Following Donald Trump’s re-election, US equities surged as investors anticipated a pro-business climate under his administration. Gains spanned various sectors, from banking and steel to automakers and travel, while global markets responded with mixed reactions, influenced by concerns over tariffs and economic policy shifts.
US Markets Rally with Record Gains
US equities saw significant gains as the S&P 500 climbed 2.53%, the Dow Jones Industrial Average rose 3.57%, and the Nasdaq increased by 2.95%. This growth reflects investor optimism regarding Trump’s policies that are anticipated to favor business growth, particularly through possible tax cuts and reduced regulation. The rally was largely supported by strong gains in sectors including:
- Banking: Anticipated deregulation benefits drove strong performance.
- Steel and Automakers: Expectations for increased infrastructure spending and trade protection lifted these sectors.
- Travel: Hopes for a robust economy under Trump’s administration buoyed travel stocks.
Additionally, the 10-year Treasury yield rose to 4.43%, a reflection of inflation concerns stemming from potential tax cuts and tariffs on imports.
Key US Market Performance Highlights
- S&P 500: +2.53%
- Dow Jones: +3.57%
- Nasdaq: +2.95%
- 10-Year Treasury Yield: 4.43%
European Markets Slide Amid Tariff Concerns
In contrast, European equities struggled, with the STOXX 50 dropping 1.5% to a 2.5-month low. Investor apprehensions over potential US tariffs on European goods, particularly automobiles, weighed heavily on the market. This led to sharp declines in major European automakers:
- BMW, Mercedes-Benz, VW, and Porsche: All saw notable declines due to tariff uncertainties.
- Clean Energy and Banking Shares: Declined, with market sentiment weakened by policy concerns.
However, defense sector stocks, such as Rheinmetall and MTU Aero Engines, benefited from an expected increase in defense spending, driven by heightened geopolitical tensions.
Asian Markets Reflect Mixed Sentiment
Asian markets displayed a subdued response, with gains in some areas counterbalanced by declines in others. Optimism over Trump’s re-election initially boosted sentiment, but faded as broader concerns took hold.
- Japan: Experienced gains, supported by a weaker yen, which boosted exporters like Toyota.
- China: Inched up by 0.4% ahead of the National People’s Congress meeting, where investors anticipate additional stimulus, despite ongoing trade concerns with the US.
- Australia (ASX 200) and South Korea (KOSPI): Both fell 0.2%, reflecting uncertainty in the region.
Federal Reserve Decision and Economic Data on the Horizon
Looking ahead, European markets are expected to open cautiously, with a close eye on the Federal Reserve’s impending rate decision and upcoming economic data releases, which could shape investor sentiment in the coming weeks. US equity index futures for the S&P 500, Nasdaq, and Dow remain steady, reflecting market consolidation after recent highs.
Oil Prices Rise Amid Anticipated Chinese Stimulus and Trump’s Election Impact
Oil prices saw gains this morning, supported by expectations of further fiscal stimulus from China, the largest oil importer globally. The recent election of Trump also adds a layer of uncertainty, particularly concerning US oil production policies and potential sanctions on Iran and Venezuela, both of which could alter global supply dynamics.
China’s Export Surge Despite Domestic Demand Challenges
China’s exports jumped by 12.7% in October compared to the previous year, marking the fastest growth rate in over two years. This increase is attributed to manufacturers accelerating shipments in anticipation of possible tariffs from the US and EU. However, imports dropped by 2.3%, pointing to a continued slowdown in domestic demand. Despite typhoon disruptions, manufacturing expanded for the first time in six months, although analysts emphasize the need for additional stimulus to shift China’s economic reliance away from exports.
Corporate Earnings Highlights
Arm Holdings and Qualcomm: Earnings Reflect Investor Expectations
- Arm Holdings: Shares fell 5.1% after the company’s third-quarter revenue forecast met Wall Street expectations but failed to impress investors who had anticipated stronger AI-driven growth. The chip designer’s focus on licensing, including its v9 architecture, helped drive revenue growth in Q2, though AI revenue remains a key focus area.
- Qualcomm: Posted stronger-than-expected Q4 results, with adjusted earnings of $2.69 per share and revenue of $10.24 billion, driven by a 12% increase in handset chip sales and a 68% rise in automotive chip sales. Qualcomm also announced a $15 billion stock buyback and issued a positive Q1 outlook, which buoyed investor sentiment.
MercadoLibre, Marathon Oil, and UniCredit: Mixed Performance in Earnings Reports
- MercadoLibre: Achieved an 11% increase in net profit to $397 million in Q3, though it fell short of analyst expectations due to high logistics and credit costs. Net revenue rose 35% to $5.3 billion, with strong growth in Brazil and Mexico; however, EBIT declined nearly 30%.
- Marathon Oil: Exceeded Q3 profit estimates, benefiting from increased production and high oil demand. Total production reached 421,000 barrels of oil equivalent per day, leading the company to raise its full-year production forecast to 393,000 boepd in 2024.
- UniCredit: Surpassed Q3 profit forecasts and increased its annual profit outlook, continuing efforts to acquire Commerzbank, which is countering with increased financial targets. UniCredit’s CEO expressed optimism about the merger despite opposition in Germany.
Additional Corporate Developments: Ahold Delhaize, Novo Nordisk, and BMW
- Ahold Delhaize: Exceeded Q3 expectations, with net sales of €22 billion and operating income of €855 million. European performance led with 6% growth, while US sales increased by 1.2%. A €1 billion share buyback program for 2025 was also announced, boosting investor confidence.
- Novo Nordisk: Reported a 48% increase in sales of its weight-loss drug, Wegovy, reaching $2.5 billion. Although group sales missed expectations due to weaker Ozempic performance, Novo remains confident in scaling Wegovy production.
- BMW: Experienced a 61% drop in Q3 profit due to reduced sales in China and braking system issues, leading to a revised profit margin outlook. Shares fell to a 2.5-year low, though BMW anticipates improved cash flow in Q4 from stronger deliveries.
Sector and Stock Outlook
Nvidia’s Continued AI Leadership
Nvidia retained positive outlooks from analysts, with Goldman Sachs maintaining a $150 target and Mizuho adding Nvidia to its top picks with a $140 target, citing Nvidia’s 95% market share in data center AI chips and gaming sector dominance.
Super Micro Computer Faces Downgrade
Super Micro Computer was downgraded by JPMorgan from Neutral to Underweight, with a price target reduction from $50 to $23. This decision reflects concerns about transparency, auditor delays, and slowing demand in the server market, coupled with margin and inventory risks.
Airbus’s Long-Term Growth Potential
Citi Research raised Airbus’s target price to €184 despite reducing 2024 delivery estimates to 750 aircraft due to supply chain constraints. Citi remains optimistic about Airbus’s long-term outlook, citing strong demand and ramp-up capacity.
Future Market Projections
Wells Fargo raised its S&P 500 target to 5,830 for 2024, supported by positive economic conditions and favorable P/E ratios, while advising investors to consider small and midcap growth stocks. Evercore ISI also projects the S&P 500 to reach 6,600 by mid-2025, driven by potential deregulatory benefits and a pro-business environment under Trump’s renewed presidency.
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