On Monday, US equities closed flat as investors awaited key inflation data and the commencement of earnings season, with minimal movement observed in major indices, although the Nasdaq edged slightly higher. Focus shifted to inflation reports and upcoming bank earnings, while real estate, consumer discretionary, and financial sectors showed strength, contrasting with lagging performance in healthcare. Tesla saw gains following news of its robotaxi plans, while Apple, Nvidia, Meta, and Eli Lilly faced declines. Concurrently, the STOXX 50 index surged 0.8%, propelled by a 1.7% rise in mining shares, and bolstered by a 1.4% increase in automakers, attributed to robust German industrial output, notably in automotive production.
Summary for 09.04.2024
- Asian equities mostly rebounded, though gains were tempered by anticipation of US inflation data and interest rate clues. Taiwan's market surged due to TSMC's $6.6 billion subsidy by the US government. Chinese shares lagged, while Hong Kong rose on potential market support. Japan's Nikkei recovered but stayed below 40,000. Other Asian markets saw mixed movements.
- European markets head for a negative open while US equity futures held steady, with investors awaiting key inflation data amid flat performance in major indices, influenced by sectoral disparities and a cautious outlook on Treasury yields.
- WTI crude futures rose to nearly $87 per barrel after hitting $84.7 in the previous session as ceasefire talks between Israel and Hamas showed no progress. Israeli Prime Minister Netanyahu announced plans to invade the Rafah enclave in Gaza, while Hamas rejected Israeli ceasefire proposals. Risks of supply disruption increased as Iran vowed retaliation for attacks in Syria.
- The Biden administration plans to award over $6 billion to Samsung for chip expansion in Texas, aiming to boost US chip production and compete with China. This follows similar subsidies to TSMC and Intel. Samsung will invest over $44 billion as part of the deal to expand domestic chip production.
- TSMC secures $6.6 billion in funding under the CHIPS Act for TSMC Arizona, expanding its US presence with a third fab, totalling over $65 billion in investment. The move aims to meet the growing demand for advanced chips, create thousands of jobs, and bolster the US semiconductor ecosystem's competitiveness with state-of-the-art technology.
- JPMorgan Chase's board is preparing for CEO Jamie Dimon's potential departure, identifying potential successors including Jennifer Piepszak and Marianne Lake. Dimon, who has led for over 18 years, signalled a possible departure in 3-1/2 years. Daniel Pinto is seen as an interim successor. The bank also announced upcoming director retirements.
- Shell's CEO stated that the company is considering various options, including relocating its listing from London to New York, if a valuation gap persists by mid-2025. A spokesperson confirmed the CEO's remarks, noting the company's willingness to explore alternative options if necessary.
- Tesla shares rose by almost 5% yesterday following Elon Musk's announcement of a "robotaxi" unveiling on 8th August. Deutsche Bank analysts view the news as potentially altering the investment thesis, while Barclays suggests pivoting from Model 2 to a Robotaxi could negatively impact investor sentiment and create division among Tesla bulls.
- Goldman Sachs analysts predict better 12-month returns for STOXX Europe over the S&P 500, citing European equities' deep discount compared to the US. They identify opportunities in selective value cyclicals, consumer cyclicals, small caps, and anticipate benefits from a cyclical upswing and modest M&A activity. However, structural challenges remain, including low capital allocation, liquidity, economic growth, and political/regulatory concerns.
- BTIG and Oppenheimer analysts observed recent momentum in energy shares, noting further upside potential. Oppenheimer highlighted a breakout for energy amidst market activity but maintained caution on commodity super-cycles. BTIG emphasized energy's strong performance year-to-date and potential for further gains due to its recent breakout and underrepresentation in momentum funds.
- Oppenheimer analysts raised price targets for Alphabet and Meta Platforms based on generative artificial intelligence prospects. Alphabet's target increased to $185 from $172, citing positive consumer survey results and potential Gemini update. Meta's target rose to $585 from $525, driven by AI-driven revenue growth and historical seasonality indicating significant share gains.
- JPMorgan raised price targets for Spotify and Netflix $320 and $650, respectively, maintaining an Overweight rating on both ahead of their earnings. For Spotify, JPMorgan anticipates revenue growth, margin expansion, and higher free cash flow in 2024, with 1Q MAUs and premium subscribers exceeding guidance. Similarly, JPMorgan expects continued strong subscriber and revenue growth for Netflix, with the potential for further monetisation from paid sharing.
- KeyBanc analysts raised price targets for chipmakers including NVIDIA, Qualcomm, and Monolithic Power Systems, while also adjusting targets for Arm Holdings, Micron Technology, and Marvell Technology. They noted mixed supply chain findings in Asia but highlighted robust artificial intelligence demand and expected capacity growth for Chip-on-Wafer-on-Substrate technology.
- Bernstein analysts lowered Boeing's price target to $240 from $272, maintaining an Outperform rating. They cite concerns over the MAX-9 accident, factory floor conflicts, and potential share shift to Airbus due to vocal airline criticism. Despite uncertainties, analysts anticipate Boeing will maintain its position in the aviation duopoly.
