Disclaimer: this is intended for educational purposes only and is not investment advice. Please do your own due diligence.

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💸 In Today’s Newsletter

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📰 Market Movers

Stocks:

• Fitch's surprise downgrade of the US credit rating from AAA to AA+ has increased investor wariness, resulting in a drop in stocks across Asia, Europe, and the US.

• This has led to a decline in Wall Street's benchmark S&P 500 and Nadaq 100 futures which are pricing c. 0.75% lower this morning after yesterday’s 0.25% drop. EruoStoxx 50 fell over 1% yesterday and futures suggest a similar drop today. Asian shares are down across the region.

• Weak economic data from the US and China, alongside some disappointing corporate earnings, have also contributed to the retreat in equities.

• In the US, the number of job openings fell to 9.6 million in June, the lowest level since April 2021, and manufacturing activity (as measured by PMI) contracted to 46.4, below expectations and the neutral 50 mark.

• In China, PMI fell to 49.2 in July from 50.5 in June, also below analysts’ forecasts of 50.3, showing a contraction in manufacturing activity. The CSI 300 is down 0.88% today.

Bonds:

• Fitch Ratings has downgraded the US's sovereign credit rating from AAA to AA+ due to increasing fiscal deficits and deteriorating governance, marked by repeated debt limit clashes in recent years. Fitch stated the downgrade reflects expected fiscal degradation over the next three years, an increasing general government debt burden, and a decline in governance compared to 'AAA' rated peers.

• Contrary to expectations, demand for US debt (Treasuries) has increased despite the credit downgrade, as investors seek safety in sovereign debt during the current market turbulence. The yield on a 10yr Treasury has decreased to 4.02%.

• The Bank of Japan's (BoJ) policy adjustment is not a move away from easing, suggesting a continuation of low short-term rates.

• Price inflation in UK shops fell for the first time in 2 years to a 7.6% year-on-year increase versus 8.4% last year. Nationwide UK housing prices have fallen 3.8% year-on-year in July.

FX:

• The US dollar was little changed after the Fitch downgrade.

• The Australian dollar fell 1.7% against the US dollar following the central bank's decision to keep the main interest rate unchanged.

Commodities:

• Safe haven assets like gold are trading slightly higher due to market turbulence.

• Oil prices climbed following a significant drawdown in US stockpiles and a reduction in OPEC's production and the Biden administration has delayed a replenishment of the US's emergency oil reserve due to high market prices, with WTI rallying above $80 per barrel.

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🤿 Deep Dive

Another deep dive from Citrini Research today all about Superconductors. Never heard of a superconductor? Neither had I, until I read this.

If you’re pressed for time, here’s the TL;DR:

• Superconductors are materials that can conduct electricity with zero resistance when cooled below a critical temperature. However, most superconductors have required extremely cold temperatures, making them costly and challenging to implement.

• Recent preprints claim LK-99, a combination of lanarkite and copper phosphide, exhibits superconductivity at ambient pressure up to 250 K, surpassing previous high-temperature superconductors.

• This breakthrough is considered the "holy grail" of condensed matter physics, as room temperature superconductors eliminate the need for expensive cooling systems, opening doors to transformative applications.

• Potential real-world impacts include lossless power transmission, maglev trains, cheaper medical scanners, more efficient electronics, scalable quantum computing, and powerful electric motors.

• While skepticism remains until independently verified, investors in power, electrification, renewables, motors, medical devices, semiconductors, and electronics could benefit if the breakthrough proves valid.

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🧠 Sentiment Analysis

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