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In today’s edition
- Nvidia’s new high
- Trafigura and easing commodity prices
- Robinhood expands
- Monzo achieves profitability
- Ethereum’s future outlook
Market Snapshot
The S&P 500 index retreated from a record high, closing the week lower after the Labor Department reported stronger-than-expected payroll and wage growth in May. This data dampened hopes for Federal Reserve rate cuts, causing a broad market slide. Despite Friday’s losses, the S&P 500 managed a 1.3% gain for the week, marking its sixth gain in the last seven weeks.
The Labor Department’s figures showed nonfarm payrolls increased by 272,000 in May, significantly surpassing expectations and previous months’ numbers, with a slight rise in the unemployment rate to 4%. Additionally, average hourly earnings rose by 0.4%, more than anticipated, leading to a sharp increase in Treasury yields as the bond market adjusted its expectations for the Fed’s monetary policy.
Investors are now focusing on wage inflation trends ahead of next week’s Federal Open Market Committee (FOMC) meeting. Despite the volatility, major market benchmarks ended the week positively: the Dow Jones increased by 0.3%, and the Nasdaq Composite rose by 2.4%. This resilience highlights the market’s complex response to fluctuating economic signals and policy expectations.
Stock market closing data for the week of Jun 3rd to Jun 7th, 2024
News Summaries
Nvidia’s (Explore: NVDA) market value crossed $3 trillion, surpassing Apple to become the world’s second-most valuable company. This has been fueled by strong demand for its AI chips, leading to a significant 262% year-on-year increase in revenue, largely due to sales of its “Hopper” chips. Despite facing market saturation and competition from companies like AMD and Intel, Nvidia remains at the forefront of AI hardware and software innovation, with plans to launch new products such as the “Blackwell” chips and the “Rubin” processors expected in 2026. Concurrently, Apple is preparing to boost its AI offerings, as indicated by its upcoming Worldwide Developers Conference and a notable $110 billion share buyback program, aimed at strengthening its market position amidst a decline in iPhone sales.
Trafigura, one of the world’s largest commodities trading firm, reported a sharp decline in profits, recording a net profit of $1.5 billion for the first half of the year, down from $5.5 billion in the same period last year, despite this period still being its fourth-best on record. This reduction in profits reflects a calming of the extreme market volatility that benefited commodity traders in the wake of geopolitical disruptions like Russia’s invasion of Ukraine. While the company’s turnover also decreased from $131.3 billion to $124.2 billion due to lower commodity prices, it managed to increase its oil and gas trading volume by 15%. The easing of inflated commodity prices is starting to impact the payment capacity of some customers, with overdue invoices rising significantly. This shift occurs as the financial landscape sees changes, including leadership transitions within Trafigura and ongoing adjustments in the global commodity trading sector.
Robinhood (Explore: HOOD) has announced its acquisition of Bitstamp, a European cryptocurrency exchange, for $200 million. This move marks Robinhood’s initial steps toward engaging institutional investors and broadening its operations internationally, particularly in the digital assets domain. The acquisition is part of Robinhood’s strategy to diversify its offerings beyond meme stocks and tap into the burgeoning demand for cryptocurrencies as bitcoin prices approach record highs. Bitstamp, established in 2011 and ranked 16th in trading volume, brings to the table over 50 global licenses and a strong presence in the EU market. This strategic purchase aims to enhance Robinhood’s transaction-based revenues from digital tokens, which constituted 17% of its total last year, and expand its market footprint amidst stringent US regulatory scrutiny on crypto businesses.
Monzo, a London-based digital bank, reported its first annual pre-tax profit of £15.4 million for the fiscal year ending March, a significant turnaround from a £116.3 million loss the previous year. This profit was driven by a revenue surge to £880 million, more than double from the previous year, largely due to a 167% increase in net interest income totaling £438 million, which benefited from higher interest rates. Additional revenue boosts came from £167 million in transaction fees and £27.4 million from subscription services like Monzo Plus and Monzo Premium. Despite these gains, Monzo increased its provisions for expected credit losses to £176.9 million, reflecting growing customer repayment challenges amid economic pressures. The bank, maintaining a conservative lending approach with less than 15% of its balance sheet in loans, is also expanding internationally with plans to enter the Irish market and has secured significant funding to support its growth and operational scalability.
From the World of Crypto
Figure 1: Ether Price Target for 2030: Base, Bull, and Bear Case Scenarios. Source
VanEck, a prominent investment management firm established in 1955 and managing over $100 billion in assets, has released updated price targets for Ethereum and Solana, indicating significant growth potential in the cryptocurrency market.
Their analysis follows recent approvals for Ethereum ETFs and includes a detailed forecast with a bear, base, and bull case scenario. For Ethereum, VanEck predicts a possible rise to $154,000 by 2030 in the bull case, starting from a current price of around $3,900, representing a potential 39.5 times increase (see Figure 1). Solana’s bull scenario suggests a climb to $3,211 from the current $175, an 18.5-fold growth.
In their report, VanEck also provides bear and base case scenarios, painting a comprehensive picture of potential market movements. The base case for Ethereum stands at $22,000, while Solana’s is pegged at $335. These predictions underscore the firm’s belief in the significant upside of these assets, tempered by realistic assessments of possible downturns, with Ethereum potentially dropping to $350 and Solana to $9.81 in the bear case scenario. This broad range of forecasts reflects the inherent volatility and uncertainties within the crypto market, emphasizing the importance of nuanced investment strategies.
The implications of these projections for market caps are substantial, with Ethereum potentially reaching a market cap of $18.5 trillion, surpassing Bitcoin’s forecasted $7.7 trillion. This shift would mark Ethereum as the new leader in the crypto space, with Solana also showing promising growth albeit still lagging behind the frontrunners. VanEck’s analysis is grounded in thorough research and market understanding, offering investors a detailed view of what might be on the horizon for these digital assets. This information serves as a crucial tool for those looking to navigate the complexities of cryptocurrency investments.
