Chips with everything
Back after the Bank holiday, not much has changed. US stocks continue to creep higher, led by the demand for chip stocks. The possibility that the US war with Iran will find a peaceful settlement is dangled before us, but fails to materialise. US consumer confidence continues to be affected by events in the Middle East and the resulting rise in energy prices. The Nasdaq index I noticed yesterday is up just over 40% in the past 12 months, which is remarkable.
With SpaceX’s IPO imminent, it would appear that anything space-related is also being dragged along with it. According to Bank of America, a basket of US companies that are key players and potential beneficiaries of the space race has climbed 61% this year, amid growing enthusiasm for the burgeoning space economy.
This week, there is not much in the way of UK economic data, as the focus remains on the political uncertainty surrounding Keir Starmer’s position as Prime Minister, with Tony Blair wading in on the debate this morning.
It’s a far busier week in the US, as after the consumer price index showed the annual rate of inflation rising to 3.8% in April, its highest since May 2023, the coming week’s updated core PCE inflation measure – widely touted as the Fed’s preferred gauge – will be keenly awaited. As well as the inflation report, we get US trade data and durable goods orders, plus further survey activity measures from the Chicago, Richmond and Dallas Feds. All will be analysed as indicators of the underlying strength of the US economy. We also get the 2nd estimate during the week of the first quarter GDP.
The recovery in China’s industrial profits has continued in April, with growth accelerating to 18.2% y/y ytd, from 15.5% in the year to March. Which leads me nicely into a book I read over the Bank Holiday weekend, entitled Breakneck, written by Dan Wang. Essentially, the book compares China as an “engineering state”—building vast systems and infrastructure at breakneck speed—while America has become a “lawyerly society” that reflexively blocks progress. It delves into why Shenzhen has become such a hub of innovation, why so much of America’s manufacturing has gone to China, and, in particular, details the iPhone. How the country handled COVID and the flawed thinking behind the 1-child policy. It’s a fascinating insight, and I would recommend it as part of your holiday reading pack for the summer holidays.
