz. International precious metals futures also generally rose that day.
l Nicky Shiels, head of metals strategy at MKS PAMP SA, said: "Overall, the movement in U.S. bonds seems to suggest the Fed is about to hike rates, while gold's movement suggests the Fed is still in rate-cut mode. Any dovish rhetoric in the future will accelerate gold's bull trend."
l That day, international precious metals futures also generally rose. COMEX gold futures rose 1.8% to $2,390.6/oz; COMEX silver futures rose 1.76% to $28.545/oz.
Crude Oil: Sticky Inflation Dents U.S. Rate-Cut Hopes, Oil Prices Dip Slightly; Focus on IEA Report and Geopolitics
l In Asian trading, U.S. crude oil edged slightly lower, currently trading around $85.41/barrel. Oil prices closed slightly lower on Thursday as sticky inflation dampened hopes for near-term U.S. rate cuts, but concerns over potential Iranian attacks on Israeli targets kept prices near six-month highs. OPEC also expects strong summer demand.
l Brent crude futures fell $0.74, or 0.8%, to settle at $89.74/barrel on Thursday; U.S. crude futures fell $1.19, or 1.4%, to settle at $85.02/barrel.
l Vikas Dwivedi, global energy strategist at Macquarie, said: "Without actual supply disruptions tied to geopolitical events, it will be difficult for Brent to stay above $90/barrel in the second half of the year."
l "Given non-OPEC supply growth, the potential return of significant OPEC+ spare capacity to the market, and persistent inflation potentially weakening demand, we expect oil to turn bearish for the rest of the year."
l The Fed's meeting minutes showed officials are concerned that progress on inflation may have stalled, requiring a longer period of tight monetary policy.
l After consumer inflation data came in higher than expected for the third straight time, investors who had expected a June rate cut now see September as more likely.
l The ECB left borrowing costs at record highs on Thursday as expected but hinted at a possible rate cut soon.
l Slower rate cuts could dampen oil demand, but OPEC maintained its forecast for relatively strong global demand growth in 2024.
l OPEC predicted robust summer fuel consumption on Thursday and stuck to its forecast for relatively strong global oil demand growth in 2024, while noting that the world economy could perform better than expected this year.
l In its monthly report, OPEC said global oil demand will increase by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025, unchanged from last month's forecasts.
l Economic growth could provide additional upside for oil prices. This year, prices have risen above $90/barrel due to tightening supply and war in the Middle East. OPEC+ agreed last week to extend output cuts through June.
l OPEC said in the report: "Despite some downside risks, if the growth momentum seen at the start of the year continues, it could provide further upside for global economic growth in 2024."
l OPEC+ will meet in June to decide whether to extend cuts further or return some supply to the market.
l OPEC's report said: "Amid ongoing uncertainties, the outlook for strong summer oil demand warrants careful market monitoring to ensure a healthy and sustainable balance."
l The report also noted that OPEC oil output remained largely stable in March, rising by 3,000 bpd to 26.6 million bpd, despite OPEC+ members implementing new voluntary cuts since January.
Source: Goldhorse Capital Extramile
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