Markets brace for February inflation data

US equity markets closed mixed on Monday, with the S&P 500 and Nasdaq 100 declining by 0.1% and 0.4% respectively, while the Dow Jones edged 47 points higher. The previous week’s record highs rally cooled off amid cautious sentiment ahead of the US CPI report. Tech equities, including Super Micro Computer and Nvidia, experienced declines, while Moderna surged following positive news on its skin cancer vaccine study. Meanwhile, in Europe, the Stoxx 50 index also experienced a 0.5% decline, mainly attributed to a 2.1% drop in technology equities. Austria’s Raiffeisen Bank and Telecom Italia saw significant decreases of 7.4% and 4.4% respectively, due to concerns over potential US sanctions and post-sale debt levels. 

Summary for 12.03.2024 

• Most Asian markets traded cautiously on Tuesday ahead of US inflation data, with Japanese equities leading losses amid speculation of a Bank of Japan interest rate hike. Chinese markets hovered near four-month highs, but doubts lingered over economic recovery. Hong Kong’s Hang Seng rose slightly, while Australian and South Korean shares remained steady. 
• European shares are on track for gains while US equity futures rose slightly, boosted by strong earnings from Oracle, while investors await key inflation data that could influence the Federal Reserve’s rate cut outlook. 
• Oil prices edged up in Asia before US inflation data and an upcoming OPEC report. Mixed demand signals, particularly from China, affected markets. Expectations of increased US demand countered concerns. Geopolitical tensions in the Middle East continued to influence sentiment amid OPEC’s production cuts. 
• Oracle announced a joint venture with Nvidia, driving shares up by over 14% in after-hours trading, after beating profit estimates. The company aims to reinvent itself as a cloud provider, leveraging partnerships with Microsoft and Nvidia. Despite slightly lower revenue, strong performance obligations hint at promising future results, although revenue growth forecasts fell short of analyst expectations. 
• Apple shares rallied over 1% following BofA analysts’ report of a 15% year-on-year rise in global App Store revenue for February, with China up 10%. BofA maintains a Buy rating and $225 price target, citing a robust iPhone cycle driven by GenAI. Evercore ISI also reaffirmed an Outperform rating, foreseeing AI-enabled tools enhancing demand and potentially raising average selling prices. 
• Walt Disney countered Nelson Peltz and Trian Fund’s push for board seats with a video, accusing Peltz of attacking companies and suggesting his candidacy is driven by vanity. Trian defends its stance, citing Disney’s poor performance. Meanwhile, CMB International Securities initiated coverage on Disney with a Buy rating and a $142 price target, citing strong IP and anticipating growth in streaming and sports sectors, supported by favourable Q1 results and strategic initiatives. 
• Taiwan Semiconductor has outperformed the S&P 500, rising over 29% YTD. Bernstein forecasts a 17% upside from current levels, citing robust earnings growth and margin outlook. Despite challenges, including depreciation costs, they anticipate higher gross margins driven by revenue growth and operating leverage. Increased capital expenditure and significant free cash flow growth are also expected. 
• Cantor Fitzgerald analysts raised NVIDIA’s price target to $1,200 from $900, maintaining an Overweight rating, while dubbing CEO Jensen Huang the “Soothsayer of Santa Clara” ahead of the GTC conference. TD Cowen analysts highlight healthcare as a significant future opportunity for NVIDIA, citing potential revenue exceeding $1 billion and a market opportunity of tens of billions over time. 
• Oppenheimer analysts project Netflix’s revenue growth driven by stricter password sharing rules, advertising initiatives, and optimized subscriber plans. They anticipate a 4% increase in average revenue per membership in 2024, supported by recent price hikes. Despite dominance, risks like content costs and execution challenges persist. The analysts raised their price target for Netflix to $725 from $615. 
• Deutsche Bank adjusted Tesla’s price target to $218, down from $250, maintaining a Buy rating. The revision is due to lower Q1 2024 delivery and earnings forecasts, citing production challenges, global EV demand softening, and margin pressure from price reductions. Slower Model 3 ramp-up and Cybertruck production hinder efficiency gains. 
• Guggenheim analysts designated Nike as their “best idea,” citing a favourable risk/reward profile. Guggenheim reiterated a Buy rating with a $130 target price, emphasising potential operating margin expansion and revenue growth, particularly driven by new product releases and the Jordan brand’s strength. 
• Citi slightly lowered Adobe’s price target to $628 from $632, maintaining a Neutral stance. Despite a solid first fiscal quarter expected, concerns over OpenAI’s Sora model impacting competition have influenced Adobe’s underperformance compared to peers. However, immediate financial impact isn’t anticipated, and Digital Media business growth potential persists with cautious guidance adjustments. 
• TD Cowen raised Novo Nordisk’s share price target to DKK1,054.00 with an Outperform rating following FDA approval of Wegovy’s expanded label. The label now includes Wegovy’s ability to reduce cardiovascular risk in individuals with obesity and cardiovascular disease, based on positive results from the SELECT trial. 
• Bernstein upgraded ASML Holding NV with a higher stock price target of €980.00, citing confidence in its competitive edge and progress with High NA EUV technology. ASML’s success in China raises questions about future trends, but its unique offerings and strategic roadmap indicate a positive outlook for performance. 
• Citi maintains a Buy rating on Continental AG despite the unexpected departure of the CFO, set for December 2024. CEO and auto-tech CEO contracts offer stability. The search for a successor is ongoing, with emphasis on automotive electronics expertise. The transition period aligns with Continental’s turnaround strategy, ensuring continuity. 
• Societe General analysts downgraded Bristol-Myers Squibb to hold from buy, cutting its price target to $51 from $85, citing concerns over revenue growth and margin pressure due to expiring drug patents. They anticipate slower top-line growth, leading to increased investment to replenish the drug pipeline and potential earnings impact.