Oil heads for strong weekly gain

Shares in the US were mostly higher on Thursday, with the S&P 500 closing roughly flat, just below the 5,000 mark, while the Nasdaq gained about 0.2%. US initial jobless claims came in slightly below consensus expectations at 218,000 and were below last week’s upwardly revised reading of 227,000. On the corporate front, Disney shares finished higher by over 10%, following strong earnings results after market close on Wednesday. Treasury yields closed higher, with the 10-year yield settling around 4.15%. In the commodity space, oil prices closed sharply higher, rising by over 3%.  European shares also continued their ascent, with the Stoxx 50 reaching a fresh 23-year high, as investors reacted to a mix of corporate updates and cautious remarks from central bankers about potential interest rate cuts. 

Summary for 09.02.2024 

• Asian markets saw mixed performance on Friday. Japanese shares hit 34-year highs, with the Nikkei rising 1%, supported by a weakening yen. However, the Hang Seng slumped 2% amid frustrations over the lack of stimulus support from Beijing. Trade was lightened by Lunar New Year closures in China. 
• European stocks are poised for a quiet start amid ongoing earnings reports, while US futures remain steady following the S&P 500’s brush with 5,000 and extended trading drops for Pinterest and Expedia. 
• Oil futures held steady on Friday, set to advance nearly 6% this week due to ongoing geopolitical tensions in the Middle East. Israeli rejection of a ceasefire proposal by Hamas, coupled with US military actions, fuelled concerns. Data showing a decline in US gasoline inventories offset rising crude stockpiles. 
• In the US, initial unemployment claims dropped by 9,000 to 218,000, slightly below expectations but above recent averages. Continuing claims decreased by 23,000 to 1,871,000. However, the four-week moving average rose by 3,750 to 212,250.  
• Nissan Motor’s shares plummeted up to 11.7% on Friday, marking their largest drop since 2001, following a cut in its sales volume forecast for the fiscal year and concerns about its China business. Despite maintaining its operating profit outlook, challenges in China led to a significant market value loss. 
• Expedia warned of revenue moderation in 2024 due to declining air ticket prices, prompting a 13% drop in its shares during extended trading. CEO Peter Kern is stepping down, to be succeeded by insider Ariane Gorin. Despite beating Q4 profit and sales estimates, concerns over softening bookings emerged. 
• Pinterest forecasted Q1 revenue below Wall Street estimates, indicating tough competition from larger social media players despite a stabilising digital advertising market. Shares dropped over 9% in extended trading even after announcing an ad integration deal with Google. Quarterly revenue of $981.3 million missed estimates, while adjusted earnings exceeded expectations. 
• Ralph Lauren exceeded profit expectations for the 14th consecutive quarter, driven by strong holiday demand in the US and a rebound in China. The company’s shares rose nearly 17%, fuelled by robust sales of luxury items like cashmere sweaters and coats. Quarterly revenue reached $1.93 billion, with adjusted earnings per share surpassing estimates.  CFRA downgraded the shares to Hold from Buy, acknowledging the recent rally but raising its price target to $150. 
• Tapestry raised its annual profit forecast due to strong sales of premium handbags, particularly in China, where demand is rebounding. Second-quarter revenue increased, driven by Coach brand sales, while Capri, soon to be acquired by Tapestry, missed estimates with decreased gross profit margin. Tapestry expects adjusted EPS of $4.20 to $4.25 for 2024. 
• Cloudflare anticipates Q1 revenue and profit to exceed market expectations, driven by heightened demand for its cloud and content delivery services. With a strong focus on client retention, the company reported a 32% revenue increase in the fourth quarter, surpassing analyst estimates. Cloudflare successfully repelled a recent hacking attempt with minimal operational impact.  Shares were up 24% in after-hours yesterday. 
• ConocoPhillips surpassed fourth-quarter profit expectations due to increased production in the US Permian Basin and a recent acquisition. The company plans to boost global production by 6% in 2024, aiming for 1.93 million barrels per day. It also announced capital expenditure and shareholder return targets for the year. 
• Siemens reported first-quarter profit slightly above expectations, with its flagship factory automation unit experiencing a slowdown. While Digital Industries saw declines in new orders and profit due to market conditions, a stronger performance from its Mobility business helped offset the downturn. Siemens confirmed its full-year outlook despite currency translation effects. 
• L’Oréal reported quarterly like-for-like sales growth of 6.9%, missing the consensus estimate of 9.56%. Total sales for the quarter were €10.61 billion. Challenges included a stagnating beauty market in China, geopolitical tensions, and inflationary pressures. However, full-year 2023 sales reached €41.18 billion, with a 11% like-for-like growth, despite a negative impact of -5% from currency fluctuations. 
• French banks Credit Agricole and Societe Generale faced mixed results, with Credit Agricole’s profit slightly better than expected while Societe Generale’s net income dropped sharply but beat forecasts. Societe Generale’s restructuring progress was noted positively, though its profitability remains a concern with targets yet to be met. 
• Unilever plc reported better-than-expected net profit for fiscal 2023, with EPS at €2.60 and revenue of €59.6 billion. Despite a decrease in net profit from the previous year, the company’s underlying sales growth accelerated to 7.0%. Unilever also announced a €1.5 billion share buyback program and expects modest improvement in underlying operating margin for 2024. 
• Under Armourraised its annual profit and margin forecasts, expecting easing input and freight costs to counter weak North American demand. Shares rose 6% despite third-quarter sales missing estimates. Wholesale revenue fell 13%, while direct-to-consumer revenue rose 4% with increased promotions. Annual gross margin and profit forecasts for fiscal 2024 were revised upwards. 
• Kering plans to invest in revitalising its flagship brand Gucci, anticipating short-term margin pressures. CEO Francois Henri Pinault prioritizes long-term growth, intending to increase advertising spend and focusing on high-end clientele amid a slowdown in consumer spending. Despite a 4% sales dip, analysts find relief in Gucci’s stabilised performance. 
• Morgan Stanley downgraded American Express from Overweight to Equal-Weight, citing that positive developments are already reflected in the share price. Analysts emphasised the need for AXP to demonstrate a reacceleration in discount revenue growth, which slowed to +5% year-over-year in 2023. They expressed caution due to potential headwinds from credit normalization. 

• Goldman Sachs raised Arm Holdings’ price target to $95.00 from $65.00, maintaining a Buy rating, citing exceeded expectations driven by improved licensing revenue and higher royalty rates from Armv9 architectures. Optimism extends to expansion in Data Center and other sectors, with non-GAAP EPS estimates for 2024 and 2025 raised by 25% and 17% respectively. 
• Deutsche Bank downgraded AstraZeneca from Hold to Sell, adjusting its price target to £95.00, following a Q4 performance below expectations, especially in cancer drug Enhertu sales. Despite robust core earnings growth, stagnant dividends and unclear margin outlook prompted the downgrade. 
• Argus downgraded Cleveland-Cliffs Inc. from Buy to Hold due to concerns over earnings impacted by pricing issues. Despite being well-run and vertically integrated, the shares displays a bearish trend, prompting a more cautious stance. A potential reevaluation to Buy is possible with improved steel pricing or a significant stock price drop. 
• Goldman Sachs analysts upgraded Roblox from Sell to Neutral, raising the target price to $48, citing improved business fundamentals and increased visibility into strong growth prospects. Barclays also upgraded RBLX to Equal Weight from Underweight, with a price target of $46, noting the appealing long-term bookings CAGR and EBITDA margin.