Sherwood News

Global stock sell-off: The Nikkei 225 just had its worst day since 1987

Japan’s flagship index shed more than 12%, its worst performance since Black Monday

8/5/24 5:47AM

After last week’s disappointing jobs report, in which US unemployment hit its highest level in more than two years, investors are once again dumping stocks, as a flurry of “risk off” trading activity reverberates around global markets.

Most notable of this morning’s flashing red charts is that of the Nikkei 225, Japan’s flagship index, which has closed down 12.4%, its worst one-day showing since 1987. That’s a remarkable decline when you consider all that has happened in that time: Japan’s asset bubble bursting in the early 1990s, the dot-com crash, earthquakes, the global financial crisis, nuclear meltdowns, and COVID-19. It builds on the nearly 6% decline seen on Friday, which means that those two days have now wiped out all of the gains — and then some — that the index had notched in 2024.

A rapid appreciation in the Japanese Yen against the US Dollar appears partly to blame for the Nikkei 225’s outsized decline, as investors unwind the “carry trade” which had seen investors borrow in Japan, where interest rates have been very low, and re-invest elsewhere. Last week’s rate hike from the Bank of Japan turned that trade on its head.

When America sneezes...

Although Friday’s jobs report came with a large weather-related asterisk, the fundamental deterioration appears to have been enough to spook investors, with many of the more successful trades this year unwound quickly in the last two trading days. European stocks are also down, with the STOXX 600 off 2.3% at the time of writing, while shares of big US tech stocks are changing hands at significantly cheaper prices in pre-market trading, with AI darling Nvidia currently down more than 9%.

Today’s sharp sell-off follows the most volatile day of the year last week, as the stock market’s “fear gauge” (the VIX) rose to its highest level since the pandemic at 47 on Monday.

Matt Phillips5s

RocketLab jumps, putting it on pace for another all-time high, after new launch deal

Retail favorite Rocket Lab jumped, putting it on track for another record high, after announcing a deal to provide two new launches for the Japan Aerospace Exploration Agency from its New Zealand launch complex.

The launches, one in December and one in 2026, will demonstrate new satellite technologies developed by Japanese, university, and research institutions.

Shares of Rocket Lab, which has never turned an annual profit and isn’t predicted to until 2027, have been on a remarkable trajectory, rising more than 150% this year and nearly 600% over the last 12 months.

The run-up implies growing expectations for Rocket Lab’s current focus: getting its larger Neutron rocket — a potential competitor to SpaceX’s dominant Falcon-9 — launched by the end of the year.

If successful, company leaders say, Neutron — which can put larger satellite constellations into orbit — should position Rocket Lab well in the growing business of selling services like consumer broadband from networks of satellites rather than terrestrial towers. Other services-from-space stocks like Planet Labs and AST SpaceMobile have also posted giant gains this year.

Rocket Lab Secures Multiple Launches with Japan Aerospace Exploration Agency (JAXA)

Nia Warfield9m

Levi Strauss tops Q3 estimates but stock unravels as tariffs weigh on margin outlook

Levi’s fell about 9% Friday morning after the denim giant topped Q3 estimates but warned of margin pressure tied to tariffs.

The company posted adjusted earnings per share of $0.34, above Wall Street’s forecast of $0.31, while revenue rose 7% to $1.54 billion, also beating expectations. Levi’s raised its full-year EPS outlook to $1.27 to $1.32, up slightly from prior guidance, and now expects revenue growth of roughly 3%, up from 1% to 2%.

Still, after a big run-up this year, investors appear to be letting some air out of the rally. The company cautioned that new US tariffs on goods from South Asia, including Bangladesh, Cambodia, and Pakistan, could hit fourth-quarter gross margins by about 130 basis points.

Elsewhere, JPMorgan lifted its price target on Levi’s to $33 from $23 and maintained an “overweight” rating, citing higher average purchase values and growing popularity among younger shoppers.

Even with the today’s earnings dip, Levi shares are still up about 29% this year.

Luke Kawa19m

IonQ dips after raising $2 billion through a creative sale of stock and warrants

IonQ is falling in early trading after announcing plans to raise nearly $2 billion from the sale of stock and warrants to Heights Capital Management, an affiliate of Susquehanna that focuses on investing in high-growth firms.

The terms of the financing may look pretty odd, at first blush.

IonQ is selling:

16.5 million shares at $93 — a 20% premium to its closing price on Thursday!
Pre-funded warrants at $93 per share that enable the buyer to accumulate another ~5 million shares within seven years.
An additional set of seven-year warrants that allow for the purchase of an additional ~43 million shares, which are exercisable at a price of $155 — double where the shares closed on Thursday!

What’s going on here: Heights Capital is paying IonQ more than its shares are worth right now in order to get cheaper optionality to the stock going up over 20% or more than doubling over the next seven years.

At the risk of stating the obvious, this is a major bet by Heights Capital — if the stock does cross the $155 threshold within the next seven years, exercising all of the (now profitable) warrants would cost ~$6.7 billion.

There’s some definite ingenuity in the financing, but thanks to OpenAI, this isn’t even the oddest arrangement we’ve seen this week.

While quantum computing is a white-hot investment theme, pure-play companies are in relatively early stages of their commercialization, and as such, require some injections of capital from time to time. Earlier this week, Quantum Computing tumbled after announcing plans to raise $750 million through a private placement of stock.

China steps up customs crackdown on Nvidia chips, launches antitrust investigation into Qualcomm, and plans special port fees on US ships

Beijing is doubling down on protectionism ahead of a planned Xi Jinping and Donald Trump meeting set for later this month.

David Crowther3h

Claire Yubin Oh3h

Stellantis rises after reporting 13% rise in Q3 shipments, driven by a rise in North America

Stellantis was up as much as 2.7% on Friday after reporting a 13% year-on-year jump in its third-quarter shipments, led by upbeat sales in North America.

The carmarker delivered an estimated 1.3 million vehicles in the three months ended September 30, driven by “a particularly strong rebound” in North America, where shipments rose 35% year on year — a notable recovery after Stellantis temporarily reduced production last year to cut its inventory in the region.

The increase was supported by an 8% shipment growth in Europe, thanks to an aggressive production ramp-up of new offerings like the Citroën C3, per the press release. The automaker also reported a 21% increase in its smaller Middle East & Africa group.

Stellantis’ shipment results were shared as the group’s new CEO, Antonio Filosa, attempts to turn around the company’s previous focus on cost cuts and efficiencies at the expense of new models. The carmaker slowly lost market share in both the US and Europe during this period, and the stock is still down some 26% this year.

Stellantis is set to report its full third-quarter results on October 30.