Markets brace for a positive open

On Friday, the US market closed with the Dow Jones reaching a record high of 40,003 points, up 135 points, while the S&P 500 edged 0.1% higher and the Nasdaq dipped slightly. Investors focused on interest rates and inflation, with Walmart and Caterpillar boosting the Dow, while meme shares like GameStop and AMC declined. For the week, both the S&P 500 and Nasdaq marked their fourth consecutive winning week since February, while the Dow recorded its fifth positive week in a row. The Stoxx 50 closed down 0.2% on Friday at 5,063, marking its second consecutive session of decline as investors evaluated corporate news and ECB rate cut expectations. For the week, the Stoxx 50 ended relatively flat amid mixed sectoral performances and cautious remarks from ECB officials regarding future rate cuts. 

Summary for 20.05.2024 

• Asian equity markets climbed on Monday, mirroring gains on Wall Street as the Dow surpassed 40,000 for the first time. China’s central bank maintained its one- and five-year loan prime rates at 3.45% and 3.95% respectively, meeting expectations. China also unveiled measures to bolster its ailing property market, prompting shares in Australia, Japan, South Korea, Hong Kong, and China to rise. 
• European markets are poised for a positive open, continuing last week’s momentum, while US equity futures are expected to open slightly higher on Monday, buoyed by strong corporate earnings and expectations of Federal Reserve rate cuts following softer-than-expected US inflation data. 
• Oil prices opened higher this morning, propelled by ongoing gains and geopolitical concerns following a helicopter crash involving Iranian President Ebrahim Raisi. The US government disclosed a significant oil purchase for its Strategic Petroleum Reserve, while OPEC reported production surpassing caps but maintained optimistic demand projections for 2024 and 2025. Investors await OPEC’s meeting on 1^st June for crucial output policy decisions. 
• Iran’s President Ebrahim Raisi and the country’s foreign minister died in a helicopter crash in the northwest, leaving Iran without two influential figures amid heightened foreign tensions and domestic discontent. Raisi, 63, was known for his conservative stance and loyalty to Iran’s supreme leader, Ayatollah Ali Khamenei. 
• Ryanair Holdings PLC reported this morning a 35% increase in pretax profit to €2.13 billion for the financial year ending March 31, with revenue climbing 25% to €13.44 billion. Despite challenges like air traffic control strikes, the company saw a 9.0% rise in customers to 183.7 million and announced a €700 million share buyback program. 
• RBC Capital Markets raised Microsoft‘s price target price to $500, citing positive investor feedback and highlighting AI’s role in driving growth, supported by advancements like GPT-4o and Azure’s expansion. Macquire Equity Research also raised their price objective to $475, emphasising global distribution and gaming opportunities, especially with Activision Blizzard. 
• Robinhood shares surged over 12% on Friday, after Bank of America Securities upgraded its rating to “Buy” from “Underperform.” Analysts noted increased retail investor engagement and accelerating organic growth, with attractive valuation following strong quarterly earnings driven by robust cryptocurrency trading volumes.  
• GameStop shares plummeted almost 20% on Friday, as the company reported preliminary Q1 sales below analyst estimates. Net sales are projected between $872M to $892M, down from $1.237B last year, with a net loss of $27M to $37M. The company also filed for a mixed-shelf offering and may sell up to 45M shares. 
• Richemont reported a slowdown in Q4 sales growth due to sluggish demand in China, yet Switzerland-listed shares rose as the 2% uptick in net sales beat expectations. For the fiscal year, sales jumped 8% but pre-tax earnings missed projections. CEO Jerome Lambert will become COO, with Nicolas Bos appointed CEO. 
• Morgan Stanley downgraded Baidu Inc citing a weak outlook for advertising revenues and slow AI monetization. Despite boosts from AI initiatives, higher expenses offset gains. Cloud services growth is expected, but near-term catalysts for share gains are limited. Baidu’s diversification efforts include a partnership with Tesla for navigation in China. 
• The Federal Reserve and other US regulators are considering reducing a mandated 20% increase in capital for major banks following lobbying efforts by CEOs like JPMorgan Chase’s Jamie Dimon. The proposal aims to make banks more resilient, but banks argue it’s unnecessary and could lead to product and business overhauls. 
• In the week ahead, investors will focus on US Fed speeches, FOMC meeting minutes, and economic indicators like S&P Manufacturing and Services PMI. Major firms including Palo Alto Networks and Lowe’s will report earnings. Globally, interest rate decisions in China, New Zealand, South Korea, and Turkey, along with inflation rates and PMI data, will be watched closely.