Weekly Market Spice 6

???????? US Arms Exports to Israel

Amidst a backdrop of geopolitical tension, US arms manufacturers are bracing for an uptick in deliveries to Israel. This surge in supplies comes at a time when manufacturers are already under pressure to arm Ukraine and replenish dwindling Pentagon stocks. Unlike Ukraine, Israel's requisitions primarily center around munitions. The top priority on Israel's wish list are interceptors for its Iron Dome missile defense system, closely followed by precision air-to-ground munitions and 120mm calibre tank rounds. Noteworthy is the fact that Israel stands as a unique player in the realm of defense with its robust domestic industry and advanced weaponry. This aspect differentiates it from Ukraine, a nation that has received substantial military support in the form of tanks and armored vehicles. Additionally, Israel benefits significantly from the United States, which allocates nearly $4 billion in military aid annually, earmarking about $500 million for air and missile defenses. Over the past seven decades, Israel has also been a substantial purchaser of US weapons, accounting for an estimated $53.5 billion, with $6.5 billion spent in the five years leading up to 2022. The surge in arms demand has led to a notable uptick in shares for major US defense contractors, such as Lockheed Martin, RTX, Northrop Grumman, and General Dynamics.

?????? UK Inflation Holds Steady at 6.7% in September

The economic landscape of the United Kingdom is witnessing a steadfast persistence of high inflation, standing resolute at 6.7% in September. This defies earlier forecasts that had suggested a modest decrease in this critical economic indicator. The unyielding inflation rate continues to exert significant pressure on the Bank of England, prompting the institution to hold steadfast in its endeavor to curb price growth through the imposition of elevated interest rates. The global bond market has responded to this economic scenario with a notable sell-off, leading to a surge in yields on 10-year gilts, which have now escalated to 4.66%. Meanwhile, core inflation, a metric that excludes energy and food costs, has experienced a slight dip, registering at 6.1%.

?????? Tesla's Q3 Performance Falls Short

The electric vehicle powerhouse, Tesla, has found its Q3 performance falling short of Wall Street's recalibrated expectations. Planned factory shutdowns and strategic price cuts have played a pivotal role in impacting the company's overall performance metrics. Notably, Tesla's gross margin from automotive operations, a closely scrutinized measure of its core functions, has descended to 16.3% in the third quarter. This marks its lowest level since the latter part of 2017 and has fallen below the anticipated 17%. In terms of net income, Q3 reflects a figure of $1.85 billion, indicating a 44% drop from the previous year. Earnings per share have not been immune to this trend, demonstrating a decline of 37% to 66 cents.

???????? New US Export Controls Threaten Chinese AI Ambitions

In a strategic move that bears significant ramifications, Washington has fortified its chip export controls. This development poses a direct challenge to major Chinese tech players like Alibaba and Baidu, potentially hindering their endeavors in the production of indigenous AI processors. The ramifications of this move are not confined solely to Chinese entities. Silicon Valley-based Nvidia faces a conundrum as it must cease shipments of two processors that were meticulously tailored to conform with earlier export regulations. These stringent controls are part and parcel of a comprehensive strategy aimed at obstructing China's technological progress, particularly within the sphere of artificial intelligence. This comes at a juncture when US-China relations have become increasingly fraught with tension and competition in the technological domain has emerged as a focal point.