Some of the Most Interesting Recent News
SUMMARY
Small-Cap Rally:
Reaction or Rotation? Recent gains in small-cap stocks prompt debate on whether the surge is a short-term reaction or a sustainable market rotation.Major Microsoft Outage Due to Software Update:
Microsoft experiences its largest service disruption ever, impacting users and businesses globally.Meta Eyes EssilorLuxottica Stake:
Meta plans to acquire a 5% stake in EssilorLuxottica as Ray-Ban Meta smartglasses exceed sales expectations, potentially strengthening their strategic partnership.
Small-Cap Rally:
Small-cap stocks have enjoyed a remarkable run, with the Russell 2000 index, the U.S. benchmark for small-cap stocks, surging 12% before settling to an 8.5% monthly gain. This influx of investments stems from two main factors: falling inflation and the heightened odds of a Trump victory following a failed assassination attempt, both of which bode well for small-cap stocks.
Weak inflation has increased market expectations of a Federal Reserve rate cut in September. Small-cap stocks, which benefit disproportionately from lower interest rates, have thus attracted significant investor attention.
Additionally, as these companies tend to generate most of their revenue domestically, they stand to gain from Trump’s protectionist economic policies.
The question investors are now asking, as noted on Bloomberg’s “Surveillance” podcast is:
”is it a reaction or is it a rotation? Because they are two different things. A reaction is short-term, as in the last 7/8 trading days, that blows through some of the technical resistance levels. A rotation happens when capitale believes small caps can durably outperform over the next 6/9/12 months”
The answer is still unclear, but what’s sure is that those investors planning to keep riding this wave will closely monitor the Fed’s actions, which will likely be one of the determining factors of the trajectory of small-caps going forward.
Major Microsoft Outage Due to Software Update
A significant service outage has left thousands of Microsoft users unable unable to log in to their computers. The disruption was caused by a defective software update from CrowdStrike, a company specializing in “endpoint security software”. The issue severely disrupted operations in sectors such as airlines, financial services, media groups, and even hospitals.
CrowsStrike’s president and CEO wrote commented on X:“CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts. Mac and Linux hosts are not impacted. This is not a security incident or cyberattack. The issue has been identified, isolated and a fix has been deployed.”
Investors have reacted strongly to the incident, driving CrowdStrike’s stock down by approximately 11% for the day.
The aviation sector was hit particularly hard, with over 2,000 flights canceled. Financial services companies, including the London Stock Exchange Group and Metro Bank, faced significant operational challenges, raising concerns about the robustness of digital infrastructures.
As businesses and services become increasingly dependent on digital platforms, the potential for such disruptions poses significant threats to economic stability and operational continuity. The outage underscores the need for robust contingency plans and resilient infrastructure to mitigate risks associated with digital disruptions.
Meta Eyes EssilorLuxottica Stake:
Meta Platforms Inc. is reportedly in talks to acquire a 5% stake in eyewear giant EssilorLuxottica, a move driven by the impressive sales of the Ray-Ban Meta smart glasses. This potential $5 billion acquisition aligns with Zuckerberg’s strategic focus on hardware and infrastructure, which he believes are crucial in the rapidly evolving metaverse era.
The negotiation comes amid intensifying competition in the wearable AI market, highlighted by Apple’s launch of the Apple Vision Pro in the first half of 2024. Zuckerberg has also underscored the importance of design and branding in wearable technology, making EssilorLuxottica, the owner of the Ray-Ban brand, an attractive partner.
The deal would be worth around $5 billion, as the company’s current market cap is just under $100 billion. It has been a particularly eventful week for EssilorLuxottica, the world’s largest eyewear manufacturer, which has announced two major acquisitions in the fashion and medical technology sectors. Notably, the acquisition of the Supreme brand may introduce new synergies with Meta, enhancing their collaborative potential.
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