Apple bruised

On Thursday, both US equities and Eurozone stocks surged to record highs. In the US, the S&P 500, Dow Jones, and Nasdaq all saw gains, buoyed by the Federal Reserve’s decision to maintain borrowing costs and its confirmation of three rate cuts this year. Micron Technology notably soared over 14% on strong earnings, while Reddit experienced a staggering 47.2% surge post-IPO. Conversely, Apple shares dipped 4% due to an antitrust lawsuit, while semiconductor firms like Nvidia and Broadcom enjoyed gains. Meanwhile, in the Eurozone, the Stoxx 50 index reached a 23-year peak of 5,054, fuelled by dovish signals from major central banks and positive economic data. Tech shares led the ascent, with ASML notably rising 5.6% following an upgrade from Deutsche Bank. 

Summary for 22.01.2024 

• Asian equity markets mostly fell on Friday as a wave of profit-taking hit financial markets, while investors took stock of monetary policy decisions from major central banks this week. Market participants also reacted to the latest inflation figures from Japan, which showed that the headline and core inflation rates both rose to a four-month high of 2.8% in February. Shares in Australia, South Korea, Hong Kong, and Chine decline, while Japanese equities scaled fresh all-time highs. 
• European equities are expected to pause today, while US equity futures show a mixed opening after reaching new highs. FedEx soared 13% on robust earnings, contrasting with Lululemon’s 11% tumble due to disappointing guidance, as investors assess the Federal Reserve’s unchanged interest rates. 
• Oil futures experienced a third consecutive decline this morning amid speculation of a Gaza ceasefire. The US was reportedly planning a UN resolution for ceasefire. US Secretary of State expressed optimism about peace talks in Qatar. Additionally, a strengthening dollar pressured oil prices, while US gasoline product supplies indicated potentially weaker consumption. 
• Japan’s core consumer price index, excluding fresh food but including fuel costs, rose by 2.8% year-on-year in February, matching analyst expectations. This marks the highest level since October. Following this, the Bank of Japan shifted its monetary policy, raising interest rates for the first time since 2007, while maintaining an accommodative stance. 
• The Swiss National Bank initiated its first rate cut in nine years on Thursday, reducing its key policy rate by 25 bps to 1.5%. This surprise move follows Swiss inflation dipping to 1.2% in February, within the SNB’s 0-2% target range, reflecting price stability. Policymakers anticipate sustained inflation within this range and modest economic growth, with forecasts projecting average annual inflation rates of 1.4% for 2024, 1.2% for 2025, and 1.1% for 2026, alongside a growth rate of approximately 1% this year. 
• The Bank of England has swiftly pivoted from a stance favouring higher interest rates to considering rate cuts, marking one of the most notable shifts in guidance. With data trends, market expectations, and the political calendar aligning, markets now anticipate the first rate cut in June, followed by two more by year-end, bringing rates to 4.5% by December. 
• The Central Bank of Turkey unexpectedly raised its benchmark interest rate by 500bps to 50%, signalling a commitment to further tightening if the inflation outlook worsens. This move, contrary to market expectations of a hold, aimed to address higher-than-anticipated inflation in February, exacerbated by elevated services prices. The decision reflects concerns over the Turkish lira’s sharp depreciation and aims to temper inflationary pressures until disinflation begins in the second half of the year. 
• Nike cautioned about a low single-digit percentage revenue decline for the first half of fiscal 2025, prompting almost a 6% drop in extended trading. Despite surpassing Q3 revenue and profit expectations, challenges in its direct-to-consumer strategy led to the decline. Nike aims to stimulate growth through innovation, but its share prices reacted negatively. 
• FedEx adjusted its fiscal 2024 profit forecast, raising the bottom end and lowering the top, amid cost cuts and share buybacks offsetting reduced business from the USPS. Shares surged 13% after Express unit margins exceeded expectations, driven by cost reductions. Quarterly revenue declined to $21.7 billion from $22.2 billion last year. 
• Lululemon Athletica forecasted lower-than-expected annual revenue and profit due to weakening demand for premium athleisure, particularly in North America, resulting in an 11% drop in extended trading. Despite surpassing fourth-quarter revenue expectations, its cautious outlook reflects broader consumer caution. 
• Apple is under scrutiny from regulators in the US and Europe, with concerns over antitrust violations and compliance with the Digital Markets Act. This has spooked investors, leading to a 4.1% drop in share price on Thursday, wiping out $113 billion in market value and extending the year-to-date loss to 11%. 
• Reddit‘s IPO saw shares surge 48%, signalling investor interest in promising yet loss-making firms. The company, valued at $6.4 billion, raised $748 million. Its popularity surged during the “meme-stock” saga, and it offered shares to retail investors, despite potential volatility risks. Reddit’s future trajectory remains under scrutiny post-IPO. 
• Rosenblatt analyst boosted Micron Technology‘s target price to $225, citing unprecedented HBM3e/4 memory cycle and anticipating a surge in market share to the low 20s percent. Piper Sandler and Cantor Fitzgerald maintained Overweight ratings, with Piper Sandler raising the target to $130 on strong results, and Cantor Fitzgerald upgrading to $135 driven by a robust May quarter outlook and optimistic forecasts. 
• Broadcom‘s shares surged after its AI Infrastructure Day event, with Goldman Sachs and Bernstein analysts bullish on the company. Goldman reiterated a Buy rating with a $1,550 target, praising Broadcom’s strategy and growth in AI infrastructure. Bernstein maintained an Outperform rating, citing Broadcom’s competent messaging and robust AI narrative. 
• Morgan Stanley analysts affirmed Tesla‘s long-term advantage in the EV market despite near-term challenges, maintaining a price target of $320. They highlight Tesla’s position as a relative winner, especially with new EPA regulations favouring companies with established battery metal supply chains. The bank believes Tesla could secure a larger share of the global EV market due to these dynamics. 
• BofA Securities reduced Boeing‘s 12-month target price to $210 from $225 due to reputational and operational risks, maintaining a ‘neutral’ rating. Concerns arose from ongoing 737 developments impacting production and deliveries. Despite challenges, Boeing remains a significant player in a robust civil aviation market. Boeing stock traded 0.2% higher. 
• Citi lowered Valeo SA‘s price target to €12.50 from €15.00, maintaining a Neutral rating. Factors influencing the adjustment include a slight downward revision in 2024 adjusted EBIT forecast, automotive production growth, currency fluctuations, and cost-saving measures. Valeo’s stock now carries a High Risk rating due to volatility and uncertainties. 
• BofA Securities upgraded Lloyds TSB Group from Neutral to Buy, with a new price target of $3.05, up from $2.62. The upgrade follows clarity on motor finance issues, with the bank’s RoTE and yield remaining robust despite motor finance costs, leading to a PE ratio below the sector average. 
• Raiffeisen‘s shares and bonds declined after reports that the US urged the Austrian bank to cancel a deal with a sanctioned Russian tycoon. The proposed $1.6 billion stake purchase in Strabag raised concerns about benefiting the tycoon. Raiffeisen shares fell 1.2%, and its bonds dropped, prompting caution amid geopolitical tensions.