Markets expected to bounce on tempered Middle East fears

The S&P 500 fell nearly 0.9% on Friday to below 5K, and the Nasdaq slid 2% as Nvidia and Netflix suffered amid geopolitical tensions and inflation worries. Netflix dropped 9% on weak Q2 guidance, while Nvidia plummeted nearly 10%. Dow Jones gained 211 points, led by a 6.1% rise in American Express. Procter & Gamble rose 0.5%, but Tesla fell 1.9% for a sixth straight session.  Weekly, the S&P 500 fell 3.8%, Nasdaq declined 6.1%, and Dow Jones lost 0.9%.  The Eurozone’s Stoxx 50 index dropped 0.4% to close at 4,919, marking a 0.7% decrease for the week, influenced by geopolitical tensions in the Middle East and led by losses in the tech sector. 

Summary for 22.04.2024 

• Asian equities rebounded on Monday amid easing Iran-Israel tensions, with Chinese shares rising as the PBOC kept loan rates steady. Hong Kong’s Hang Seng surged, while Japan’s Nikkei and TOPIX recovered losses. Australia’s ASX 200 and South Korea’s KOSPI also gained.  
• The relief rally spreading through Asian markets is set to sweep into Europe at the open.  US equity index futures also rose as Wall Street attempts a recovery from two weeks of losses driven by tech declines and diminishing rate cut expectations, with focus shifting to upcoming tech earnings and economic data. 
• Oil prices fell in Asian trade on Monday amid hopes of easing Iran-Israel tensions and concerns over steady US interest rates and weakening global economy. Brent crude futures for June dropped 0.8% to $86.62, while West Texas Intermediate fell 0.8% to $81.59. 
• Bitcoin completed its halving, reducing the rate of new bitcoin creation. Market reactions were mixed, with prices stable around $66,000. Halving events, occurring every four years, are seen as significant by enthusiasts but sceptics view them as speculative. Analysts differ on its impact on prices, with some expecting declines. 
• Despite oil price uncertainty and Middle East tensions, European Central Bank member Francois Villeroy de Galhau affirmed that the ECB remains committed to its first interest-rate cut in June. This stance contrasts with the Bank of England, where opinions vary between economists and investors regarding the need for rate cuts. 
• The US approval of over $60 billion in aid provides vital support to Ukraine‘s military, although it’s not expected to drastically change the course of the war. The effectiveness of the aid hinges on how swiftly it reaches the front lines, considering the package’s delay in Congress, leaving Kyiv’s forces facing critical shortages. 
• Tesla is reducing prices of some models in Germany and other parts of Europe, the Middle East, and Africa, following recent price cuts in China and the United States. In Germany, the Model 3 rear-wheel drive’s price dropped to €40,990 from €42,990. Tesla also slashed the price of its Full Self-Driving software in the US to $8,000 from $12,000. CEO Elon Musk aims to boost revenue through self-driving tech, despite regulatory challenges. 
• Salesforce has ended talks to acquire data-management software firm Informatica due to disagreement on terms. Informatica’s shares closed at $35.19 on Friday, valuing the company at about $11.2 billion. Salesforce, known for acquisitions, previously bought Tableau Software and Slack Technologies for $15.7 billion and nearly $28 billion respectively. 
• Netflix shares fell 10.9% on Friday after announcing plans to stop reporting subscriber numbers from 2025, raising concerns about future growth. Despite strong subscriber growth, Q2 revenue forecasts missed estimates, leading to a significant market valuation drop. Nonetheless, analysts at Needham upgraded the share to ‘Buy’ with a $700 price target, citing technological advancements and positive first-quarter earnings. 
• Super Micro Computer Inc. shares lost almost a fifth of their value on Friday amidst a broader decline in semiconductor shares. The sudden fall is attributed to disappointment among investors due to lack of substantive guidance in an upcoming announcement. Analysts remain optimistic about SMCI’s future, with Loop Capital raising its price target to $1,500 only last week. 
• American Express reported first-quarter profit surpassing estimates, attributed to its affluent customer base, while focusing on expanding its small business appeal, which will be outlined at its investor day. Despite economic challenges, AmEx maintains growth expectations and plans to discuss strategies for its premium consumer and small business sectors. 
• Schlumberger reported Q1 EPS of $0.75, meeting expectations, with revenue slightly above estimates at $8.71 billion, a 13% increase year-on-year. Despite a 2.1% share decline post-earnings, CEO Olivier Le Peuch highlighted strong international growth, reaffirmed 2024 revenue outlook, and announced plans to return $7 billion to shareholders, expressing optimism for future performance. 
• Procter & Gamble raised its annual profit forecast despite missing analysts’ sales expectations in the third quarter. Lower commodity costs contributed to increased bottom-line growth, but concerns linger over sluggish sales in China and soft volume trends in some markets due to geopolitical tensions. 
• Research analysts at Needham & Company advised investors to buy the dip in Taiwan Semiconductor Manufacturing, stating that the sell-off was unwarranted given the strong fiscal Q1 2024 earnings. Needham maintains a price target of $168 on TSM’s US-listed shares, implying over 27% upside, while Bank of America raised its target for TSMC’s Taipei-listed shares. 
• Morgan Stanley upgraded Shopify to Overweight from Equal-Weight, raising the price target to $85 from $74. The firm is confident in Shopify’s growth potential, particularly with its strategic moves into larger markets and international expansion, anticipating a compound annual growth rate of over 20% through 2030. 
• Deutsche Bank analysts expressed optimism about PayPal, maintaining a Buy rating and $74 price target. They believe new CEO Alex Chriss’s focus on improving pricing, reducing friction, and revitalizing Venmo could lead to positive results, anticipating stronger earnings, branded growth, and net transaction revenue in the first quarter. 
• UBS raised Berkshire Hathaway‘s price target to $481 and maintained a Buy rating, citing positive prospects for Geico and BNSF. They revised first-quarter EPS estimates upward due to improved Geico loss ratios and increased BNSF volumes, projecting solid underwriting margins and premium growth. 
• Global equity funds experienced significant outflows in the seven days through 17^th April, totaling $23.48 billion, the highest since December 2022, as investors reacted to speculation of delayed US interest rate cuts and escalating Middle East tensions. US and European equity funds saw large withdrawals, while bond funds attracted modest inflows. Precious metals and high-yield bond funds faced notable outflows. 

• In the US, this week’s focus lies on Q1 GDP growth, PCE prices, personal income, spending, durable goods orders, and key PMI data. Over 30 companies with $100 billion+ market caps will report earnings. Globally, attention is on manufacturing and services PMIs, consumer confidence, interest rate decisions in Japan, China, and Turkey, Australia’s inflation, and South Korea’s GDP growth rate.