Equities slip from record highs

Equities saw a mixed start to the week, with the S&P 500 and Nasdaq dipping despite recent highs, while the Dow Jones remained flat. Investors monitored economic indicators and impending Federal Reserve speeches amid inflation worries. Tech sector momentum paused post-Nvidia’s strong earnings, awaiting Thursday’s PCE report. Small-cap shares outperformed, but Berkshire Hathaway declined despite robust Q4 earnings. The Stoxx 50 also slipped marginally on Monday, with notable drops in mining stocks and utilities. 

Summary for 27.02.2024 

• Most Asian equities declined this morning amid caution ahead of key economic data releases. Japan’s Nikkei 225 retreated from record highs due to concerns about inflation and a potential shift in BOJ policy. Other markets, including Australia’s ASX 200 and South Korea’s KOSPI, also fell, while China’s rebound stalled pending PMI data. 
• European shares are poised for a calm opening as investors anticipate forthcoming economic data influencing interest-rate expectations. Meanwhile, US equity futures held steady after a minor retreat from all-time highs, with Zoom Video surging 10% on strong earnings. Attention remains on PCE inflation figures, Federal Reserve speeches, and Q4 GDP projections. 
• Oil prices rose on concerns over supply disruptions from global shipping issues and Middle East tensions. WTI crude futures held above $77/barrel amid Red Sea shipping disruptions caused by Houthi attacks. US refineries showed strong demand, while investors awaited US inflation data for Fed rate insights. 
• Japanese consumer inflation in January was slightly above expectations, with core CPI rising 2% year-on-year but slowing from December. The softer inflation reduces immediate pressure on the Bank of Japan to tighten policy, although some analysts anticipate a gradual increase in interest rates starting in April amidst signals of economic recovery. 
• Jeffrey R. Schmid, President of the Federal Reserve Bank of Kansas City, emphasised the importance of patience regarding interest rate cuts despite inflation surpassing the 2% target and a robust job market. In his first significant address since assuming the role six months ago, he advocated maintaining the current policy stance given strong demand and tight labour markets. 
• Zoom Video Communications surpassed expectations in its fourth-quarter results, buoyed by strong demand for its product portfolio amidst the embrace of hybrid work models. Shares rallied over 10% in after-hours trading. The company’s strategic focus on integrating AI features has proven successful, reflected in improved profitability. Additionally, Zoom announced a $1.5 billion stock buyback program. 
• Google Cloud criticized Microsoft for allegedly seeking a cloud computing monopoly, which could stifle innovation in technologies like AI. Google accused Microsoft of creating a closed ecosystem, forcing customers onto Azure. Google’s Vice President Amit Zavery called for antitrust action, while Microsoft defended its practices and claims healthy competition. 
• Intuitive Machines anticipates losing contact with the US moon lander Odysseus, ending its mission prematurely due to a faulty landing and limited solar power. The spacecraft’s malfunctioning laser range finders led to its sideways touchdown, hindering communication and battery recharging. Despite the setback, Odysseus marked a historic commercial lunar landing. 
• Blackwells Capital urges Disney to adopt an artificial intelligence strategy, projecting a potential 129% share price increase. While Disney has made long-term technology investments, Blackwells emphasises the impact of AI on market value. Disney refutes the proposal, citing ongoing innovation efforts and the complexity of its business synergies. 
• Berkshire Hathaway’s shares dipped over 2% yesterday as the US government warned of a potential lawsuit against its power company, PacifiCorp, regarding wildfire costs. Warren Buffett cautioned investors about future performance, citing limited investment opportunities. Despite robust annual profits, Berkshire’s market value fell short of the trillion-dollar milestone. 
• Shein, a fast-fashion company headquartered in Singapore, is reportedly considering shifting its initial public offering from New York to London due to anticipated hurdles in securing approval from the US Securities and Exchange Commission. This potential move could offer a welcome boost to the struggling London market, as per sources familiar with the situation. 
• Carvana’s shares rose almost 1% on Monday despite Kerrisdale Capital’s short position, criticising the company as “poorly capitalised” and overvalued compared to CarMax and tech firms. Kerrisdale argues Carvana’s enterprise value exceeds CarMax’s despite selling fewer units. They assigned a $16 price target, significantly lower than Carvana’s current valuation of $19 billion. 
• UniCredit is reportedly in early talks with private equity firm Warburg Pincus to acquire Vodeno, a Polish banking services company known for its cloud-based platform offering various financial services. NatWest Group and the European Bank for Reconstruction and Development are among Vodeno’s investors. UniCredit has yet to comment. 
• CFRA upgraded Citigroup Inc. shares from Hold to Buy, raising the price target to $65. Citigroup’s focus on streamlining operations and strong market sectors drove the upgrade. Despite unchanged EPS estimates, management targets improving efficiency, enhancing profitability, and free cash flow. Potential risks include a steep decline in interest rates. 
• Bitcoin surged past the $57,000 mark for the first time since late 2021, benefiting from increased investment in exchange-traded funds dedicated to the cryptocurrency. The digital currency rose by up to 4.4% to hit $57,039 before experiencing a slight decline during Asian trading on Tuesday. This year, Bitcoin’s value has risen by a third, with approximately £5.6 billion flowing into notable Bitcoin ETFs launched in the US in January.