Money Masters' Market Pulse: Week 25 Recap

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Dear Money Master,

Another week full of financial news! Some countries are cutting interest rates while others are holding steady, sales in China are weakening, and Nvidia was briefly the largest company by market cap. This and more in today's news

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📰 Your Daily Financial Digest - June 21st, 2024

🌍 Economics & Finance

1. Swiss National Bank Cuts Interest Rate to 1.25% 🇨🇭📉

   The Swiss National Bank reduced its key interest rate by 25 basis points to 1.25%, influenced by lower inflationary pressures and a stronger Swiss Franc. The bank’s forecast suggests no further cuts this year. Read More

2. Bank of England Expected to Hold Rates Despite Inflation Hitting Target 📊🇬🇧

   The U.K. celebrated as headline inflation hit the Bank of England’s 2% target for the first time in nearly three years. However, this milestone has not increased the likelihood of an imminent rate cut, with money market pricing showing just a 5% probability of a rate reduction at the upcoming BOE meeting. Read More

3. China Spent $230 Billion to Build Electric Car Industry 🚗🔋

   China invested $230.8 billion over more than a decade to develop its electric car industry, according to a report by the Center for Strategic and International Studies. This investment represents 18.8% of total electric car sales between 2009 and 2023, with the ratio of spending to EV sales declining from over 40% before 2017 to just above 11% in 2023. Read More

4. Nvidia Briefly Surpasses Microsoft as Largest Company by Market Cap 🏆💼

   On Tuesday, Nvidia briefly surpassed Microsoft to become the world’s most valuable public company with a market cap of $3.34 trillion. This milestone follows a 170% surge in share price this year, driven by the boom in generative AI and Nvidia's 80% market share in data center AI chips. Read More

5. Home Prices Hit Record High in May as Sales Stall 🏠📉
   Sales of previously owned homes remain at a 30-year low, with May sales essentially flat at a seasonally-adjusted annualized rate of 4.11 million units. High mortgage rates and record home prices have stalled the market, with the median home price rising to $419,300, a 5.8% year-over-year increase. Read More

💻 Technology:

1. Apple Faces AI Challenges in China 🇨🇳🤖

   Apple’s big AI push is facing significant challenges in China due to Beijing's strict AI regulations. This comes as Apple’s market share in China is threatened by local competitors like Huawei. Read More

2. Oracle to Invest Over $1 Billion in AI and Cloud Computing in Spain 🇪🇸☁️

   Oracle announced a $1 billion investment over the next 10 years in AI and cloud computing in Spain, establishing a new cloud region to support regulatory compliance and digital transformation. This will be Oracle's third cloud region in Madrid, in partnership with Telefonica España. Read More

3. Coinbase Launches $2 Million Ad Campaign Targeting Latino Voters 📢💰

   Coinbase has launched a $2 million ad campaign aimed at Latino voters, promoting crypto alternatives for remittances. The ads, featuring a young man sending money to his grandmother in Mexico, highlight that sending money with USD Coin on Coinbase Wallet is fee-free, compared to an average fee rate of 6.18%. Read More

💹Earnings:

1. Darden Restaurants Reports Mixed Q4 Results as Olive Garden Sales Decline 🍝📉

   Darden Restaurants reported mixed quarterly results, with Olive Garden’s same-store sales falling for the second consecutive quarter. The company faced a weaker consumer environment and increased discounting from rivals. For fiscal 2025, Darden forecasts same-store sales growth of 1% to 2%. Read More

2. Carlsberg Slides After Britvic Rejects $3.9 Billion Takeover Offer 🍺❌

   Carlsberg shares plunged 8.7% on Friday, marking their largest single-day decline in over four years, after Britvic rejected the Danish brewer’s £3.11 billion ($3.9 billion) takeover proposal. Britvic's shares, however, surged 12.5% following the news. Read More

3. China's 618 E-Commerce Festival Sees Sales Decline for First Time 📉🛒

   China's annual 618 mid-year e-commerce festival experienced its first sales drop in eight years, with gross merchandise value falling 7% to 742.8 billion yuan ($102.3 billion). The decline reflects ongoing consumer confidence issues amid high youth unemployment and a prolonged property crisis. Read More

📚 Deep Dive: Understanding Interest Rates and Their Impact on the Economy 📊🏦

Interest Rates: What Are They?

Interest rates are the cost of borrowing money, set by a central bank. They influence economic activity by making borrowing more or less expensive for consumers and businesses. When central banks lower interest rates, it generally encourages borrowing and spending, which can stimulate economic growth. Conversely, raising rates can help cool down an overheating economy and combat inflation.

The Swiss National Bank's Decision to Lower Rates 🇨🇭

The Swiss National Bank (SNB) recently reduced its key interest rate by 25 basis points to 1.25%. This decision was driven by lower inflationary pressures and a stronger Swiss Franc. The SNB's goal is to support economic activity amid global uncertainty. Lower rates make borrowing cheaper, encouraging spending and investment. This can help counteract economic slowdown and deflationary pressures. Additionally, a lower interest rate can weaken the Swiss Franc, making Swiss exports more competitive internationally.

The Bank of England's Steady Approach 🇬🇧

In contrast, the Bank of England (BoE) decided to maintain its interest rates despite headline inflation hitting the bank’s 2% target for the first time in nearly three years. The BoE is focusing on persistent inflation in services and wages, which remain high. Policymakers are cautious about cutting rates too soon, fearing it could reignite inflation. By keeping rates steady, the BoE aims to balance curbing inflation while supporting economic stability, particularly as the country navigates post-Brexit economic challenges and upcoming general elections.

Impact on Currency 💱

Interest rates also have a significant effect on a country’s currency. Higher interest rates tend to attract foreign investment, increasing demand for the currency and thereby strengthening it. Conversely, lower interest rates can weaken the currency as investors seek higher returns elsewhere.

• Switzerland: The SNB's rate cut is likely to weaken the Swiss Franc. A weaker currency can boost exports by making them cheaper for foreign buyers, which is beneficial for Switzerland's export-driven economy.

• United Kingdom: The BoE’s decision to hold rates steady helps to maintain the strength of the British Pound. This can help keep import costs low and support purchasing power, but it may also pose challenges for exporters facing stronger currency values.

Understanding these dynamics helps investors and consumers anticipate how changes in central bank policies might impact their finances, from loan rates to the prices of goods and services.

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To your financial empowerment, The Money Masters Team

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