The US employment data fell short of expectations, and the expectation of interest rate cuts has once again heated up; Apple’s performance in the previous quarter exceeded market expectations; Has the rapid rise of the Japanese yen exchange rate seen results in a counterattack?
① US employment data falls short of expectations and interest rate cuts are expected to rise again
The report released by the US Bureau of Labor Statistics on Friday showed that non-farm employment increased by 175000 people last month, the smallest increase in six months and lower than market expectations of 240000 people. The unemployment rate has risen to 3.9%, higher than the expected 3.8%. After the report was released, US treasury bond bond yields and the US dollar fell, while stock index futures rose. Swap contracts have restored expectations for the Federal Reserve to cut interest rates twice by 25 basis points in 2024. Traders have advanced the expected first rate cut by the Federal Reserve from November to September and raised the likelihood of a rate cut in September to over 50%.
-Commentator Xu Ge: Non farm employment in the United States increased by 175000 people in April, lower than the expected 240000 people. At the same time, the unemployment rate has risen to 3.9%, and salary growth has declined to 3.9%, the lowest growth rate in three years. The data has increased market expectations for the Federal Reserve’s interest rate cut, and the first rate cut was moved forward from November to September. After the FOMC interest rate meeting, Powell also stated that future rate cuts would be based on data, and Friday’s ISM service industry index also fell below 50, which also confirms the cooling of the US economy. But this year is an election year, and the Federal Reserve may be more cautious. A single data may not necessarily change the Fed’s determination to cut interest rates, so future inflation data may be more important.
-Huang Cendong, Strategy Analyst at Guojin Securities Wealth Center: The non farm employment data is lower than expected, and the probability of a rate cut in September has now risen to 100%. US bond yields are down, and the US dollar index is down. The offshore RMB rose sharply against the US dollar. Expectations of ample international liquidity are rising again, with Hong Kong stocks soaring and A-shares expected to benefit.
② Apple’s performance in the previous quarter exceeded market expectations
Apple’s first quarter financial report shows that its smartphone business, which accounts for the highest proportion of revenue, has experienced another decline in revenue, marking the fifth decline in the past six quarters; The sales and revenue of Vision Pro were not disclosed, and Apple CEO Tim Cook only emphasized the high acceptance of this “revolutionary product” among corporate customers. Apple’s future seems to have been betting on AI, and before October last year, Apple had been cautious about AI. However, during this earnings conference call, Cook changed his previous “caution” and loudly declared, “We believe in the transformative power and prospects of artificial intelligence, and we also have advantages that can stand out in this new era, including Apple’s unique seamless integration of hardware, software, and services.”.
-Commentator Xu Ge: Apple’s performance in the previous quarter exceeded market expectations and proposed a massive $110 billion repurchase plan, causing its stock price to soar. But the market is more looking forward to its progress in artificial intelligence. Cook has also mentioned AI multiple times in conference calls, believing that Apple has “advantages” in the field of AI, and that Apple will have “exciting products” at the upcoming hardware launch event. Therefore, investors can pay attention to the Apple industry chain, and if the new Apple AI empowers, it may increase the turnover rate.
-Huang Cendong, Strategy Analyst at Guojin Securities Wealth Center: Although Apple’s revenue and profit growth rate have declined, they are better than Wall Street’s expectations. The future still depends on the decline in Apple’s smartphone sales growth rate and Apple’s innovation capabilities. In the short term, it is still recommended to remain cautious about the Apple industry chain.
③ The Bank of Korea suddenly announced its purchase of gold
Since March, gold has been soaring all the way, repeatedly reaching new historical highs. Since the spot gold price in London rose to a historic high of $2431 on April 12th, the price of gold has started to adjust, but the magnitude is not significant. The Bank of Korea stated last week that it is considering purchasing more gold in the medium to long term. The Bank of Korea stated that it will monitor the domestic foreign exchange market trends and the global gold market trends to determine the timing and scale of gold investment. As of the end of March, the Bank of Korea held 104.4 tons of gold in its foreign exchange reserves. Since 2013, the Bank of Korea has not purchased any gold.
-Commentator Xu Ge: The 550 gold price fell during the holiday, with a 1.58% drop last week. On the positive side, the expectation of a US dollar interest rate cut is heating up, and the central bank’s enthusiasm for purchasing gold remains undiminished; On the bearish side, the easing of the marginal situation and the excessive rise in gold prices this year have led to excessively high gold prices suppressing some private demand. But overall, the factors behind the bullish gold market have not changed and still belong to a benign adjustment.
-Huang Cendong, Strategy Analyst at Guojin Securities Wealth Center: The medium-term bullish logic of gold prices remains unchanged. Under the expectation of interest rate cuts by the Federal Reserve, the downward trend in US bond yields has boosted gold prices. Meanwhile, the demand for physical gold remains strong. Therefore, one can continue to be bullish on gold.
④ Has the rapid rise of the Japanese yen exchange rate during the Golden Week yielded significant results in the yen’s “counterattack”?
Since the end of April, the trend of the Japanese yen in the foreign exchange market has fluctuated sharply. During the May Day Golden Week, the Japanese yen/US dollar exchange rate briefly fell below the 160 integer mark on the morning of April 29th, experiencing a significant increase of about 2% and briefly regaining the 155 integer mark. After a brief adjustment on April 30th, the Japanese yen rose for three consecutive days from May 1-3. It is worth noting that on May 3rd, it rebounded to 152.75, with a weekly increase of 3.5%, a new high in 17 months. The market speculates that the Bank of Japan may intervene three times to stabilize the Japanese yen exchange rate: the first intervention may occur on April 29th, with a scale of approximately 5.5 trillion yen; The second intervention may occur on May 2nd, with a scale of 3.5 trillion yen; The third intervention is considered to be on May 3rd. As of the time of publication, the Japanese authorities have chosen to remain silent and refuse to comment on this matter.
-Commentator Xu Ge: The Japanese yen exchange rate surged by 3.39% last week, and the exchange rate against the US dollar dropped from a maximum of 160 to 152. The intervention of the Bank of Japan is indispensable, but it is difficult to reverse the decline of the yen, which may fluctuate between 150 and 160 in the future. The spread between the US dollar and the yen is the driving force for short selling the yen. From this intervention, it appears that the Japanese authorities may set 160 as the intervention line for the Japanese yen exchange rate.
-Huang Cendong, Strategy Analyst at Guojin Securities Wealth Center: The Japanese yen is an important component of the US dollar index. The intervention of the Bank of Japan is conducive to the weakening of the US dollar index, thereby reducing the external environment of RMB depreciation. From a medium-term perspective, the domestic economy is stabilizing and improving, while the pressure on the US economy may gradually increase, and the RMB exchange rate is expected to stabilize and rise. The recent influx of international funds into the Hong Kong stock market may also prove this. This is beneficial for the performance of A-shares.
⑤ Q1 financial report highlights of weight loss drug giant Novo Nordisk: revenue from the slimming version of Smegglutide doubles
Last week, Novo Nordisk released its first quarter financial report for 2024, with a revenue of 65.349 billion Danish kroner during the reporting period, a year-on-year increase of 22%; Net profit of DKK 25.407 billion, a year-on-year increase of 28%; Operating profit was 31.846 billion Danish kroner, a year-on-year increase of 27%. If calculated at a fixed exchange rate (CER), revenue and operating profit increased by 24% and 30% respectively. Lars Frurgaard Jrgensen, president and CEO of Novo Nordisk, said that the demand for GLP-1 (glucagon like peptide-1) drugs in the field of diabetes and weight loss treatment was growing, and the company achieved sales growth in the first quarter, which was satisfactory. From the financial report data, it can be seen that Novo Nordisk’s flagship product, GLP-1 drug Smegglutide, is an important reason for its performance growth.
-Commentator Xu Ge: Benefiting from the “weight loss miracle drug” sitagliptin, Novo Nordisk’s sales and profits exceeded market expectations, with sales of obesity care drugs, including sitagliptin, increasing by 41%. Novo Nordisk stated that the shipment volume of glumethide in the United States was four times higher than at the end of last year. But the market is concerned that supply restrictions may hinder the company’s performance in the future, causing a drop of nearly 3% after the financial report. The future market can continue to monitor the price of its weight loss pills in the United States, and Novo Nordisk promises to expand the supply of this medication.
-Guojin Securities: The A-share pharmaceutical sector experienced high growth before and low growth after 2023, and the first quarter of 2024 was a period of low prosperity, low fund allocation, and low market attention for the sector. The impact of related adverse factors will soon be eliminated in the second quarter of 2024 and beyond, and the improvement in fundamentals combined with the year-on-year acceleration brought about by the low base in the second half of 2023 will jointly ignite the investment enthusiasm for adding to the pharmaceutical sector. Related targets: Mindray Medical, Hengrui Pharmaceutical, Tebao Biotechnology, Yifeng Pharmacy, Taiji Group, etc.