Microsoft emerges as clear winner from OpenAI turmoil

US equity markets surged on Monday, with the Nasdaq leading the gains, as the November rally continued before the Thanksgiving holiday.  The S&P 500 rose 0.7% to 4.547.38, the Dow Jones increased by 0.6% to 35,151.04, and the Nasdaq Composite posted a 1.1% gain, closing at 14,284.53.  The 10-year US Treasury yield, now around 4.42%, contributed to positive market sentiment as it moved lower from earlier highs.  Technology shares, particularly Microsoft, played a significant role in driving the market’s strength, as investors eagerly anticipated Nvidia’s quarterly results, considering its pivotal role in artificial intelligence and its potential impact on market sentiment for the rest of the week.  In Europe, shares edged higher with the Euro Stoxx 50 gaining less than 0.1%, led by a 1.3% climb in energy shares amid expectations of further OPEC+ supply cuts, while the healthcare sector declined 0.4%, weighed down by an 18% drop in shares of Bayer following the abandonment of a late-stage trial and a $1.56 billion payout in a US lawsuit over its Roundup weedkiller. 

Summary for 21.11.2023 

• Asian equities rose on Tuesday, buoyed by optimism over the Federal Reserve signalling no more rate hikes.  Positive developments in China’s property sector, including reports of additional supportive measures, contributed to gains in the Shanghai Shenzhen CSI 300 and Shanghai Composite indices.  Hong Kong’s Hang Seng index also surged 1.2%, led by property shares, while the tech sector outperformed, driven by gains in heavyweight Chinese technology shares and anticipation of Nvidia’s quarterly results. 
• European shares are expected to open flat as traders await the latest Fed minutes, while US equity futures held steady with a focus on Nvidia’s earnings report and forward guidance. 
• Oil prices dipped in this morning Asian trade after a recent three-session rebound, influenced by speculations about potential production cuts by major suppliers, particularly Russia and Saudi Arabia.  Reports suggest these OPEC members are considering extending supply curbs into 2024.  Market sentiment is also affected by a weaker dollar and concerns about a US economic slowdown and China’s sluggish recovery, adding uncertainty to oil market dynamics.  
• The Reserve Bank of Australia emphasised the importance of preventing a significant increase in inflation expectations, considering the associated costs, according to the November meeting minutes.  Members acknowledged a decline in inflation but noted stronger-than-expected underlying inflation, projecting CPI inflation around 3-½ by the end of 2024 and at the top of the 2 to 3% target range by the end of 2025, with decisions on further tightening of monetary policy continent on evolving economic data and risk assessments. 
• ECB President Christine Lagarde proposed the establishment of a single regulatory body similar to the SEC to oversee Europe’s capital markets, aiming to address regulatory shortcomings and streamline economic changes, particularly in support of decarbonisation initiatives.  Lagarde emphasised the need for substantial investments to tackle generational challenges and foster a unified and competitive yet secure financial ecosystem across Europe. 
• OpenAI/s board of directors reportedly approached Anthropic’s CEO, Dario Amodei, about replacing ousted chief Sam Altman and exploring a potential merger between the two AI startups, but Amodei declined both offers.  Amid leadership changes, ex-Twitch CEO Emmet Shear has been appointed as OpenAI’s interim chief, while Altman agreed to join Microsoft, triggering concerns as nearly all of OpenAI’s 700 employees threatened to quit, including a board executive. 
• In Monday’s evening trading, Zoom Video Communications Inc gained 1.1% after reporting earnings per share of $1.29, surpassing the expected $1.08, and revenues of $1.14 billion, exceeding the expected $1.12 billion.  The company now expects EPS in the range of $1.13-$1.15 for Q4 and full-year EPS at $4.93-$4.95, surpassing consensus estimates. 
• Agilent Technologies reported better-than-expected fiscal fourth-quarter results, with shares rising 3% in after-hours trading, and provided Q1 guidance, anticipating a slow but steady recovery in 2024. 
• Officials in the Brasilian government are reportedly considering replacing the CEO of state-run oil company Petrobras, Jean Paul Prates, due to dissatisfaction with the firm’s direction, with President Luiz Inacio Lula da Silva expressing concerns and requesting adjustments to Petrobras’ investment plan.  Tensions have also arisen over fuel prices, and while discussions about a potential replacement are ongoing, Brasil’s presidential palace denied the information. 
• Boeing’s shares surged nearly 4% yesterday after Deutsche Bank upgraded the aerospace giant from “hold” to “buy” with a price target of $270, suggesting a 30% potential upside.  The upgrade reflects confidence in Boeing’s expected recover from previous setbacks, including delivery delays and supply shortages, as analysts anticipate improved production growth and increased airplane deliveries.