US equities closed mixed, with the S&P 500 and Nasdaq gaining ground while the Dow slipped, continuing its three-day decline. Investors remained attentive to Federal Reserve Chair Jerome Powell's commentary on future monetary policy, emphasising that rate adjustments would only occur with sustained evidence of decreasing inflation. Meanwhile, in Europe, equities closed higher fueled by positive economic data. Financial shares and German auto giants spearheaded gains, with Siemens affirming no intention to bid for Renishaw.
Summary for 04.04.2024
- Asian shares mostly rebounded on Thursday, recovering from recent losses, although sentiment remained fragile after a devastating earthquake in Taiwan. Mixed signals on US interest rate cuts also influenced markets, with trading volumes subdued due to holidays in China and Hong Kong. Japanese equities rose, benefiting from yen weakness, while Indian markets focused on the upcoming RBI meeting and elections.
- European equity futures hold steady as traders anticipate insights into the European Central Bank's March rate decision, while US equity futures edge up, with investors evaluating the previous session's mixed market performance and ongoing assessment of Federal Reserve monetary policy.
- Oil prices surged to five-month highs in Asian trade, driven by geopolitical tensions in the Middle East and OPEC+ maintaining production cuts. Threats from Iran and ongoing conflicts in the region fuelled concerns of supply disruptions. Positive economic data from China also boosted prices, though mixed US inventories tempered gains.
- Fed Chair Jerome Powell, speaking at Stanford University in opening remarks before a question-and-answer session, stated that while most FOMC participants foresee lowering interest rates at some point this year, it won't happen until there's greater confidence in sustained inflation decreases. Recent solid economic data hasn't significantly altered the Fed's outlook, maintaining a cautious stance on monetary policy adjustments.
- The US ISM Services PMI fell to 51.4 last month from 52.6 in February, signalling the weakest growth in three months. Slower new order growth, declining inventories, and faster supplier deliveries were noted, while employment continued to contract. Concurrently, private sector employment surged by 184K, driven by services, with significant pay gains in construction, financial services, and manufacturing, reflecting ongoing inflation concerns. Chief Economist Nela Richardson highlighted increasing pay despite cooling inflation.
- In March, the Euro Area consumer price inflation fell to 2.4%, a 28-month low, below expectations, with the core rate at 2.9%. Meanwhile, the unemployment rate held steady at 6.5% in February, slightly above forecasts, with Spain reporting the highest jobless rate and Germany the lowest, while youth unemployment remained unchanged at 14.6%.
- Atlanta Fed President Raphael Bostic asserted that the Fed should delay cutting its benchmark interest rate until the year's end, citing uncertainty amid elevated inflation and a robust labour market. While some officials anticipate multiple rate cuts, Bostic suggests a single cut in 2024 may suffice.
- Spotify plans to raise prices for its audio service in key markets for the second time in a year, aiming for long-term profitability. The streaming giant will increase prices by about $1 to $2 a month in five markets by the end of April, including the UK, Australia, and Pakistan. Additionally, a new basic tier priced at $11 per month, excluding audiobooks, will be introduced.
- At Disney's AGM, CEO Bob Iger and board members retained their positions, defeating activist investors Nelson Peltz and Blackwells Capital's bid for board seats. The battle centred on Disney's performance in streaming and succession planning. Iger received notable endorsements, and Disney's shares have rebounded this year.
- HSBC Chairman Mark Tucker confirmed at the shareholders' meeting in Hong Kong that there are no plans for a spin-off of its Asian business, citing lack of shareholder appetite demonstrated in the previous AGM. Despite a surge in 2023 pretax profit to $30.3 billion, HSBC will focus on strategic measures like buybacks and dividends.
- Eli Lilly's weight-loss drug Zepbound faces short supply of its 5 mg and 12.5 mg doses until April-end, as per the US FDA's website, amidst soaring demand. Similarly, limited quantities of its diabetes drug Mounjaro are available. The surge in demand reflects the popularity of GLP-1 agonists for diabetes and obesity treatment.
- Exxon Mobil anticipates a drop in Q1 operating results compared to the prior quarter, attributing it to weaker oil and gas prices alongside significant losses in fuel derivatives. Despite previous strong financial performance, the company expects a decline in profits, with natural gas prices hitting multi-year lows.
- Samsung Electronics is expected to report a nearly nine-fold increase in first-quarter profit, driven by a rebound in semiconductor prices, particularly in memory chips. Despite continued losses in chip design and manufacturing, robust demand and higher smartphone prices contributed to the surge in earnings.
- Ulta Beauty's shares plunged up to 14.5% as executives warned of a demand slowdown and intensified competition in the first quarter, leading to declines in peers like elf Beauty, Coty, and Estee Lauder. Ulta anticipates moderate mid-single-digit growth after years of strong expansion, citing challenges in prestige makeup and haircare.
- Apple is reportedly delving into personal robotics, with engineers working on concepts for a mobile robot and a sophisticated table-top device. The move aims to explore new revenue streams following the discontinuation of its electric vehicle project, potentially solidifying its presence in consumers' homes leveraging AI advancements.
- Redburn Atlantic analysts upgraded UPS shares to Buy, raising the price target to $180, citing higher earnings estimates. They anticipate positive volume growth in Q224, supported by stable macroeconomic indicators. UPS aims for a 13% EBIT margin within three years, through workforce reduction and operational enhancements, potentially boosting the equity value.
- BofA Securities reaffirmed a Buy rating on Taiwan Semiconductor Manufacturing Co. Ltd. despite Intel's plan to decrease outsourced wafers. The analyst believes TSMC's long-term growth outlook remains strong, supported by its structural growth drivers and uncertainty surrounding Intel's foundry improvements, which could benefit TSMC.
- Wells Fargo lowered Alphabet Inc. price target to $141 from $144, maintaining an Equal Weight rating. Recent legal settlements, including the Incognito Privacy case, incurred one-time expenses, influencing the revised outlook. The adjustments account for the financial impacts of these settlements and operational changes, reflecting a neutral stance.
- HSBC analyst lowered Tesla's share price target to $138, maintaining a "Reduce" rating due to concerns over project timelines like Dojo and Full Self-Driving. Tesla's first-quarter delivery shortfall, potential Model Y refresh delays, governance issues, and Elon Musk's cautious remarks contribute to the analyst's cautious outlook.
- Wolfe Research maintained an underperform rating for Intel with a $31.00 price target, citing concerns over startup costs and outsourcing impacting profit margins through 2025. While costs are expected to peak in CY24, significant margin improvement isn't anticipated until CY26 due to processor production transitions.
- BofA Securities maintained a Buy rating for Amazon.com with a $204.00 price target. Amazon is discontinuing Just Walk Out technology in most Fresh stores, opting for Dash Carts instead, following customer preference for real-time feedback. This shift reflects Amazon's evolving grocery strategy and potential for increased advertising revenue.
- Barclays analysts upgraded European equitiies to Overweight, citing catch-up potential due to factors like domestic growth, signs of life in China, and potential rate cuts by ECB and BoE. They raised their STOXX Europe 600 Index target to 540 and added to pro-cyclical stance, favouring commodities, banks, and small caps amidst reflation trade momentum.
