Mega caps give back gains

US equity indices experienced a mostly lower close on Monday with the S&P 500 retracting from a five-week gain. Real estate led as the top-performing sector, while technology and communication services lagged. Small-cap shares stood out with a nearly 1% rise, building on last week’s over 3% gains. The S&P 500 faced resistance at the 4,600 level, prompting profit-taking in large-cap technology, and investors appeared to rotate into underperforming sectors amid expectations of lower rates and a potential soft landing for the economy. Meantime, European shares remained largely unchanged, with the Stoxx 50 at four-month highs. 

Summary for 05.12.2023 

• Asian shares fell on Tuesday, experiencing profit-taking after a strong November rally. Weak economic readings, including Japan’s service sector growth and Australia’s unexpected current account deficit, contributed to the decline, while caution prevailed ahead of key nonfarm payrolls data and concerns over a new epidemic in China added to the negative sentiment. 
• European and US equity markets anticipate a subdued open as traders reassess Fed policy, with cautious sentiments prevailing amid concerns about interest rates and a weakening consumer. 
• Oil prices showed minimal change this morning as WTI crude futures remained above $73 per barrel, experiencing a possible technical rebound. The market evaluated concerns over the Middle East geopolitical situation and uncertainties about OPEC+ cuts amid the recent decline in oil prices. 
• The Reserve Bank of Australia maintained its interest rates at 4.35% in its final meeting for 2023, emphasising the need for more macroeconomic data before considering further rate adjustments. While acknowledging risks from high inflation, RBA Governor Michele Bullock stated that uncertainties persist, and the central bank will continue its data-driven approach to future monetary policy decisions. 
• A group of 83 Spanish media outlets, including El Pais and ABC, has filed a €550 million lawsuit against Meta Platforms, alleging unfair competition in the advertising market. The lawsuit accuses Meta of violating EU data rules by using personal data from Facebook, Instagram, and WhatsApp users without proper consent, potentially setting a precedent for similar cases across the European Union. 
• Hawaiian Holdings’ shares nearly tripled yesterday following Alaska Air Group’s $1.9 billion acquisition agreement, which includes debt. The deal aims to expand networks, offering more choices to passengers, but uncertainty remains due to regulatory considerations and Hawaiian’s recent challenges. 
• Qatar Holdings, a subsidiary of the Qatar Investment Authority, plans to sell around half of its Barclays shares, valued at up to £517 million. The move signifies a significant shift for the sovereign wealth fund, which has been a major shareholder in Barclays since the financial crisis, and comes as the bank undergoes a strategic overhaul. 
• Shares of Carvana surged almost 14% yesterday after JP Morgan upgraded its rating to “neutral” from “underweight,” citing improvements in productivity, costs, and culture. The online used car dealer has experienced significant growth but faces challenges as industry volumes decline amid higher rates and prices. 
• Twilio announced plans to cut its workforce by an additional 5% as part of ongoing restructuring efforts, expecting restructuring charges of $25 million to $35 million. Despite this, the cloud communications company’s share price remained stable, and it has maintained a strong financial outlook following earlier cost-cutting measures. 
• Continental plans to make its user experience unit, which produces instrument panels and displays for vehicles, independent, potentially opening the door to sell-off or change of ownership. The auto parts manufacturer is exploring further restructuring within its automotive division, which includes user experience, software safety features, and autonomous driving technology, without specifying details. 
• Roche has agreed to acquire obesity drug developer Carmot Therapeutics for $2.7 billion upfront, gaining access to the promising drug candidate CT-388. The move puts Roche in competition with Novo Nordisk and Eli Lilly in the weight-loss drug market, with CT-388 potentially becoming a leading obesity drug in the GLP-1 class. 
• Spotify is set to lay off approximately 1,500 employees, constituting 17% of its workforce, in its third significant workforce reduction this year. The move aims to align operational costs with financial goals more effectively, and despite recent positive earnings, it triggered a 7.5% surge in the company’s US-listed shares.