يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَـٰطِلِ إِلَّآ أَن تَكُونَ تِجَـٰرَةً عَن تَرَاضٍۢ مِّنكُمْ ۚ
O believers! Do not devour one another’s wealth illegally, but rather trade by mutual consent. (Qur’an, 4:29)
Market Snapshot
▼ S&P 500 -1.97%
▼ SPUS -2.53%
▼ MSCI World Islamic -1.40%
*Market data for last week.
Last Week’s Review
Major Tech Earnings: Leading tech companies delivered mixed quarterly results, affecting market sentiment. Alphabet posted a 34% profit increase, driven by AI and cloud growth; Apple met revenue and profit expectations but saw declining sales in China; Amazon exceeded expectations with a 19% rise in AWS revenue; Meta surpassed estimates, though user growth fell short; and Microsoft exceeded forecasts on strong AI demand but faced stock pressure over capacity concerns.
Employment Report: The U.S. economy added just 12,000 jobs in October, the smallest gain under the Biden administration, with the Boeing strike and hurricanes contributing to the slowdown. Despite this, the unemployment rate held steady at 4.1%, suggesting resilience in the labor market.
PCE Inflation Data: The Personal Consumption Expenditures index, a key inflation measure, rose 0.2% in September. This inflation may weigh on the Federal Reserve’s upcoming policy decisions, as the data points to easing price pressures.
This Week’s Outlook
U.S. Presidential Election (Nov. 5): The United States will decide between incumbent President Kamala Harris and former President Donald Trump. If Harris wins, markets could experience short-term volatility as investors assess her potential policy moving forward. In a Trump victory, markets are likely to react positively due to expected continuity in business-friendly policies from his first term.
Federal Reserve Interest Rate Decision (Nov. 7): The Federal Reserve is expected to lower its benchmark rate by 25 bps to a range of 4.5-4.75%. This rate cut would make borrowing cheaper for consumers and businesses, encouraging spending and investment. Low/decreasing interest rates tend to accompany good performance in stocks.
Curated Reads
Major Layoffs in 2024 Across Sectors
In response to ongoing economic challenges, numerous high-profile companies are implementing significant workforce reductions. Intel leads with over 15,000 layoffs as part of a $10 billion cost-cutting initiative. Spotify recently laid off 17% of its staff in its largest round of cuts this year, and Citigroup has started layoffs expected to impact 10% of its major business units. Amazon’s gaming division cut 180 positions, while Hasbro reduced its workforce by 20%. T-Mobile also announced 5,000 job cuts, reflecting a broad trend of industry-wide adjustments. [Read]
IEA 2024 Global EV Report: Key Takeaways
The International Energy Agency’s latest report reveals a 40% surge in global EV battery demand, driven by record sales in China, the U.S., and Europe. However, oversupply in China has sparked intense price competition, pushing Tesla, BYD, and others to cut EV prices by up to 10-20%. Market capitalizations of EV and battery companies have fallen as investor concerns grow over profitability, with Tesla’s share price down by 15% since 2021. As Chinese exports increase, intensified competition globally is expected to press margins further. [Read]
Eurozone Inflation Rebounds
Eurozone inflation rose to 2.0% in October, surpassing the forecast of 1.9%. Core inflation, excluding food and energy, remained steady at 2.7%. The ECB is expected to adopt a cautious approach to rate cuts, with a significant December cut appearing less likely. October’s growth metrics also saw an unexpected 0.4% GDP increase and a record-low unemployment rate of 6.3%. Germany’s inflation rose sharply to 2.4%, while France and Italy recorded modest increases. [Read]
Chart of the Week
Our chart of the week is STMicroelectronics (STM). As a European leader in semiconductor solutions, STM is deeply embedded in the electric vehicle (EV) sector. With the EU’s mandate for all new vehicles to be zero-emission by 2035, STM stands to capitalize on the rising demand for EV chips. The company has been proactive in aligning with major automakers to advance system-on-chip technology specific to EV applications, a strategic positioning that aligns well with the region’s push toward green mobility.
The volume profile on STM’s chart since 2022 shows a notable level around $45, considerably higher than the current price of $26.67. Given that European governments hold substantial shares in STM, it is highly unlikely that it stays at this depressed price for long. Furthermore, as the EU aims to strengthen domestic semiconductor production, STM is likely positioned for continued support, potentially through subsidies or policy backing if needed.
Current Price: $26.67
Target Price: $45
Disclaimer: This information is accurate as of the date of publishing and is not intended as investment advice.
Your Questions
Is it okay to invest in a stock that passes just one out of the five Shariah standards?
Yes you can. Although you may want to check if the interest-based debt, for example, will be coming down in the future or going up. In the latter case, it may become Non-Compliant. (Answered by Faraz Omar, AAOIFI Certified Shariah Advisor and Auditor)
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