Disrupt & Elevate

MARKET BUZZ

BRIEFING BOARD

🚀 SpaceX tells FCC it has a plan to make Starlink about 10 times faster. SpaceX has submitted an application to the US Federal Communications Commission seeking approval for changes to Starlink which will enable gigabit-per-second broadband service. The changes include lowering the altitude of satellites to increase the potential maximum number of orbital planes and satellites per plane. SpaceX plans to send 29,988 or less second-generation satellites into orbit - the FCC has so far approved 7,500 Gen2 satellites. To obtain approval for the changes, SpaceX must demonstrate that the changes won't negatively affect other spectrum users and satellite operators.

🧬 The exciting research that may cure Parkinson's. GeneCode, a pharmaceutical company, received a €16 million funding option from the European Innovation Council Accelerator last year to support the development of a novel drug. Designed to combat neurodegeneration in Parkinson's patients, preliminary evidence suggests that the drug may alleviate symptoms, protect neurons from further damage, and help restore neurons for a healthier and longer life. The drug binds to receptors in the brain; sending chemical signals that stimulate dopamine production which allows neurons with axons to stay active and maintain synaptic connections with other neurons. GeneCode has almost completed animal experiments, but it still needs to certify that the drug can be consistently and safely produced to ensure future quality assurance and perform toxicology studies before it can begin clinical trials in humans.

☢️ Google Backs New Nuclear Plants to Power AI. As big tech companies have recently invested in nuclear power, Google committed to buying power, which is generated by seven nuclear-power reactors under Kairos Power. The project aims to add 500 megawatts of nuclear power starting at the decade's end. The project site (or sites) have yet to be determined, but Google will have its data centers somewhere near the reactors. However, it hasn't been determined whether they will receive power directly from the plants or the grid.

🤺 OpenAI Unveils Secret Meta Prompt — And It's Very Different From Anthropic's Approach. OpenAI has revealed the meta-prompt for its new o1 model family to help developers improve and fine-tune their products. Meta-prompts are used to instruct models to create good prompts based on user task descriptions or to enhance existing prompts. The companies in question, Anthropic and OpenAI use very different engines, and their prompts reveal a lot about how each company thinks and what they expect from their products. OpenAI conceptualizes ChatGPT as a powerful computational tool, while Anthropic envisions Claude as a friendly, human-like assistant.

CASE IN POINT

Foxconn’s Fallout: The Human Cost of Electronics

Hon Hai Technology trading, known as Foxconn internationally, is a Taiwanese electronic contract manufacturer which was established in 1974. It is the world’s largest contract manufacturer - its revenue reaching $192 billion in 2023. It was also ranked 20^th in the 2023 fortune global. Foxconn has produced, and continues to produce goods for some of the most famous companies worldwide such as Blackberry, Apple, Kindle, Nintendo, Nokia, Xiaomi etc. As of 2012, it was estimated that Foxconn produces an estimated 40 percent of all consumer electronics worldwide. However, in 2010, 18 Foxconn workers attempted suicide out of which around 14 people died. This led to them facing many allegations pertaining to long working hours, low pay and harsh working conditions.

A former Foxconn employee (who wanted to remain anonymous) when interviewed said “The factories themselves are top notch although they are fairly intense working environments. Westerners would find it very difficult to work there. Employees have to work long days and many of the staff were working at least six days a week. So it was very common to hear of people being burnt out. During change of shift, imagine Wembley emptying after a game, employees were often organised in "platoon"-sized groups for a pre-shift briefing. So, I am not surprised to hear of military-style enforcement.”

Many reports also uncovered that there were repeated instances of overwork and prevalent corporal punishments in the company. Other reports led to the discovery of regularly raised production targets without corresponding wage increases. It was not unusual for workers to be on the production line all but two or three days of a month, maybe ten or eleven days in a row. Many workers live eight to a room in the dorms. In response to these suicides, Foxconn CEO, Terry Gou, had large nets installed in many of the buildings to catch falling bodies. The company hired counsellors and workers were made to sign pledges stating they would not attempt to kill themselves. Apple, who is Foxconn’s largest contractor, commissioned an independent review by a broader team of suicide prevention experts.

This team was asked to conduct a deeper investigation into the suicides, evaluate Foxconn’s response, and recommend strategies for supporting workers’ mental health in the future. Despite of all the actions taken by Foxconn, they were still heavily criticized by the public and labour unions as they thought that all the corrective measures taken by the company were merely done to maintain good public relations instead of focusing on the root problems

EXPERT EDGE

Economic Surprises: Effects on Markets, Inflation, and the Economy

Economic surprises are defined as unexpected deviations from forecasted economic data that have significant impact on inflation, financial markets and the economy as a whole. These surprises/shocks influence everything from investor sentiment to monetary policy decisions, often leading to volatile market reactions and adjustments in economic forecasts.

Market Reactions

Positive Surprises: Stronger-than-expected economic performance typically boosts equity markets. For example, positive employment data can lead to increased stock prices as investors adjust their growth expectations upward.
Negative Surprises: Conversely, factors like  higher-than-expected inflation can depress market performance. This is due to concerns that central banks may tighten monetary policy to combat rising prices.

Economic surprises also affect investor behaviour. According to Investment Monitor, investors often anticipate market movements based on economic data releases and adjust their portfolios accordingly. In this case, surprise data showing stronger economic performance can lead to higher asset prices as investors become more optimistic. Conversely, negative surprises can cause risk aversion, leading to a flight to safer assets like gold or government bonds.

Inflation and Yield Curves

Inflationary Pressures: Surprises indicating stronger demand or robust labour market conditions can heighten inflation expectations. When demand outstrips supply, prices rise, prompting central banks to consider contractionary measures such as increasing interest rates.
Yield Curve Dynamics:The yield curve, which reflects the difference between short- and long-term interest rates, can steepen or flatten based on economic surprises. Sudden increase in inflation can lead investors to anticipate higher short-term interest rates, resulting in a steeper yield curve.

Broader Economic Implications
On a larger scale, economic surprises can shape economic cycles by influencing central bank policies and investor confidence. Unexpected shocks to consumer demand or supply can prompt central banks to adjust interest rates, which, in turn, affects everything from corporate investment decisions to household spending. Higher interest rates raise the cost of borrowing, which can slow economic growth.

As economic surprises accumulate over time, they create a feedback loop. Persistent positive surprises may lead to overconfidence in the economy, while consistent negative surprises can create pessimism, stifling growth. A study published in Empirical Economics underlines how systematic surprises across multiple indicators  can significantly influence broader economic performance by altering expectations about future inflation and economic activity .