Weekly Insights: ECB Cuts Interest Rates to 3.5%

Welcome to the Weekly Insights, which provides you with the most valuable information of this week.

Part1

Europe

Macroeconomic

ECB cuts interest rates to 3.5%

On Thursday, the ECB cut the deposit rate from 3.75% to 3.50%, the lowest since June 2023. This aligns with market forecasts. The ECB stated that recent inflation data meets expectations and reaffirmed its commitment to returning inflation to 2%. It has not committed to a specific interest rate path and will continue to use a data-driven approach to maintain restrictive rates.

Lindsay James at Quilter Investors remarked that the rate cut provides relief for consumers and businesses, potentially aiding Europe’s recovery, but future cuts remain uncertain. The ECB has less room to maneuver compared to other central banks, although another cut in October is possible.

Source: Investing.com, ECB Rate Decision

Sector

IEEFA: Europe's Peak LNG Investment Raises Stranded Asset Risk

The Institute for Energy Economics and Financial Analysis (IEEFA) projects that Europe's natural gas imports will decline by 11% this year and accelerate to a 37% drop by the end of 2030. The institute warns that with some countries planning new terminals, about three-quarters of Europe’s import capacity could face underutilization risks by 2030.

In response to concerns over energy supply disruptions following the Russia-Ukraine conflict, Europe invested billions in liquefied natural gas (LNG) over the past two years to replace the dominant Russian pipeline gas. However, approximately half of Europe’s LNG import terminals are expected to operate at less than 50% capacity in the first half of 2024.

Source：IEEFA

Stocks

BMW Reduces 2024  Earnings Guidance, Leading to Stock Drop

On Tuesday, BMW cut its earnings guidance for 2024, leading to a stock price drop of over 11% to around €69, the largest single-day decline since March 2022, which also affected major European indices.

The company revised its annual operating profit margin from 8%–10% to 6%–7%, partly due to a recall of its braking systems. BMW reported that failures in integrated braking systems provided by Continental AG prompted the recall of 1.5 million vehicles, increasing costs.

Jefferies Downgrades Danone Amid Key Segment Slowdown Concerns

On Friday, Jefferies revised its recommendation for Danone from "Buy" to "Hold," citing a slowdown in the company's main growth areas. The report indicates that organic growth expectations for 2025 are now more moderate, with margins expected to remain stable.

Analysts highlighted that three key segments—coffee creamers in the U.S., the Mizone brand in China, and specialized infant nutrition in China—were significant contributors to Danone's growth in 2023. However, Jefferies now anticipates a slowdown in these segments in 2025, pointing to risks related to demand and increased competition.

Part2

Global und US

Macroeconomic

Key Takeaways from the Trump-Harris Presidential Debate

Tariffs and Immigration: Harris criticized Trump’s plan to impose high tariffs on foreign goods, likening it to a sales tax on the middle class, while Trump pointed to inflation issues during the Biden administration.

Abortion Rights: Harris supports abortion rights and criticizes Trump’s policies for restricting women's choices; Trump argues that the Democrats are too radical on this issue and believes it should be decided at the state level.

Gaza Conflict: Harris called for a ceasefire in Gaza, emphasizing sympathy for both Israelis and Palestinians; Trump claimed that if Harris were elected, she would no longer support Israel.

Housing: Harris pledged to provide financial support for first-time homebuyers and plans to increase housing construction; Trump focuses on economic issues, arguing that belittling and insulting do not solve the problem.

U.S. August CPI Falls to 2.5%; Market Eyes 25bps or 50bps Rate Cut

On Wednesday, September 11, the U.S. Bureau of Labor Statistics reported that the CPI for August rose at an annual rate of 2.5%, the lowest since February 2021. However, the month-over-month core CPI increased slightly from 0.2% to 0.3%, above the forecast of 0.2%.

As the Fed's September meeting approaches, there is ongoing debate about whether to cut rates by 25 or 50 basis points, with speculation surrounding a larger cut reflecting recession concerns. JPMorgan CEO Jamie Dimon expressed increased confidence in declining inflation but warned of stagflation risks, estimating a 35% to 40% chance of a "soft landing."

However, Following the data release, analysts noted that FOMC members wary of aggressive monetary policy are likely to oppose a 50 basis point cut at next week's meeting.

Source: TradingEconomics

Sector

Gold Hits New Highs: Is $3,000 Within Reach?

Recently, spot gold prices have risen significantly, breaking through $2,580 per ounce on Friday and peaking at $2,585. Market sentiment remains bullish, with expectations for a 16% increase to reach $3,000 in the coming year.

The rise in gold prices is driven by three main factors: geopolitical conflicts, monetary easing policies, and the upcoming U.S. elections. These influences persist, prompting analysts to maintain a positive outlook for gold.

Source: TradingView

Two-Day Surge in Oil Prices: Will the Uptrend Persist?

Oil prices have rebounded for two days due to the ongoing effects of Hurricane "Francis," which has shut down nearly 42% of oil production in the U.S. Gulf of Mexico.

However, concerns about crude oil demand remain. The International Energy Agency (IEA) reported that global demand growth has fallen to its lowest level since before the pandemic. Additionally, reduced demand from China, the largest crude oil importer, due to economic slowdown, complicates the outlook. This indicates that OPEC+'s production cut plans may struggle to mitigate the oversupply issues in the oil market.

Source：Investing.com

stocks

TSMC Reports 33% Revenue Growth in August Fueled by AI Chip Demand

On September 10, TSMC announced August revenue of NT$250.8 billion, a 33% year-on-year increase. For the first eight months of the year, revenue totaled NT$1.7739 trillion, up 30.8% year-on-year.

While this is just a monthly snapshot, the results may ease concerns about the sustainability of AI infrastructure spending. Bernstein analyst Mark Li remarked that the strong August performance could lead TSMC's Q3 revenue to slightly exceed expectations.