💡Quote of the week
Companies that use AI well might increase their productivity growth by up to 1.5 percentage points each year for a decade after widespread AI adoption, according to Neil Shearing of Capital Economics:
“Along with beneficiaries including Singapore and South Korea, US productivity growth will accelerate to over 2% a year in the 2030s. In contrast, economic, political, and institutional factors mean that the pace of adoption is likely to be slower in Germany, France, and Italy. The UK sits somewhere between the US and the eurozone.”
Investment news
⭐ Dollar hits 10-month high, putting pressure on gold. Gold prices on Wednesday plummeted to their lowest point in over a month as the dollar continued its ascent, with markets anticipating a longer period of elevated interest rates.
Spot gold saw a 0.3% decline, reaching $1,895.13 per ounce, its lowest level since August 22. Simultaneously, U.S. gold futures dipped by 0.3% to $1,913.30.
The U.S. dollar remained robust, hitting a 10-month peak against major currencies, while Treasury yields remained elevated due to expectations of prolonged U.S. interest rate hikes.
Meanwhile, silver dropped 0.4% to $22.76 per ounce, reaching a 12-day low, and platinum fell 0.1% to $902.75. Palladium, on the other hand, was on course to end a four-session losing streak, gaining 1.1% to $1,237.37.
🌍 Global stock selloff. After a sharp selloff that had rattled both stocks and bonds, on Wednesday markets have regained some composure as a sense of calm returned. U.S. equity futures showed a 0.3% gain, with the Dow Jones Industrial Average dipping below its 200-day moving average—a technical sign suggesting that the index may have been oversold and could see a rebound. The Cboe Volatility Index (VIX), commonly known as Wall Street's fear gauge, retreated after reaching its highest level since May. (Bloomberg)
U.S. Treasury yields reversed course, sliding by three basis points. This retracement follows a recent surge to a 16-year high, driven by speculation that the Federal Reserve may maintain a restrictive monetary policy well into the coming year. Additionally, the U.S. dollar hovered near its highest point for the year.
Market experts suggest that the stabilization in markets could be attributed, in part, to psychological factors. Investors may have reached a threshold for bond yields and now require more concrete reasons to push them higher.
📉 A looming shutdown. The United States finds itself in a perilous position, more vulnerable than it was during the 2011 credit downgrade, warns the former chairman of S&P's sovereign rating committee. As the October 1st government shutdown deadline approaches, House Speaker Kevin McCarthy faces a tightrope walk in garnering support for a spending bill, with hard-right members within his party demanding deeper domestic spending cuts… a ticking time bomb that might be resolved by the time you read this 😉 (CNBC)
Moody's recently cautioned that a government shutdown would harm the nation's credit, following Fitch's downgrade of the long-term U.S. sovereign credit rating in August, spurred by the political standoff over raising the debt ceiling.
S&P had controversially downgraded the U.S. credit rating from AAA to AA+ in 2011 due to political polarization during a debt ceiling dispute. John Chambers, the former chairman of S&P's Sovereign Rating Committee, asserts that a government shutdown is likely today, highlighting it as a glaring sign of weak governance.
🤖 ChatGPT breaks boundaries. OpenAI's ChatGPT has undergone a significant transformation, expanding its capabilities to "see, hear, and speak." This latest update, the most substantial since the introduction of GPT-4, empowers users to engage in voice conversations with ChatGPT through its mobile app, offering a choice of five synthetic voices for responses. Furthermore, users can now share images with ChatGPT and seek analysis or focus on specific details, enhancing the chatbot's utility. (CNBC)
These enhancements will be rolled out to paying users within the next two weeks. While voice functionality will be limited to iOS and Android apps, image processing capabilities will be available across all platforms.
This development coincides with the escalating competition among AI chatbot leaders, including OpenAI, Microsoft, Google, and Anthropic. Tech giants are racing to introduce new chatbot apps and features to encourage wider adoption of generative AI in daily life. Google has announced multiple updates for its Bard chatbot, and Microsoft has incorporated visual search into Bing.
🕵️♀️ CIA develops its own AI tool to rival China in the quest for information. The US Central Intelligence Agency (CIA) is gearing up to introduce its artificial intelligence tool, akin to OpenAI's ChatGPT, to bolster analysts' access to open-source intelligence. The CIA's Open-Source Enterprise division plans to offer this AI tool to US intelligence agencies in a bid to navigate the vast amount of publicly available data and remain competitive with China's AI ambitions. (Bloomberg)
This tool will enable users to trace the information source and engage in real-time conversations with AI, enhancing intelligence distribution and collection. While the CIA hasn't disclosed the specific AI model or data protection measures, it underscores the agency's efforts to collaborate with the tech sector.
The tool will be accessible to the 18-agency US intelligence community but not policymakers or the public, adhering to US privacy laws. This development aligns with the broader US initiative to leverage AI for intelligence purposes while addressing privacy concerns.
💸 Amazon's aggressive AI move. In a bold step, e-commerce titan Amazon is injecting up to $4 billion into the artificial intelligence trailblazer, Anthropic, while securing a minority stake in the company. This move underscores Amazon's vigorous foray into AI, positioning itself to match rivals like Microsoft and Google. (CNBC)
Founded two years ago by former OpenAI researchers, Anthropic recently unveiled its AI marvel, Claude 2. Amazon is capitalizing on the buzz surrounding generative AI, home to tech gems like OpenAI's ChatGPT and Anthropic's Claude chatbots.
🇨🇳 🤴 Evergrande crisis. Hui Ka Yan, the billionaire chairman of the beleaguered property developer China Evergrande Group, has been put under police control, according to insiders familiar with the matter. Hui was taken into custody by Chinese authorities earlier this month and is currently subject to residential surveillance, a form of police action that does not constitute formal detention but imposes significant limitations on his activities. (Bloomberg)
The news is the latest indication that the turmoil surrounding the world's most indebted developer is entering a new phase, potentially involving the criminal justice system. Earlier this month, Chinese authorities detained some staff from Evergrande's wealth management unit, and two former executives were reportedly held.
These developments further raise questions about Evergrande's future, particularly in light of recent setbacks to its restructuring efforts, causing turmoil in financial markets and heightening the risk of liquidation.
🛢 Year high! Oil prices have surged to their highest level in over a year, driven by shrinking crude stocks at a key storage hub, Cushing, Oklahoma. Crude inventories there fell to 22 million barrels, close to the minimum operational level, down 943,000 barrels from the prior week. (CNBC)
Experts attribute this surge to Cushing's dwindling inventories and anticipate oil prices to remain high for the year.
The continued decrease in stocks could make it challenging to meet demand, potentially pushing prices even higher. Analysts suggest that the market's strong deficit, driven by the recent production cuts by OPEC+ and the extended voluntary cuts by Saudi Arabia and Russia, will support these elevated prices.
Risks are that this rise in energy prices will rekindle the inflation fire as its just starting to cool down.
🇪🇺📉 Inflation down? Eurozone inflation dropped to 4.3% in September, the lowest since October 2021, down from 5.2% in August. Core inflation also decreased to 4.5%. The European Central Bank recently hiked interest rates to 4%, aiming to address inflation concerns However, officials remain cautious about rate cuts and predict inflation at 5.6% this year, declining to 3.2% in 2024 and 2.1% in 2025. (CNBC)
The economic outlook remains uncertain, with the ECB forecasting modest growth and concerns about rising oil prices.
Inflation rates vary significantly across European nations, with Germany at 4.3%, France at 5.6%, and Spain at 3.2% in September.
📸 Image of the week
Opinion
🤔 “Europe needs a makeover to outlast Putin’s long war.” As the Ukraine conflict drags on, Vladimir Putin's strategy of outlasting Western allies poses a mounting challenge to European leaders. Populist parties in Slovakia and Poland, fueled by Ukraine's financial aid burden, are gaining momentum. The prospect of a second Donald Trump presidency, which could diminish U.S. support for Ukraine, further emboldens Putin's agenda. (Bloomberg Opinion)
While Europe has surpassed the U.S. in providing aid to Ukraine, war fatigue is inevitable. To counter Putin's long-war strategy, Europe must send a clear signal of support, consider EU accession talks for Ukraine, bolster its defense, and help Ukraine overcome Putin's grain blockade. The key is convincing Putin that his control over Ukraine isn't inevitable, leading to a lasting settlement, according to Bloomberg Opinion columnist Marc Champion.
What else is happening
🇫🇷 France boosts welfare and pensions to counter inflation surge. As part of its 2024 budget bill, the French government plans to increase welfare and pension payouts to aid households in battling the rampant inflation that has gripped developed nations, Finance Minister Bruno Le Maire announced. Acknowledging the worst inflation crisis since the 1970s, Le Maire emphasized the need to address this pressing concern while also focusing on reducing the country's debt and deficit. (Reuters)
However, as France phases out costly price controls on gas and electricity, Le Maire cautioned that the state can no longer bear the entire burden of combating inflation. To alleviate the situation, the government has applied pressure on major food retailers in the country to offer car fuel at cost. Additionally, they are accelerating annual food price negotiations between retailers and producers to swiftly deliver reduced prices to consumers.
🧑⚖️ Judge rules. A New York judge has delivered a damning verdict: Former President Donald Trump engaged in fraud while constructing his real estate empire, leading to a resounding rejection of his attempt to dismiss a civil lawsuit. Judge Arthur Engoron determined that Trump and his company, including sons Eric and Donald Jr., consistently deceived banks, insurers, and others by inflating asset values and exaggerating his net worth on official documents. (The Guardian)
The lawsuit, initiated by New York Attorney General Letitia James, alleges that Trump and the Trump Organization engaged in a decade-long deception about asset values and net worth, all in an effort to secure favorable terms on bank loans and insurance.
Judge Engoron left no room for doubt, stating that the documents clearly contained fraudulent valuations used in business dealings. James asserts that Trump inflated his net worth by up to $2.23 billion, or even as much as $3.6 billion, on annual financial statements given to financial institutions and insurers.
And finally…
🧑🔬 Right again, Einstein! In a significant scientific feat, researchers have, for the first time, demonstrated that antimatter reacts to gravity just like ordinary matter, affirming Albert Einstein's foundational theory of general relativity. (Reuters)
Ordinary matter, which constitutes everything from planets to puppies, differs from antimatter solely in its electrical charge. While matter particles are negatively or positively charged, antimatter particles possess the opposite charge. Despite theory suggesting an equal creation of matter and antimatter during the Big Bang, antimatter is notably scarce in the universe, including Earth, due to its annihilation effect when in contact with matter.
This groundbreaking experiment took place at the European Center for Nuclear Research (CERN) in Switzerland, led by researchers from the international Antihydrogen Laser Physics Apparatus (ALPHA) collaboration. They focused on antimatter's counterpart to hydrogen, the lightest element, providing new insights into the behavior of these elusive particles.
See you next week!
