On Wednesday, the US equity market extended its rally, reaching a two-month high as positive economic indicators, including better-than-expected retail sales, and cooling producer prices, fuelled investor optimism. The S&P 500 climbed 0.2%, the Dow Jones Industrial Average rose 0.5%, and the Nasdaq Composite edged up 0.1%. Retail and financial sectors were among the strongest performers, while energy shares lagged due to a significant drop in crude oil futures. Additionally, the House’s approval of a bill to avert a government shutdown added to the positive sentiment. Elsewhere, European shares also closed higher yesterday, with the Stoxx 50 up 0.6% to its highest level since August, as strong performances from key manufacturers Volkswagen, Siemens, and luxury giant LVMH contributed to the positive market sentiment. 

Summary for 16.11.2023 

  • Asian equity markets declined on Thursday, reversing recent gains as strong US retail sales data lifted Treasury yields. Concerns over the Chinese property market, particularly declining house prices, contributed to the overall cautious sentiment, with major indices in China, Hong Kong, and other Asian countries experiencing losses. The impact of high-level US-China talks, and President Biden’s characterisation of President Xi Jinping as a “dictator” added to the uncertainties in the region’s markets. 
  • European shares are anticipated to dip slightly at the open, while US equity futures are expected to open lower as markets aim to consolidate recent gains. Concerns about weak corporate guidance, particularly from Cisco and Palo Alto Networks, may impact trading sentiment.  
  • Oil prices extended losses in Asian trade this morning, driven by a larger-than-expected weekly build in US crude stockpiles and signs of easing demand in China, market the fourth consecutive week of decline amid concerns over increased inventories and weakened economic conditions. 
  • US President Joe Biden said talks with Chinese counterpart Xi Jinping had yielded progress in repairing strained ties in the bilateral relationship, hailing agreements to restore high-level military communications, combat fentanyl and open a dialogue over artificial intelligence. China described the talks as a “candid and in-depth exchange of views,” according to a statement released by the nation’s Foreign Ministry. At the conclusion of his press conference, however, Biden said he still believed his Chinese counterpart Xi Jinping was a dictator. 
  • China’s new home prices fell for the fourth consecutive month in October, dropping 0.3% month-on-month, signalling a broader weakening in the real estate sector amid regulatory crackdowns and developer challenges. Of the 70 cities surveyed, 56 reported declines, the most since October 2020, reflecting ongoing challenges despite government measures to prop up the property market. 
  • Yesterday’s economic data revealed that US retail sales experienced a smaller-than-expected decline in October of –0.1%, with prior months being revised higher, signalling continued consumer resilience. Additionally, producer prices unexpectedly dropped in October by the most since April 2020, reinforcing a disinflation trend and supporting the notion that the Federal Reserve may conclude its tightening campaign. 
  • The US government funding bill, passed by the House yesterday, received approval from the Senate earlier this morning, reinforcing expectations for President Biden’s endorsement before the 17th of November deadline. While it addresses immediate market concerns by extending funding for various government programmes, it grants lawmakers a little over two months’ breathing room until the next deadline on 19 January 2024. 
  • The Euro Area’s economic growth forecast for 2023 has been revised down to 0.6%, citing challenges like high inflation, rising interest rates, and weak external demand, according to the European Commission’s Autumn 2023 Economic Forecast. Germany is expected to contract by 0.3% this year, while Spain, France, and Italy are projected to see varied growth, and inflation is forecasted at 5.6% for 2023. 
  • The UK’s inflation rate dropped to 4.6% in October, below expectations of 4.8%, reaching its lowest point since October 2021, driven by reduced energy prices following regulatory adjustments. Declines were observed in housing and utilities, with the cost of gas and electricity experiencing the most substantial fall since January 1989, contributing to an overall easing in various consumer price categories. 
  • Cisco Systems reported a strong fiscal first-quarter profit of $3.64 billion, beating Wall Street expectations, and revenues of $14.67 billion. Despite the positive results, Cisco’s shares dropped approximately 11% after hours due to lowered full-year forecasts amid declining demand for networking equipment and ongoing supply chain challenges. 
  • Palo Alto Networks reported a 20% year-on-year growth in first-quarter revenue of $1.9 billion, surpassing expectations, but shares dropped by over 5% after-hours as the company issued second-quarter and full-year billing guidance below estimates, citing heightened cyber threats. 
  • Target forecasted a holiday-quarter profit above analyst expectations, with improved gross margins and easing supply chain costs, sending its shares up 17%. Despite a challenging year marked by inflation and changing consumer behaviour, Target’s shares surged as it expects adjusted earnings between $1.90 and $2.60 per share in the fourth quarter, exceeding analyst estimates, and plans to focus on value with a holiday collection priced attractively below $25. 
  • Siemens this morning exceeded Q4 profit expectations but issued a cautious 2024 sales outlook, anticipating 4-8% growth, down from 11% in 2023. The subdued forecast is linked to muted expectations in the industrial production division, with potential sales growth of up to 3% or stagnation, driven by customer destocking and an expected global demand rebound in H2 2024, particularly in China.  
  • Goodyear Tire & Rubber has unveiled the “Goodyear Forward” transformation plan, aiming to optimise its portfolio, revamp its chemical business, and generate over $2 billion from portfolio optimisation. The strategic initiative, prompted by Elliott Investment Management, includes cost reduction of $1 billion and targets an annual run-rate benefit of $300 million by the end of 2025, with CEO Richard J. Kramer set to retire in 2024.