US equities closed with mixed results on Tuesday, as investors exercised caution ahead of the impending US inflation report. The S&P 500 edged up 0.1%, Nasdaq rose 0.3%, while the Dow Jones slightly declined. Attention remains on inflation data and the producer price index. Financials, industrials, and tech struggled, while real estate saw gains. JPMorgan, Mastercard, and Visa declined, while Tesla and Alphabet gained following a successful chip unveiling. Meanwhile, the STOXX 50 index in Europe dropped 1%, led by a dip in insurance shares but countered by a rise in mining equities. As investors brace for the European Central Bank meeting, they anticipate static rates, but with potential cuts looming in June.
Summary for 10.04.2024
- Most Asian equities traded cautiously as investors awaited US inflation data. Hong Kong's Hang Seng surged on Alibaba's gains, while Australian shares rose, led by mining shares. Chinese markets lagged. Japan's Nikkei fell, and Taiwan equities reached record highs amidst the wait.
- European equity markets are set for a positive open while US equity futures showed slight gains, reflecting cautious optimism as investors awaited key inflation data and Federal Reserve commentary amid ongoing concerns about interest rates and the start of the first-quarter earnings season.
- Oil prices remained stable in Asian trading, with concerns over potential US inventory build-up and anticipation of key inflation data limiting significant movements. Ceasefire talks between Israel and Hamas showed little progress, while Iran's threats against Israel supported prices. US crude inventories saw a larger-than-expected increase, hinting at less tight supplies despite robust fuel demand.
- Fitch has this morning revised its outlook on China’s sovereign credit rating to negative, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.
- A sell-off in defence shares dominated Tuesday’s market activity in Europe. Concerns over-inflated valuations following a record-breaking run, fuelled by increased military spending post the Ukraine-Russia conflict, led to caution among investors. Shares of defence companies like SAAB, Leonardo, Rheinmetall, and Thales saw notable declines ranging from 4.9% to 9.8%.
- Malta's trade deficit narrowed to €175 million in February, down from €249.1 million a year earlier, as exports grew substantially, particularly in machinery & transport equipment, reaching €453 million. Imports also increased to €628 million, mainly in machinery & transport. Over the first two months, the trade gap reduced to €469.3 million, with exports rising by 10.2% and imports by 1.7%.
- Alibaba Group's Hong Kong shares surged 5.4% after founder Jack Ma endorsed the firm's current leadership in an internal memo, praising restructuring efforts. The memo comes a year after announcing plans to revamp core businesses. Alibaba slashed cloud prices to capitalise on AI demand amid struggles in the e-commerce sector due to increased competition and economic slowdown in China.
- Google unveiled new versions of its data centre AI chips, including an Arm-based central processor called Axion, aiming to rival Nvidia's offerings. Axion, to be available via Google Cloud, promises superior performance over x86 chips and general-purpose Arm chips. This move signifies Google's commitment to providing innovative computing solutions and further diversifies its cloud offerings amidst competition from Amazon and Microsoft.
- Pfizer's phase 3 trial for its Abrysvo RSV vaccine in adults aged 18-59 met endpoints, showing non-inferior immune responses compared to older adults. The vaccine demonstrated good tolerability, prompting Pfizer to seek expanded approval for ages 18 and above, aiming to address a significant unmet need pending regulatory approval.
- Moderna shares surged as much as 8% yesterday to a three-month high following positive result from an early-stage trial of its individualised cancer vaccine developed with Merck. The vaccine showed promise in treating head and neck cancer, indicating its potential effectiveness beyond melanoma. Analysts believe this validates Moderna's therapy platform.
- Boeing reported a significant drop in aeroplane deliveries for March, down to 29 from 64 a year ago, mainly due to decreased 737 MAX production amid quality checks and regulatory scrutiny. The company handed over 83 aeroplanes in the first quarter, including 66 MAX jets. Despite challenges, Boeing secured 113 new orders in March, including a significant deal with American Airlines for 85 737 MAX 10 jets. In another development, a quality engineer at the company alleged that Boeing took shortcuts to ease production bottlenecks for its 787 Dreamliner aircraft.
- Mizuho analysts revised down Apple's 2024 iPhone estimates by 7% to 217 million units, citing potential supply chain bottlenecks. They anticipate a significant drop in Q1 production (-21% Y/Y) and a cautious outlook for Q2. Despite short-term concerns, optimism remains for the iPhone 16 and AI enhancements in the latter half of the year.
- Julius Baer warns of potential headwinds for Latin American markets due to diverging growth expectations and emerging inflationary pressures. However, they maintain a positive outlook, anticipating a return to pre-pandemic growth averages of around 1.5% this year. They reiterate an Overweight rating for Latin American equities, expecting increased investor inflows and higher returns.
- Citi analysts suggest that the market is currently trading the reflation trade, with the US economic surprise index and GDP on the rise. They note that during reflation, government bonds underperform slightly, while risky assets perform well, particularly equities, despite higher-than-normal valuations in both credit and equities.
