US equities closed higher on Monday, extending last week’s gains with the S&P 500 securing its seventh consecutive weekly win. The Dow Jones reached a fourth straight record high on optimism about potential 2024 rate cuts. Communication services, consumer staples, and energy shares led the gains, while utilities and real estate lagged. Despite warnings of an overbought market, positive inflation and economic data, along with a flexible Fed stance, kept the market buoyant. In contrast, the STOXX 50 declined 0.3%, impacted by losses in construction and material stocks, while oil and gas stocks rose 1.16% on Red Sea-related concerns. 

Summary for 19.12.2023 

  • Asian shares showed limited movement on Tuesday, with Japanese markets surging 1.2% after the Bank of Japan maintained its ultra-dovish stance. The Nikkei 225 rose, led by industrial and technology stocks. The Bank of Japan, while acknowledging persistent risks, provided scant cues on tightening policy in 2024. Other Asian markets were largely muted, with Australia’s ASX 200 rising 0.9% and South Korea’s KOSPI falling 0.1%. Hong Kong’s Hang Seng dropped 0.5%. 
  • European shares are poised for an uptick, while US stock futures edge lower following Monday’s gains, with investors eyeing interest rates and economic data. 
  • WTI crude futures held steady around $73 per barrel on Tuesday after a 1.5% increase in the previous session. Concerns about supply disruptions grew as Houthi militants in Yemen intensified attacks on ships in the Red Sea, leading to diversions. Notably, BP and Frontline avoided the area. Additionally, Iran reported a nationwide disruption to petrol stations due to an alleged cyberattack, while US officials plan to enhance transparency on Russian oil dealings to enforce sanctions. 
  • The Bank of Japan (BoJ) kept its short-term interest rate at -0.1% and 10-year bond yields at around 0% in the year’s last meeting, as expected. Amid high uncertainties, the central bank will patiently continue monetary easing and respond to economic developments. The BoJ aims for a sustainable 2% price stability target with wage increases, ready to take extra easing measures if necessary. 
  • In December, the NAHB/Wells Fargo Housing Market Index in the US increased to 37, up from November’s 34—the lowest in nearly a year—and beating expectations of 36. This uptick, the first in five months, is attributed to declining mortgage rates, fuelling buyer interest and raising sales expectations. NAHB Chief Economist Robert Dietz anticipates increased homebuyer demand in the coming months. 
  • Germany’s Ifo Business Climate indicator unexpectedly dropped to a three-month low of 86.4 in December 2023, down from a revised 87.2 in November and below the forecasted 87.8. Companies turned more pessimistic about future expectations (84.3 vs 85.1) and current business situations (88.5, the lowest since August 2020, vs 89.4). The data suggests a weak economy with a demand problem, potentially indicating a slight GDP contraction in Q4, according to Ifo President Clemens Fuest. 
  • Bank of America (BofA) revised its economic outlook for the US, anticipating faster growth and lower inflation. BofA analysts expect the US Federal Reserve to cut rates four times in 2024, with 25bp cuts in March, June, September, and December. They project a federal funds rate target of 4.25-4.50% in December 2024. 
  • Apple is temporarily stopping sales of its Series 9 and Ultra 2 smartwatches in the U.S. due to a patent dispute with Masimo, following a U.S. International Trade Commission (ITC) order. The ITC ruling, under review until December 25, could ban Apple from importing its watches. Apple plans to comply if the ruling stands, impacting its global smartwatch market share of about a quarter. Masimo is open to negotiations, and Apple intends to appeal. The ban could take effect on December 26. The dispute centers on the blood oxygen feature technology. 
  • Japan’s Nippon Steel has clinched a $14.9 billion deal to buy U.S. Steel, triumphing over competitors such as Cleveland-Cliffs and ArcelorMittal. The $55 per share offer, reflecting a 142% premium to August 11, suggests confidence in U.S. Steel’s potential benefits from President Biden’s infrastructure bill. 
  • Enphase Energy is undergoing a significant workforce reduction of approximately 10%, along with restructuring efforts to enhance operational efficiencies and align with market demands. The plan includes ceasing operations at manufacturing facilities in Romania and Wisconsin and consolidating microinverter manufacturing in the United States. Anticipated restructuring and impairment charges are estimated at $16 million to $18 million, with the majority expected in Q4 2023. The company aims to substantially complete the restructuring by the first half of 2024. 
  • Amazon is reportedly in discussions to invest in Diamond Sports Group, a regional sports programmer that filed for bankruptcy. The deal could involve a strategic investment and a multi-year streaming partnership. If successful, Amazon’s Prime Video platform might become the streaming destination for Diamond’s games.  Diamond has local rights to about half the teams in Major League Baseball, a third of the National Hockey League teams, and more than 40 major sports teams across the US.  The financial terms of the potential investment are not yet clear. 
  • Adobe abandoned its $20 billion deal to acquire Figma, a cloud-based designer platform, citing obstacles in securing antitrust approvals in Europe and the UK. The termination comes after regulatory concerns were raised about the potential negative impact on software used by UK digital designers. Adobe will pay a $1 billion termination fee to Figma. 
  • Goldman Sachs downgraded Nokia shares from Buy to Neutral, citing diminished confidence in Nokia’s product roadmap and competitive standing. The downgrade follows AT&T’s shift to ORAN-based networks, predominantly supplied by Ericsson. Nokia’s recent adjustment of its long-term EBIT margin target, reflecting Mobile Networks segment headwinds, also contributed to the downgrade. 
  • Raymond James downgraded Palo Alto Networks to Market Perform from Outperform, citing stretched valuation, an anticipated plateau in financing receivables, and increased pressure to close deals amid industrywide digestion. The analysts noted Palo Alto’s new channel strategy and acknowledged the risk but deemed the risk/reward in the stock less favourable, prompting the downgrade. 
  • HSBC analysts initiated coverage on Thermo Fisher Scientific and Teva Pharma with Buy ratings and assigned a Buy rating to Danaher. They downgraded Bayer AG, Demant, Coloplast, and UnitedHealth Group to Reduce from Hold. AbbVie, Novartis, and Sartorius were lowered to Hold from Buy. Analysts cited various reasons, including dividend risk, normalized tailwinds, margin concerns, and regulatory risks. 
  • Netflix shares rose over 3% yesterday after Morgan Stanley increased its price target to $550 from $475, citing an attractive risk/reward profile, boosted confidence in content spending, and reduced competitive pressure. The bank also noted Netflix’s currency hedging and raised net adds forecast for 2024, emphasizing the streaming giant’s unmatched scale, free cash flow, and potential benefits from gaming investments. 
  • Farfetch shares plunged 35% in after-hours trading on Monday as Coupang announced its acquisition of Farfetch’s business and assets. The move positions Coupang as a global leader in the $400 billion personal luxury goods segment. The deal provides Farfetch access to $500 million in capital, allowing it to continue offering exclusive brands and advanced technology. 
  • Wolfe Research upgraded Salesforce to Outperform from Peer Perform with a $315 price target, stating that 2024 is the year to own Salesforce. The analysts believe Salesforce’s growth has bottomed, with double-digit growth ahead, driven by pricing increases, product cycles, and AI. They also see a commitment to margin leverage and stable leadership.