Before the Bell: Recession fears return from vacation

Broadcom closes in on Nvidia. Compagnie du Bois Sauvage trades at half its value. In Tokyo, investors cheer the prime minister’s resignation.

Early last week, markets were rattled by a small rise in long-term yields—about 5 basis points (0.05). Belgian REITs dropped in Pavlovian fashion. By Friday, however, the picture had flipped. For the third or even fourth consecutive month, the U.S. published a very weak jobs report. The modest rate increase quickly turned into a sharp drop, with government bond yields falling 10 basis points. Wall Street initially rose, counting on three more rate cuts this year. But soon the fear took hold that the American economy has begun its descent. The word recession had been on holiday for a while, but it returned on Friday. For the week, the S&P 500 managed a 0.3% gain, while the Stoxx Europe 600 slipped 0.2%. Alphabet jumped 14% last week after a judge issued a surprisingly mild ruling in its monopoly case. Europe, however, slapped the search giant with a massive fine of nearly 3 billion euro on Friday. Donald Trump immediately declared he would not accept it. Meanwhile, Salesforce tumbled nearly 10% as its results and outlook fell short of lofty expectations.

In China, export growth slowed from 7.2% in July to 4.4% in August, dragged down by a 30% drop in shipments to the U.S., where preliminary import tariffs of 30% are in place. Hong Kong shrugged it off, climbing 0.5% this morning, with small gains elsewhere in China. Tokyo rallied 1.5% after Prime Minister Ishiba’s resignation. Later this week, attention will turn to Thursday’s ECB rate decision, U.S. inflation data, and consumer sentiment.

A 48% discount, and still not a bargain?

At the end of June, the portfolio of Brussels-based holding Compagnie du Bois Sauvage was worth 498.8 euro per share—unchanged from year-end. By comparison, Sofina reported last week that its portfolio had fallen 4.9%. That was not a poor showing, given its heavy U.S. exposure and the 13.5% drop in the dollar. Conditions improved at Bois Sauvage. Its chocolate group—including Neuhaus, accounting for half the holding’s value—boosted revenue 3.7%. Stakes in Ageas and, finally, Umicore also gained in value. Real estate holdings were weaker, with transactions postponed. The stock trades at a 48% discount to net asset value, but these results may not be strong enough to narrow it meaningfully.

The number two in AI chips is number seven in market cap

Chip and software designer Broadcom has quickly climbed to number seven among the largest companies on Wall Street. After well-received results on Thursday evening, the stock surged 9.4% Friday to a record valuation of 1.58 trillion dollar. Revenue rose 22% to nearly 16 billion dollar. Investors are enthusiastic about Broadcom’s custom-designed AI chips for major clients. In terms of growth and scale, it is chasing Nvidia. Broadcom also announced a major new customer set to fuel even stronger growth next year. According to the Financial Times, that client is OpenAI, the company behind ChatGPT. Today, OpenAI relies mainly on Nvidia’s chips. Trading at 60 times earnings, expectations are already sky-high.

Did you know…

OPEC+ decided on Friday to increase oil production again, despite prices hovering around just 65 dollar per barrel? The move aims to grab market share from U.S. producers and others.

This article was translated from Dutch and was originally published on Spaarvarkens.be.