U.S. Markets Experience Slight Declines
On Thursday, U.S. equity markets slipped as stubborn inflation data pushed Treasury yields to two-month highs. The S&P 500 fell by 0.21%, the Dow Jones dropped 0.14%, and the Nasdaq dipped 0.05%. A higher-than-expected Consumer Price Index (CPI) suggested cooling inflation, but a surprising rise in weekly jobless claims, potentially due to recent hurricanes, added to market uncertainty.
European Market Trends
Following the U.S. trend, the STOXX 50 closed 0.3% lower, with underperformance in tech stocks like Adyen and Prosus. However, insurance companies like Generali posted gains. In the automotive sector, BMW shares dropped by 0.8% following a 13% decline in Q3 sales. Conversely, Mercedes-Benz shares edged slightly higher despite a small drop in sales.
Asian Markets Face Sharp Losses
In Asia, markets headed for their first weekly loss in five weeks. The MSCI Asia-Pacific Index (excluding Japan) fell by 1.7%. Chinese blue-chip stocks dropped 1% on Friday, and Hong Kong’s Hang Seng Index recorded a 6.5% weekly decline—its steepest in two years. Meanwhile, Japan’s Nikkei rose by 0.6%, pushing its weekly gain to 2.6%, and South Korean shares climbed 0.4%.
European Markets Poised for Higher Open
European markets are expected to open slightly higher, with investors turning their attention to U.S. inflation data and corporate earnings. U.S. equity futures showed modest gains, with the S&P 500, Nasdaq 100, and Dow Jones futures all up 0.1%. As earnings season begins, JPMorgan, Wells Fargo, and BlackRock are set to report, though analysts expect muted performance in the banking sector. For Q3, S&P 500 earnings per share (EPS) growth is forecasted at 4.2%, a reduction from earlier estimates.
Oil Prices Ease, Weekly Gains Expected
Oil prices eased slightly on Friday after a recent rally. Brent crude fell 0.5%, and West Texas Intermediate (WTI) crude dropped 0.4%. Despite this decline, both benchmarks were on track for weekly gains of 1%-2%. These gains are driven by concerns over hurricane-related supply disruptions in the U.S. and potential geopolitical risks, such as Israel’s possible targeting of Iranian oil sites. The market remains cautious amid ongoing tensions and uncertainties surrounding U.S. oil demand.
U.S. Economic Data: Inflation and Jobless Claims
In the U.S., the annual CPI dropped to 2.4% in August, slightly above expectations, marking the lowest level since February 2021. Core CPI, which excludes food and energy, edged up to 3.3%. Additionally, jobless claims rose to 258,000, exceeding forecasts, likely reflecting the normalization of the labor market without any significant downturn. These indicators support the Federal Reserve’s “soft landing” outlook, suggesting inflation moderation and potential for further rate cuts.
ECB Signals Gradual Rate Cuts Amid Volatility
Minutes from the European Central Bank (ECB) September meeting revealed confidence that inflation will return to target levels by late 2025. However, high core inflation is expected to persist through 2024. The ECB noted that a gradual reduction in interest rates might be appropriate if inflation trends align with projections. The deposit facility rate was cut by 25 basis points in September, bringing it down to 3.5%. The ECB emphasized its data-dependent approach without committing to a specific rate path.
Tesla Unveils New Robotaxi and AI Developments
At Tesla’s “We, Robot” event, CEO Elon Musk introduced the Cybercab robotaxi, targeting production by 2026 with a price under $30,000. The robotaxi, designed without a steering wheel or pedals, is expected to have an operating cost of just 20 cents per mile. Tesla also showcased the Robovan and updated its humanoid robot, Optimus, as it continues to emphasize its shift toward AI. This comes as Tesla grapples with declining sales and rising competition.
AMD Ramps Up AI Chip Production
Advanced Micro Devices (AMD) announced plans to increase production of its new AI M1325X chip in the fourth quarter of 2024. This chip features enhanced memory and is designed to compete with Nvidia’s offerings. AMD expects to begin shipping the MI325X in early 2025 and plans to launch the next-gen MI2350 chips by mid-2025. Despite these advancements, AMD’s stock fell 4%.
Delta Air Lines Misses Q4 Guidance
Delta Air Lines provided lower-than-expected earnings guidance for Q4, predicting earnings per share of $1.60 to $1.85, compared to analysts’ estimates of $1.78. The company expects a 2%-4% revenue increase, though it faces challenges from overcapacity, which has pressured fares. Delta also dealt with the aftermath of a summer computer outage, which cost the airline around $380 million, contributing to its Q3 earnings decline—$1.50 per share, down from $2.03 a year earlier.
Automotive Struggles: Stellantis, BMW, and Mercedes-Benz
Stellantis confirmed that CEO Carlos Tavares plans to retire in early 2026 amid difficulties in the North American market. The automaker’s earnings have declined, leading to a profit forecast cut. Tavares aims to accelerate the company’s shift toward electric vehicles, with the goal of 100% electric passenger car sales in Europe by 2030. Both BMW and Mercedes-Benz faced significant challenges in Q3. BMW saw a 13% drop in sales, while Mercedes-Benz reported a 31% decline in battery electric vehicle sales. Despite this, BMW noted a 19.1% increase in EV sales.
Deutsche Telekom Accelerates Growth Plans
Deutsche Telekom announced an ambitious plan to drive revenue and earnings growth, including a €2 billion share buyback program set for 2025. The company aims to increase revenue to over €15 billion by 2027 and expects free cash flow to reach €21 billion. However, competition and regulatory risks may pose challenges.
GSK Settles Zantac Lawsuits
GSK plc shares rose by more than 3% after the company reached settlements for approximately 80,000 lawsuits related to Zantac. The company will pay up to $2.2 billion to resolve 93% of these cases, while continuing to deny liability. GSK will record a £1.8 billion charge in Q3 2024, which will be funded through existing resources.
Weak Demand for Apple’s iPhone 16
Jefferies analysts reported weak demand for Apple’s iPhone 16, highlighting shortened delivery lead times in key markets like China and the U.S. Resale prices in Hong Kong are currently below the official rates, with the popular Desert Gold variant selling at a discount. Early data indicates a double-digit decline in iPhone sales across all models. However, analysts remain optimistic about Apple’s long-term growth, citing the company’s future AI advancements.
Meta and Nike See Upgrades, Pepsi Faces Downgrade
Truist analysts raised their price target for Meta Platforms to $650, anticipating strong Q3 ad demand and 19% revenue growth for FY 2024. Similarly, Nike was upgraded to a “Buy” with a price target of $97, as analysts expect new leadership to restore wholesale relationships. In contrast, PepsiCo was downgraded to “Hold” due to aggressive pricing strategies that have diminished its appeal as a low-cost option, leading to potential volume pressures.
CVS Health and Builders FirstSource Gain Positive Outlook
Barclays upgraded CVS Health Corp to “Overweight”, citing positive margin recovery prospects for its Medicare business. Additionally, Goldman Sachs initiated coverage of Builders FirstSource, expecting it to benefit from a rebound in residential construction.
Metals and Mining Downgrades
JPMorgan downgraded several mining shares, including Anglo American and Boliden, due to limited effects from China’s recent stimulus. Analysts foresee 10%-20% downside risks for European mining stocks as trade tensions grow ahead of the U.S. elections.
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