US shares rose on Friday, driven by strong earnings from Alphabet and Microsoft. The Nasdaq climbed 2%, with the S&P 500 up 1% and the Dow Jones gaining 153 points. Investors shrugged off inflation concerns, focusing on positive earnings. Microsoft rose 1.8%, Alphabet surged 10.2%, but Intel fell 9.2% due to a disappointing outlook. Chevron rose slightly, while ExxonMobil fell. Weekly gains included 2.2% for the S&P 500 and 3.5% for the Nasdaq. Elsewhere, the Euro Stoxx 50 closed 1.4% higher on Friday and advanced 1.5% for the week as investors absorbed an ECB survey revealing that inflation expectations dropped to the lowest level in over two years.
Summary for 29.04.2024
- Asian shares mostly rose on Monday, driven by tech shares following strong Wall Street gains. Chinese markets surged due to eased property restrictions, while Hong Kong’s Hang Seng outperformed. Markets also looked forward to Chinese PMI figures for April and Japan’s industrial production and retail sales. Shares in Australia and South Korea also advanced. Meantime, Japanese markets were closed for a holiday.
- Oil prices fell in Asian trade due to concerns over higher US interest rates and a stronger dollar. Brent crude dropped to $88.53 a barrel, and WTI crude fell to $82.98. Fears of weakening demand, fuelled by US economic data, and anticipation of the Fed's meeting contributed to the decline. Geopolitical tensions, including Ukraine-Russia conflict and Israel-Hamas strife, kept supply concerns alive.
- European markets are poised for a positive start on Monday, driven by expectations surrounding central bank decisions, earnings, and economic data. Meanwhile, US equity futures edged up, particularly in the tech sector, although concerns over inflation tempered enthusiasm, with attention shifting to the upcoming Fed meeting and expectations for prolonged higher interest rates.
- The US personal consumption expenditure price index rose 0.3% month-over-month in March, in line with expectations. Services increased by 0.4%, goods by 0.1%. The annual rate edged up to 2.7%, surpassing forecasts of 2.6%. Core PCE inflation held steady at 0.3%, as expected. Food prices decreased slightly, while energy prices rose 1.2%. Annual core inflation remained at 2.8%, defying expectations of a drop to 2.6%.
- Secretary of State Antony Blinken stated that US export controls on advanced computing chips to China are not intended to hinder China's economy or tech development. While restrictions have been placed on chip exports to China, licenses were granted to Intel and Qualcomm to continue sales to Huawei, indicating a focus on security-sensitive technology.
- During an unannounced visit to Beijing, Tesla CEO Elon Musk met with Premier Li Qiang to discuss Full Self-Driving (FSD) software and data transfer permissions which are considered crucial for Tesla's China strategy. This visit follows reports of potential FSD availability in China. Additionally, it was announced that Baidu reached an agreement with Tesla, granting access to its mapping license, clearing regulatory hurdles and enhancing Tesla's driver assistance system.
- BHP Group is considering an improved offer for Anglo American after its $39 billion bid was rejected. Discussions for a revised bid are ongoing, with no decision made on size or structure yet. Anglo rejected the initial offer, saying it undervalued the company. BHP has until May 22 to come back with a formal offer.
- Deutsche Bank announced it is considering a settlement in litigation over its acquisition of Postbank, facing claims from minority shareholders of undervaluation during the takeover. The bank has made provisions of up to €1.3 billion for this case, suggesting a significant potential liability. This has resulted in uncertainty on the possibility of another share buyback in 2024.
- Apple is reportedly in renewed discussions with OpenAI to utilise its generative AI technology in upcoming iPhone features. Talks involve integrating OpenAI's technology into Apple's next iPhone operating system, iOS 18. While discussions are ongoing, Apple has not finalised agreements and may consider other providers, including Google's Gemini chatbot.
- Porsche reported a 30% decline in first-quarter operating profit, citing increased investments in its largest-ever product launch year. Despite meeting profit estimates, the German luxury carmaker beat sales forecasts. CEO Oliver Blume emphasised their strategic focus amid challenging conditions. Porsche aims to maintain profit margins despite struggling Chinese demand and a market price war.
- TotalEnergies shares rose to a new record high on Friday after reporting Q1 profit of $5.1 billion, slightly above estimates despite a 22% decline. Falling natural gas prices affected profits. Total's gearing ratio rose due to a $5.7 billion working capital outflow, but the company expects a reversal in Q2. Hydrocarbon production remains stable but is expected to dip due to planned maintenance. CEO Patrick Pouyanne announced the company is considering a possible primary listing in New York to cater to its majority of US-based shareholders, with plans to report to the board on the matter by September.
- Exxon Mobil Corp reported a 28% drop in Q1 profits, missing estimates due to weak refining margins and lower natural gas prices. Despite volume gains, lower earnings from oil and gas production and refining were offset by a doubling in earnings from the chemicals business. The company said that its acquisition of Pioneer is nearing completion.
- Chevron Corp beat first-quarter profit estimates with a $5.5 billion profit, aided by increased US production and recent acquisitions. Despite weak natural gas prices and fuel margins, Chevron's production rose 12%, with earnings from oil and gas offsetting declines in gasoline and chemicals. The proposed acquisition of Hess Corp is progressing, pending regulatory review.
- Saint Gobain shares surged over 6% Friday following its first-quarter results, which showed sequential volume improvement. While sales were €11.4 billion with a slight currency effect, like-for-like sales fell 5.8%, mainly due to European construction decline, offset by growth in the Americas and Asia-Pacific. Despite challenges, the company expects a double-digit operating margin. Jefferies maintained a Buy rating, noting a reassuring outlook for volumes and margins.
- Shares of Chinese EV companies Li Auto, NIO, and XPeng surged on Friday after Morgan Stanley analysts predicted their prices would rise over the next 15 days. The bank considers them "Research Tactical Ideas" and believes recent market trends make their short-term valuation compelling. China's subsidy announcement for vehicle trade-ins also supports sector demand.
- HSBC upgraded Snap from 'Reduce' to 'Buy', raising the price target to $15.10 following Snap's strong Q1 earnings, beating estimates. The upgrade reflects Snap's revenue growth, diversification efforts, and subscription service success. Despite optimism, HSBC notes risks including economic recovery fragility and competitive pressures from AI spending.
- Country Garden, a major Chinese property company, plans to present a debt restructuring proposal to offshore creditors in the second half of the year to counter a liquidation petition. Defaulted on $11 billion in offshore bonds, the developer faces a court hearing in May and aims to negotiate a preliminary restructuring plan by June.
- The week ahead is packed with key events and data releases. In the US, attention will focus on the Fed's interest rate decision and the labour market report. Additionally, investors will analyse ISM PMIs, JOLTs job openings, and earnings from major companies like Amazon and Apple. Globally, April inflation rates and Q1 GDP growth rates will be closely watched, along with manufacturing PMIs from several countries.
