Equities higher dspite hotter-than-expected US inflation

Equities closed higher on Tuesday despite higher CPI inflation, led by growth sectors like technology and communication services. Oracle’s strong earnings fueled a 10% surge in its shares. Treasury yields rose modestly, suggesting market confidence in the Fed’s ability to manage rates despite inflation. European markets followed suit, buoyed by a weaker UK employment report, possibly signaling future rate cuts from the Bank of England. 

Summary for 13.03.2024 

• Most Asian stocks rose slightly, led by tech shares buoyed by AI optimism after Oracle’s strong earnings. South Korea’s KOSPI gained 0.3%, while Hong Kong’s Hang Seng remained flat despite tech strength. Japanese stocks fell due to BOJ policy concerns, with Nikkei down 0.2%. Chinese markets dipped amid growth worries. 
• European shares are anticipated to stall after reaching a record high, while Inditex, VW, and Adidas are among companies expected to report earnings. In the US, equity markets are projected to open steady, with futures indicating stability despite concerns over consumer inflation. Attention is turning to upcoming factory inflation and retail sales data for additional market direction. 
• Oil prices bounced back from two-week lows, hovering around $78 per barrel, supported by optimistic global demand projections. OPEC retained its outlook for demand growth in 2024 and 2025, while raising economic growth forecasts. Unexpectedly declining US crude inventories signalled strong demand amid inflation worries and expectations of Federal Reserve rate cuts. 
• In February, the US annual inflation rate unexpectedly rose to 3.2%, slightly exceeding forecasts of 3.1%. Energy costs dropped less than expected, while prices for food, shelter, new vehicles, and medical care increased at a softer pace. Monthly inflation increased to 0.4%, primarily driven by shelter and gasoline prices. Core inflation eased to 3.8% from 3.9%, with a steady monthly rate. 
• In January, the British economy expanded by 0.2% month-over-month, rebounding from a 0.1% fall in December, matching market forecasts. The services sector contributed the most to the growth, particularly in retail trade, human health, and education. Conversely, industrial output declined by 0.2%, driven by a decrease in water supply activities. Over the three months to January, the economy shrank by 0.1%. 
• Li Auto Inc’s shares surged 4% in Hong Kong trading, outpacing local NEV peers, after reporting the third-highest number of insurance registrations for new vehicles in China, signalling strong sales. The company’s recent rollout of new models and price cuts amid a fierce price war contributed to its performance. 
• Volkswagen anticipates increased orders in Western Europe driven by new models, including electric cars like the recently launched ID.7. Despite a challenging outlook, it raised dividends and aims to cut costs by reducing administrative staff expenses. The company achieved a rise in operating return on sales for its core brand group, driven by strong revenue growth. 
• Adidas anticipates a North American sales decline in 2024 due to an overstocked market and the discontinuation of its Yeezy line. Despite disappointing profits, CEO Bjorn Gulden remains optimistic. The company plans to maintain dividends despite a net loss in 2023. Adidas aims to regain market share, focusing on popular sneaker styles like Samba and Gazelle. 
• BNP Paribas plans to intensify its cost-cutting efforts for 2022-2025, targeting an additional €400 million in efficiency gains, totalling €2.7 billion. The bank aims for a 60% payout dividend ratio over 2024-2026, totalling around €20 billion for shareholders. Despite anticipating a rise in net profit for 2024, it expects to miss its 12% return on tangible equity target until 2026, citing weak fourth-quarter results and an anticipated economic slowdown in the eurozone. 
• Arm Holdings’ shares gained 2.2% yesterday as its lockup period ended, anticipating increased trading. Softbank owns 90% of Arm, with limited public shares post-IPO. Demand for AI chip designs boosted shares by 68% post-earnings. Uncertainty looms over Softbank’s stake. Other investors like Nvidia, Google, Intel, and TSMC hold smaller stakes in the company. 
• Coinbase Global’s shares fell about 4% in after-hours trading as the company announced plans to sell $1 billion worth of special bonds targeted at major investors. An additional $150 million may be sold based on demand. These bonds offer interest payments and can be converted into cash or Coinbase equities by 2030. 
• Shares of Illumina Inc dropped 4.6% as activist investor Carl Icahn backed off from a threatened proxy battle to oust more board members. Icahn had previously expressed dissatisfaction with Illumina’s performance, particularly its acquisition of Grail. Despite dropping the proxy contest, Icahn continues with a lawsuit against Illumina directors. 
• Porsche anticipates lower profit margins in 2024 due to investment in four new models amid increased competition. While focusing on brand and pricing, the company expects a challenging market, particularly in China. Despite exceeding fourth-quarter estimates, Citi analysts find the 2024 outlook disappointing, reflecting broader concerns in the automotive industry. 
• Canaccord Genuity reiterated a Buy rating on MicroStrategy and raised its price target to $1,810 from $975 following the company’s acquisition of 12,000 bitcoins. They view MicroStrategy’s strategy of using equity sales to fund bitcoin purchases as unique and potentially accretive to share price. 
• Both Piper Sandler and Mizuho Securities raised Oracle’s price target, with Piper Sandler citing strong cloud revenue growth, emphasising cRPO uptick and stabilized IaaS growth, supporting confidence in double-digit revenue growth. Mizuho highlighted impressive Q3 results, with 53% OCI growth and a 29% increase in RPO, bolstering confidence in Oracle’s cloud trajectory and margin improvement. 
• Jefferies maintains a Buy rating on Apple with a $205 price target, adjusting iPhone sales forecasts and noting reduced expenses from cancelled projects. Despite lower revenue expectations, confidence in Apple’s long-term value persists. BofA Securities also reaffirms a Buy rating with a $225 target, highlighting Apple’s evolving pricing strategy and wide range of offerings, foreseeing continued success amidst market shifts. 
• Citi reaffirmed its Buy rating for AMD with a $192 price target, citing strong notebook shipment performance in February, driven by demand for Dell’s commercial PCs. Despite a slight month-over-month decline, February outperformed expectations, leading to a revised Q1 2024 forecast and anticipation of fluctuating monthly trends throughout the year. 
• CFRA raised LVMH Moet Hennessy Louis Vuitton SE’s price target to €913 from €790, maintaining a Buy rating. The adjustment reflects a €123 increase based on a 26.0 times multiple of the firm’s 2024 EPS estimate, supported by strong performance and the strategic acquisition of Tiffany & Co. 
• UBS maintains Nike’s Buy rating with a $138 price target, anticipating Q3 results in line with consensus despite market sentiment. Options suggest a potential +/- 6.9% price move. Meanwhile, RBC Capital lowered Nike’s target to $110, still Outperform-rated, citing updated Q3 FY2024 revenue expectations but remains confident in Nike’s execution amidst competition. 
• RBC Capital maintains an Outperform rating on ConocoPhillips, setting a $135 price target, highlighting the company’s potential for over 50% free cash flow growth by 2030. Emphasising its robust project pipeline and financial strength, RBC sees ConocoPhillips as well-positioned for shareholder value enhancement amidst commodity price fluctuations. 
• CFRA downgraded Ferrari from Buy to Hold, revising the price target to $425 from $465. The change reflects the shares’ significant appreciation, up 24% YTD, leading to a valuation in line with its impressive performance. Despite strong fundamentals, CFRA expects EPS growth to slow in 2024. 
• HSBC lowered NIO Inc.’s price target to $7.90, maintaining a Buy rating, following disappointing Q4 earnings, attributing the shortfall to increased costs and weak EV demand. Despite revised EPS estimates for 2024 and 2025, HSBC anticipates a recovery driven by refreshed models and new brand launches, affirming confidence in NIO’s prospects. 
• Carvana Co. received a significant upgrade from Jefferies, shifting from Underperform to Hold, with a boosted price target of $85, up from $30. The upgrade reflects sustained improvements in Retail Gross Profit per Unit and progress towards positive cash flow, enhancing its risk-reward profile. 
• UniCredit faces court hearings in Britain and Russia in Q2 after a Russian energy firm sued over guarantee payments, citing EU sanctions. The bank, along with Intesa Sanpaolo, still operates in Russia amid divestment challenges. Despite risks, UniCredit’s Russia business showed improved returns in 2023 despite reduced capital allocation. 
• Wolfe Research strategists anticipate a “no landing” outcome for the US economy, forecasting robust GDP growth exceeding 2% in 2024 and inflation trends remaining above 2.5%. They foresee the Fed cutting rates despite inflation, leading to a bullish market with a revised S&P 500 target of 5,300 by year-end 2024.