Weekly Overview of Global Markets

Market Review and Outlook

US Stocks: On Wednesday, the release of unexpectedly lower CPI data in the US caused a reversal in the downward trend of the stock market. The meme stock sentiment also played a role in boosting the market, with all three major indices reaching historic highs last week. The Dow Jones Industrial Average even surpassed the 40,000 point mark during Thursday's trading. However, it is important to note that one month of data does not necessarily form a trend. Federal Reserve officials spoke out last week, indicating that they need to see inflation slow down for several months before they will have the confidence to lower interest rates. Although the hype of meme stocks represented by GME and AMC has decreased, the market's sentiment for speculation remains high, as evidenced by the continuous emergence of meme stocks with new explosive growth last week. Investors should be cautious and mindful of position control.

Hong Kong Stocks: The positive policy releases have boosted market risk appetite, leading to a surge in the Hang Seng Index under optimistic expectations. However, further upward momentum will require more solid fundamental data to support it. In the short term, investors can seek out industries with higher dividend yields, such as utilities, energy, finance, and others.

Crude Oil: Last week's OPEC monthly report initially gave a boost to oil prices, as it maintained an optimistic outlook for demand in 2024. However, this was countered by the International Energy Agency, which lowered its forecast for oil production growth this year, causing the mild rebound in oil prices to essentially come to a halt. On Wednesday, a decrease in US petroleum inventories provided some support for oil prices in the context of slowing inflation. According to analysts from Quantum Commodity Intelligence, the current signal for crude oil pricing is mixed, largely due to the fact that recent macro factors are playing a crucial role in determining price direction and sentiment. With the upcoming OPEC meeting on June 1st, analysts predict that the supply of oil will remain balanced over the second half of 2024, but uncertainty remains regarding how events will unfold in the coming weeks and months.

Gold: Gold prices have seen a sustained uptick in recent weeks, hovering around the $2400 per ounce mark and experiencing consecutive weekly gains. This rise has been driven by expectations of lower interest rates, which have boosted demand for the precious metal. As a result, silver prices have also seen a boost, breaking through the $30 mark and reaching an 11-year high. One of the key drivers behind the increase in gold prices has been China's demand for the metal, which has been steadily growing in recent months. Moving forward, it will be important to keep a close eye on whether the rise in gold prices will lead to reduced purchases from central banks, as well as monitoring the outflow of funds from physical gold ETFs. These factors could potentially impact the trajectory of gold prices in the coming weeks and months.

Note: The weekly performance of major asset classes is ranked based on the weekly change in the asset class as shown in the table above, with ">" indicating the ranking from highest to lowest. US bonds are ranked based on the change in futures prices. Past returns do not guarantee future returns.

Data source: Bloomberg. Date as of May 17th, 2024

Weekly Hot Topic

Over 2000% surge last week? MEME Stocks are back!

Last week's surge in the US stock market caught many investors off guard, as they witnessed an unprecedented rise in low-priced stocks. This sudden surge ignited the emotions of individual investors, who quickly flooded the market and caused these stocks to skyrocket overnight. Some stocks even experienced an incredible rise of up to 500% in just one day. For instance, Faraday Future (NASDAQ: FFIE) surged over 2000% last week.

When we talk about MEME stocks, we're referring to stocks of companies that have developed a sort of cult following among retail investors on social media platforms like Reddit and Twitter. These stocks typically share a few common characteristics:

• The company's fundamentals are weak, and the stock price is low.

• Hedge funds are heavily shorting the stock.

• However, there are signs of a potential turnaround.

The rise of MEME stocks is widely regarded as a clash of intelligence between retail investors and Wall Street giants. Hedge funds often bet against stocks with weak fundamentals, such as GameStop (GME.N) and AMC Entertainment (AMC.O). However, when these stocks attract the attention of retail investors, they can experience a remarkable surge in demand. This can result in a short squeeze, where investors who bet against the stock are forced to buy shares to cover their losses. In some cases, this can even lead to Wall Street institutions going bankrupt, as was seen in the "retail vs Wall Street" saga of 2021, where GME surged by a staggering 135%.

While the trading volume of these stocks has increased significantly, the duration of this recent hype and market reaction has been different from that of 2021. This is reflected in:

• The emergence of more experienced investors who use machine learning and algorithms to trade, putting retail investors in a disadvantaged position.

• In the 2021 hype, Gabe Plotkin's Melvin Capital Management closed due to short-selling losses. Short covering was a key factor in driving stock prices up, but this time the scale of institutional short selling is relatively small.

• The sustainability of meme stocks depends on their ability to attract investor attention, but currently, investor attention may not be as concentrated as before.

If you want to learn more about MEME stocks and whether you should invest in them, you can refer to the article "Meme Stocks Are Back: A Guide to Investing in Meme Stocks".

Important Events Outlook for This Week

FOMC Minutes

According to data released on last Wednesday, the US inflation index for April saw its first drop in six months, which is a positive development that Federal Reserve officials were hoping to see before considering cutting interest rates. However, several Fed officials stated last week that the central bank should maintain high borrowing costs for a longer period, as policy makers are still waiting for more evidence that inflation is easing. This suggests that they are not in a hurry to cut interest rates.

Earlier this month, the Fed announced that it would keep benchmark interest rates unchanged at its policy meeting, with the next meeting scheduled for June 11-12. This decision was made to keep a close eye on the state of the economy and to ensure that the Fed's policies remain in line with its goals. Overall, while the recent drop in the inflation index is a positive sign, it remains to be seen whether it will be enough to prompt the Fed to cut interest rates in the near future.