US equities closed lower on Monday, extending losses from the previous week, with the Dow Jones down 248 points, the S&P 500 falling 1.2%, and the Nasdaq slipping 1.8%. March retail sales surpassed expectations, suggesting steady interest rates. Concerns over potential Israeli retaliation following Iran's attacks weighed on markets. Earnings reports showed mixed results, with Goldman Sachs rising but Tesla, Apple, and Salesforce declining. Meantime, in the Euro Area, the Stoxx 50 index rose 0.4% yesterday as investors processed statements from ECB officials, including the possibility of multiple interest rate cuts this year, alongside corporate actions including Adidas’ upgrade by Morgan Stanley and BNP Paribas’s acquisition of a stake in Ageas.
Summary for 16.04.2024
- Asian equities nosedived on Tuesday amid global unease over Middle East tensions and escalating concerns about rising US interest rates. Chinese shares showed relative resilience, buoyed by better-than-expected Q1 GDP growth, though fears of prolonged rate hikes lingered. Investors remained cautious, with Japanese, South Korean, and Australian equities taking significant hits.
- European equity markets are set to extend declines while US equity futures steadied after Monday's losses, with investors awaiting earnings reports from Bank of America, Morgan Stanley, and United Airlines on Tuesday.
- Oil prices surged in Asian trade nearing six-month highs due to concerns over Middle East tensions after Iran's attack on Israel. Reports of Israel considering an imminent response heightened fear of further conflict. Iran expressed reluctance for escalation. Markets monitored China's GDP data for oil demand cues amidst dollar strength amid expectations of no Fed rate cuts in H1 2024.
- China's economy outperformed expectations in Q1 2024, with GDP expanding by 5.3% year-on-year, surpassing forecasts of 4.8% and improving from the previous quarter's 5.2%. Quarter-on-quarter growth reached 1.6%, contrasting with a 1% increase in the prior month. However, industrial production grew by 4.5% year-on-year in March, missing expectations of 5.4% and slowing from the 7% seen in the first two months. Similarly, retail sales expanded by 3.1% year-on-year in March, falling short of the anticipated 5.1% and sharply decelerating from the 5.5% in the previous two months.
- US retail sales surged by 0.7% month-over-month in March 2024, surpassing forecasts of 0.3%, with notable increases in non-store retailers, gasoline stations, miscellaneous store retailers, and building materials. Core retail sales, excluding certain sectors, rose 1.1%, indicating robust consumer spending and potentially impacting GDP calculations.
- Mary Daly, president of the San Francisco Federal Reserve Bank, stated there's "no urgency" to cut US interest rates despite inflation surpassing the Fed's target. With a strong economy and labour market, she emphasised the importance of not acting urgently when it's not required, indicating a cautious approach.
- Goldman Sachs reported a 28% increase in profit, beating expectations with earnings per share reaching the highest since late 2021. The surge was driven by a revival in underwriting, deals, and bond trading, reflecting improving conditions for dealmaking. Revenue from investment banking and trading segments rose notably, driving the strong performance.
- Charles Schwab reported first-quarter revenue surpassing Wall Street expectations, driven by increased asset management fees and record-high client assets of $9.1 trillion. Despite a 15% decline in overall profit due to higher interest expenses, the brokerage saw a $96 billion increase in core net new assets, reflecting a market rebound.
- Tesla shares plunged over 5% on Monday as two top executives, notably Drew Baglino, Senior VP of Powertrain and Energy left the company. Wedbush analysts highlighted Baglino's departure as a significant setback, reflecting Tesla's challenges in the EV market. The move coincides with Tesla's plans, reported by Electrek, to trim its 140,473 global workforce by 10%.
- Lockheed Martin secured a $17 billion contract from the US Missile Defence Agency to develop Next Generation Interceptors (NGI) against intercontinental ballistic missile threats. The NGI aims to modernise the Ground-Based Midcourse Defence program. Lockheed's win follows challenges in other defence projects, boosting its outlook amidst supply-chain issues.
- Lynx Equity Strategies reiterates a $220 price target on Apple, highlighting its advanced AI strategy. Despite Q1 iPhone shipment decline of 10%, aligned with consensus, the ASP growth suggests a less severe revenue decline of 7.5%. Analysts anticipate a rebound in iPhone production, projecting 3% revenue growth for FY 2024.
- Citi analysts initiated upside catalyst watches for NVIDIA, Microchip Technology, and Intel. For NVIDIA, it's the pullback post-GTC event; for Microchip, upcoming earnings amid YTD underperformance; and for Intel, the earnings amidst a 29% YTD stock decline, with positive notebook data potentially driving upside.
- Guggenheim analysts downgraded ServiceNow from Buy to Neutral due to its significant rally, leading to high valuations. They cited challenges in Q1 2024 projections, weaker ACV from the US Federal segment, and mixed feedback from field checks. Despite ServiceNow's quality, analysts see limited upside given current levels.
- Bank of America Securities upgraded Cisco Systems to Buy from Neutral, citing three growth drivers: Splunk, Security, and artificial intelligence. They anticipate networking to rebound with Cisco's gains in AI buildouts, security growth to accelerate, and synergies from Splunk's acquisition. Analysts see a favourable setup for CSCO shares amid improved fundamentals.
- Macquarie Equity Research resumed coverage of China EV shares, rating Li Auto Inc. Outperform and NIO Inc. and XPeng Inc. Neutral. They emphasised the importance of the Rmb200-300k segment and the need for EV players to chase volume in the mass market. Li Auto was favoured for its product positioning in EREV adoption.
- Goldman Sachs analysts anticipate better macroeconomic momentum to bolster European earnings releases in the first quarter. Despite downward revisions in earnings expectations, they expect top-line growth to drive earnings, especially in cyclical sectors like energy. Overall, they foresee room for positive commentary and potential upgrades to 2024 guidance.
- Goldman Sachs also anticipates a strong recovery for Chinese equities in Q1 2024, with a focus on alpha sectors like consumer technology and internet stocks. Despite risks such as slowing economic growth and US-China tensions, they see potential upsides, emphasising shareholder returns and sectoral preferences for better growth prospects.
