On Thursday, US equities rebounded strongly, led by a surge in tech shares, after a nearly 1% decline the previous day. The S&P 500 rose by 0.74%, and the Nasdaq surged by 1.68%, while the Dow only lost a marginal 2 points. Tech giants like Broadcom, Apple, Nvidia, and Alphabet drove the gains. Meanwhile, the Euro Stoxx 50 fell by 0.7% to a four-week low, pressured by banks, following the European Central Bank's decision to maintain record-low interest rates amid inflation concerns.
Summary for 12.04.2024
- Asian equity markets were largely subdued on Friday amid uncertainty over Federal Reserve interest rate cuts and US inflation. Japan's Nikkei 225 rose 0.5%, supported by tech shares, while other markets saw small losses. Hong Kong's Hang Seng recorded the largest decline at 1.31%, weighed down by property shares.
- Shares in Europe are expected to bounce back from overnight losses while US equity futures remained stable ahead of the first quarter earnings season, with major banks, including JPMorgan Chase, Wells Fargo, and Citigroup, set to release results.
- Oil prices climbed, reclaiming prior losses, driven by escalating Middle East tensions, with Israel anticipating a possible Iranian attack. Ceasefire talks between Israel and Hamas failed, prolonging the Gaza conflict. Strong US inflation data dimmed hopes for Fed rate cuts, potentially impacting energy demand. On the other hand, European policymakers held rates but hinted at future cuts.
- US producer prices edged up by 0.2% month-over-month in March, marking the smallest increase in three months, falling below the expected 0.3%. Service prices saw a 0.3% rise, led by gains in various sectors like securities brokerage and investment advice. However, goods costs declined by 0.1%, primarily due to lower gasoline prices. Year-on-year, the PPI increased by 2.1%, the highest since April 2023.
- During its April meeting, the European Central Bank held interest rates steady at record highs, maintaining the main refinancing rate at 4.5% and the deposit facility rate at 4%. While acknowledging declining inflation, officials cautioned about strong domestic price pressures, suggesting a potential easing of policy restrictions contingent on inflation progress. President Lagarde emphasised future rate decisions will remain data-dependent.
- Goldman Sachs forecasts an 11% increase for the average S&P 500 equity over the next 12 months, noting less correlation among equities, offering opportunities for investors. They highlight undervalued put options and anticipate reduced retail investor activity, possibly encouraging short sellers in weak fundamental companies.
- Morgan Stanley's research highlights strong demand for Nvidia, particularly from Tesla and other non-traditional customers. Tesla's ambitious computing goals could lead to increased reliance on Nvidia GPUs. Analysts foresee Tesla potentially becoming one of Nvidia's major clients, emphasising the importance of Tesla's dataset and compute needs for future growth.
- Apple is reportedly close to producing M4 processors for Macs, incorporating AI capabilities, aiming for late 2024 and early 2025 releases. Other tech giants like Intel, Qualcomm, and Nvidia are also developing similar chips. Apple plans to showcase AI prowess and macOS integration. Expectations rise ahead of Apple's developers conference in June, anticipating AI partnerships and iOS updates.
- Ford reduced prices of select F-150 Lightning electric pickup truck variants by up to $5,500 amidst competitive EV market dynamics. Hybrid vehicles gain traction due to consumer demand for dual powertrains. Sales surged for Ford's EVs and hybrids in Q1 even though it faces competition from GM, Chinese EVs, and Tesla.
- UniCredit received approval from the European Central Bank to repurchase up to €3.085 billion in shares, marking the second phase of its buyback plan based on robust financials. Under CEO Andrea Orcel, UniCredit's shareholder-friendly approach has bolstered its share price and valuation. This follows a previous €2.5 billion tranche completed in March, alongside significant dividends totalling €8.6 billion from 2023 profits.
- AstraZeneca shareholders approved the 2024 pay policy, elevating CEO Pascal Soriot's potential remuneration to £18.9 million, despite over a third of investors opposing the significant sum. The resolution passes with 64.43% in favour, reflecting investor discontent with high executive pay amidst slower worker wage growth. AstraZeneca defends the policy, citing the need for competitiveness and leadership recognition.
- Airbus CEO Faury suggested Airbus could acquire two US and UK plants from Spirit Aerosystems if Boeing proceeds with its purchase, emphasizing Airbus's capability in wing production. The fate of these plants, with 4,000 workers, is linked to Boeing's crisis and potential supplier restructuring.
- Morgan Stanley raised Microsoft's price target to $520, predicting a potential doubling of earnings per share to $24 by 2029. They cite Microsoft's strong positioning in tech, Cloud, and AI, forecasting a 14% revenue and 16% EPS CAGR through FY29. Generative AI is expected to drive additional share gains.
- Apple's shares have declined 10.35% YTD despite a market rally. JPMorgan notes improved sentiment, attributing it to the AI-driven iPhone upgrade cycle. However, they highlight headwinds like iPhone demand and regulatory scrutiny. Bank of America underlines underestimated gross margins, expecting 180bps Product and 150bps Services margin upside over the next few years.
- JP Morgan upgraded Walt Disney to Overweight from Not Rated, with a new price target of $140, implying 20% upside. They cite Disney's strong content, improving streaming services, and robust park operations. Disney's DTC segment is expected to profit, with increased operating income from international parks. Challenges are noted in legacy media but outweighed by strategic measures.
- Bank of America upgrades Nike to Buy from Neutral, raising the price target to $113 from $110. They cite Nike's transformative efforts, low relative P/E, and bottoming estimates. Anticipated catalysts include the Olympics and Nike's upcoming Investor Day. Innovation and organisational changes are seen as crucial for sales stabilisation and growth.
- Needham & Company downgraded Airbnb from Buy to Hold, citing challenges for the company to expand beyond its core. They believe the market's view on Airbnb's potential with AI is overly optimistic. Benchmark initiated Airbnb with a Buy rating and a $190 price target, seeing long-term upside potential despite current challenges.
