EU to cut interest rates first

MARKET UPDATE

TODAY’S BIG HEADLINES

• EU to cut interest rates first

• Liberty Media acquiring MotoGP

• Amazon spending $150 billion on AI centres

• The Stablecoin project offering 50%+ yields

MACROECONOMIC
EU to cut interest rates first✂️

What’s happening? As the rooster crowed on Wednesday morning, the EU, in a surprising twist, unveiled their March Inflation data. The figures tiptoed in at a modest 2.4%, shy of the anticipated 2.5% and a step down from February’s 2.6%. Meanwhile, Turkey’s inflation figures strutted in like a peacock at a whopping 68.5%! Talk about a hot economy!

This economic plot twist has forced markets into recalibrating the odds of interest rate cuts. Traders, now akin to fortune tellers, are foreseeing a rate cut from the EU’s key deposit rate, which currently lounges at a record high of 4%. They predict this as early as June, beating both the US and the UK to the punch.

The crystal ball of the trading world is currently showing the Bank of England as the likely to wield the rate-cutting scissors for the first time in August. Meanwhile, markets are penciling in the Fed for a rate cut in September.

Why does this matter for the market? Earlier this week, the market threw a tantrum at the positive manufacturing numbers released in the US. This is because it likely gave the Fed the green light to stay the course for longer and avoid cutting rates too soon, proving that the economy is still a tough cookie.

sources: (telegraph), (financial times)

ACQUISITIONS
Liberty Media acquiring MotoGP🏍️

What’s happening? On a not-so-ordinary Monday, whispers began to circulate that Liberty Media (LSXMA), the puppet master behind Formula One’s transformation into a global extravaganza, had pulled another rabbit out of their hat. They’ve reportedly snapped up MotoGP for a cool $4.5 billion from Spanish company Dorna Sports, bringing the two motor sports under one roof. The deal is structured like a well-baked pie, with Liberty gobbling up about 86% of Dorna, while the current management of Dorna will hold onto the remaining slice.

Shares of Liberty Media (LSXMA) reacted like a startled cat to this news, trading down over 2.5%. However, the stock is still strutting its stuff, up over 20% since August 2023.

We’re all on tenterhooks to see how the European Commission will react once they’ve dissected this case. Flashback to 2006, when CVC had dreams of controlling both F1 and MotoGP. But the European antitrust authorities, playing the role of party poopers, forced the Luxembourg fund to drop its interest in MotoGP. Owning both motor sports, they argued, would’ve been as “bad for competition” within the EU, similar to a bull in a china shop.

sources: (autosport), (BBC)

AI NEWS
Amazon spending $150 billion on AI centres👨‍💻

What’s happening? Amazon (AMZN) has declared its grand plan to pump a staggering $150 billion into data centres over the next 15 years. Why, you ask? Well, they’re gearing up to meet the tsunami of AI-driven demand that’s predicted to hit us over the next decade and a half. It’s like preparing for a marathon, but in the tech world!

Amazon, not one to be outdone by its rivals Alphabet (GOOGL) and Microsoft (MSFT), is planning to fortify its stronghold in the cloud services industry. The company is set to roll out its data centres across the US, Saudi Arabia, and Malaysia, building a global fortress to secure its position as the alpha wolf.

Who benefits from this news? Realistically, it’s the semiconductor producers who craft the parts used in these data centres. This includes the usual suspects like Nvidia (NVDA), AMD (AMD), and Intel (INTC), but also other players on the field such as Micron Technologies (MU), Applied Materials (AMAT), and let’s not forget our Dutch friends at ASML who manufacture the very machines used to create semiconductors. This news is like a golden ticket, guaranteeing orders for a substantial length of time, from a source as reliable as your morning coffee.

sources: (readwrite)

CRYPTO
The Stablecoin project offering 50%+ yields🤑

What’s happening? In the bustling bazaar of crypto projects, a new kid on the block, Ethena ($ENA), is making waves with its avant-garde approach to achieving a stablecoin staked to a currency. This method, known as “delta neutral”, is like a magician’s trick, offering its stakers a whopping yield of over 50%! It’s like finding a golden goose in your backyard!

So, how does this sorcery work? Ethena is a synthetically backed fiat crypto dollar that uses Ethereum (ETH) and its staked derivative (stETH). It issues a stablecoin, USDe, pegged 1:1 with the US Dollar, as steady as a tightrope walker at a circus!

Authorized participants (APs) can mint and burn USDe.

• Minting involves depositing ETH or stETH, selling an ETH/USD perpetual swap to lock the USD value, and minting equivalent USDe.

• Burning involves depositing USDe, covering a portion of the short ETH/USD perp swap position, burning the USDe, and returning ETH or stETH.

USDe generates yield through ETH staking and perp swaps, attracting users to hold USDe. Ethena’s yield comes from staked ETH and positive funding from perp swaps.

sources: (@pakpakchicken), (medium article)

MORE NEWS
Additional market-moving events🌎

• Nothing good ever lasts: Amazon (AMZN) has abandoned its “just walk out“ grocery store model in the US, as it turns out, the “AI” powering this system was actually just 1,000 human contractors.

• EU’s climate fund sees big failures: The EU’s $40 billion climate-focused fund has some sizable failures. A manufacturer of solar panels is laying off workers. A battery manufacturer that’s ditched Europe for US subsidies. A green hydrogen project which has stalled due to a lack of electricity.

• Minimum wage increases: California has increased minimum wage for fast-food workers to $20, leaving many chains unhappy and likely to layoff many workers in response to this change.

• Dalio & Bridgewater’s gloomy future: Since Ray Dalio, the famed hede fund manager left Bridgewater, the fund has gone from $100 billion in AUM to $60 billion. Bridgewater’s flagship fund also posted a loss of 7.6% in 2023.

OUR PICKS
Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,303.00 SEK (📉-0.72%)

• Hims & Hers Health: $15.47 (📈+6.98%)

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