Markets look to wrap up a winning November

US equities showed mixed results on Wednesday, with the S&P 500 down slightly and the Dow Jones reaching its highest level in nearly four months. The Nasdaq, driven by the rally in growth and technology shares, rose 12% since late October. The positive economic outlook was supported by a stronger-than-expected GDP growth of 5.2% in Q3. November’s equity market rally was accompanied by a significant bond story, with the ten-year Treasury yield falling below 4.3%, marking a more than 70 basis point decline since October, indicating a growing belief that the Fed might cut rates in 2024. Meanwhile, Eurozone equity markets rebounded, with the Stoxx 50 rising by 0.5%, fuelled by evidence of disinflation in the region and signals of potential interest rate cuts by the ECB and US Fed. 

Summary for 30.11.2023 

• Asian shares remained steady this morning, constrained by concerns over China’s economic slowdown revealed in disappointing PMI data. While November saw a strong regional rally propelled by eased US interest rate fears, a dovish BoJ, and bargain hunting, Chinese shares trailed due to ongoing worries about economic recovery. Top performers for the month include Japan’s Nikkei, up 7.9%, and South Korea’s Kospi, leading with a 10.6% gain driven by robust performances in technology shares. 
• European equity markets are poised for a positive open, similar to their US counterparts, as major equities globally eye a winning November. 
• Oil prices remained stable on Thursday as investors, influenced by hopes for price-supportive measures from OPEC+ group, navigated uncertainties. Despite bearish signals from the US Energy Information Administration’s surprise inventory build, the market found support in expectations of production cuts. 
• Israel and Hamas agreed to extend their ceasefire for another day, allowing negotiators to continue working on a deal to exchange hostages and allowing humanitarian aid into Gaza. The US Secretary of State, Antony Blinken, arrived in Tel Aviv to discuss the ceasefire extension, emphasising efforts to secure the release of all hostages held by Hamas. 
• Chinese manufacturing activity decline in November, with the official manufacturing PMI reading 49.4, below expectations, marking the sixth contraction in 2023. The non-manufacturing sector also saw a downturn, contributing to China’s composite PMI dropping to 50.4, approaching contraction territory, as the country grapples with slowing overseas demand and economic challenges. 
• The US economy expanded by an annualised 5.2% in Q3, exceeding both the preliminary estimate of 4.9% and the forecast of 5%, marking the strongest growth since Q4 2021. Non-residential investment, residential investment, private inventories, and government spending contributed positively, while consumer spending slightly slowed, mainly in services, with exports and imports showing marginal variations from the advance estimate. 
• German consumer price inflation dropped to 3.2% year-on-year in November, the lowest since June 2021, driven by a sharp easing in food inflation and a faster decrease in energy prices. Core inflation, also decreased to 3.8%, reaching its lowest point since August 2022, while monthly consumer prices fell by 0.4%. 
• Apple has extended its contract with Qualcomm until 202, signalling a departure from its previous plans to produce its own modems for iPhones and iPads. Despite acquiring Intel’s modem division in 2019, Apple faced challenges in modem development, prompting a strategic shift and continued reliance on Qualcomm for crucial components. 
• Elliott Investment Management has invested $1 billion in Phillips 66 and is urging the US oil refiner to overhaul its board for improved performance. The activist investment firm believes Phillips 66’s shares, currently trading around $118 per share, could reach $200 with necessary improvements and has criticised the company’s refining operations and underperformance relative to rivals. 
• Microsoft will assume non-voting, observer role on OpenAI’s board, granting access to meetings and confidential information without voting rights. CEO Sam Altman, recently reinstated after being ousted, outlined board changes, emphasising partnership with co-founder Greg Brockman and indicating ongoing discussions about the role of chief scientist Ilya Sutskever, who will no longer be part of the board. 
• US health insurer Cigna is reportedly in talks to merge with peer Humana in a deal that could exceed $60 billion, aiming to enhance their scale in the health insurance sector. The potential cash-and-shares merger, if finalised by the end of the year, would face intense antitrust scrutiny due to the consolidation within the industry and previous regulatory challenges faced by both companies. 
• General Motors announced that its new labour deals following the US strike will cost $9.3 billion, leading to a lowered 2023 profit outlook. Despite this, GM outlined a $10 billion share buyback, a 33% dividend increase, and reduced spending at its Cruise robotaxi unit, prompting a 9.8% rise in its shares, although the share price remains below pre-strike levels. 
• Salesforce reported strong Q3 results, beating Wall Street targets with revenue of $8.72 billion and adjusted profit of $2.11 per share, leading to almost 9% surge in its shares after the announcement. The company raised its annual profit forecast to $18.18-$18.19 per share and provided an optimistic outlook for Q4, signalling increased confidence in tech spending amid a cooling inflationary environment.  
• Snowflake reported better-than-expected Q3 results, with EPS at $0.25 and revenue reaching $734.2 million, driving a more than 7% surge in the company’s share after-hours. The cloud data platform anticipates continued growth in Q4, projecting product revenue in the range of $716-$721 million, and expects full-year product revenue to reach $2.65 billion, reflecting a 37% year-over-year growth. 
• Foot Locker reported Q3 adjusted EPS of $0.30, surpassing estimates, while facing an 8% decline in comparable sales. CEO Mary Dillon highlighted “ongoing consumer uncertainty” and narrowed the full-year earnings guidance to $1.30-$1.40 per share. Despite challenges, shares rallied by 16% during Wednesday’s regular market session. 
• Austria’s Signa Holding, with debts of around €5 billion, declared insolvency, marking the largest casualty in Europe’s property crash. Controlled by magnate Rene Benko, Signa owns prominent properties like New York’s Chrysler Building and German’s KaDeWe, and its collapse is expected to impact the continent’s troubled property sector. 
• JP Morgan upgraded BMW to Overweight, noting the market’s underestimation of the company’s growth potential in EVs and its strategic moves, including a significant product lineup revamp and plans for EV battery assembly capacity in China. Analysts expect BMW to achieve a faster transition to 100% EVs in China by 2030 and highlighted the launch of BMW’s Neue klasse in 2025 as a key step in narrowing the margin gap between internal combustion engine and EV models. 
• Jefferies downgraded Airbnb to Hold from Buy, citing a slowdown in bookings and increased rsk of missing consensus expectations. The analysts noted that the opportunities for monetisation are already reflected in Airbnb’s current share price, which is 65% higher than the average in the Internet sector despite similar EBITDA growth.