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On Monday, US equity markets closed slightly higher, with the S&P 500 and Nasdaq reaching near 21-month highs. The day’s gains were led by retailers, notably Macy’s, while semiconductor and transportation sectors also posted significant increases. In Europe, equities experience a mixed performance.
Summary for 12.12.2023
Most Asian equities rose slightly, driven by a dovish outlook from the Bank of Japan. Japan’s Nikkei 225 extended gains, while Chinese shares remained muted amid concerns over disinflation and the property market. Traders awaited US CPI data and the Federal Reserve’s decision. Gains in Australia and South Korea contrasted with losses in Philippine shares. European shares are anticipated to rise as traders prepare for a crucial US inflation report that could influence Federal Reserve policy, while US stock futures remain stable ahead of the inflation data and the upcoming Federal Reserve decision. Oil prices remained stable in Asia, with concerns about China’s economic weakness and anticipation of key US inflation data. Chinese disinflation and decreased oil imports fuelled growth worries. Despite recent losses, oil prices found support from bargain buying and US plans to replenish the Strategic Petroleum Reserve. Global monetary conditions and OPEC+ production cuts contributed to a cautious near-term outlook. In November, US consumers’ short-term inflation expectations, surveyed by the Federal Reserve Bank of New York, reached their lowest point since April 2021. This decline, potentially indicative of future inflation trends, was driven by changing consumer predictions for fuel, rent, and education costs. Individuals over 60 also expressed their lowest inflation outlook in almost three years. In a significant antitrust defeat, Google has lost a court battle against Epic Games, the creator of Fortnite. A federal jury in San Francisco found Google Play guilty of wielding monopoly power through anticompetitive actions within its Alphabet unit. This verdict, which follows a month-long trial, could have substantial financial repercussions for Google, echoing Epic’s prior challenges against Apple’s app store. Oracle’s Q2 revenue of $12.94 billion fell short of the estimated $13.05 billion, attributed to an uncertain economy and cloud computing market competition. The company’s shares dropped over 8% in extended trading. Oracle’s forecast for the current quarter, which includes Cerner, anticipates revenue growth in the range of 6%-8%, slightly below analysts’ average estimate of about 7.6%. Berkshire Hathaway significantly reduced its stake in HP Inc., halving its holdings in the PC and printer manufacturer, according to a regulatory filing. As of November 30, the conglomerate now owns a 5.2% stake, holding approximately 51.5 million shares, down from its earlier position of nearly 100 million shares. Sanofi is terminating a $755 million exclusive licensing deal with Maze Therapeutics to develop a drug for Pompe disease, a rare genetic condition causing muscle weakness. The U.S. Federal Trade Commission objected, citing concerns about a potential monopoly. Sanofi cited prolonged legal proceedings as the reason for ending the planned deal, announced in May 2023. Rosenblatt Securities upgraded Spotify to Buy from Neutral, doubling the price target to $300 from $150. The firm sees the recent large-scale restructuring as promising for margin growth, with potential for operating profit to surpass estimates, projecting sustained high teens revenue growth and faster profit growth due to margin expansion after 2024. Broadcom shares surged 9.0% after Citigroup resumed coverage with a Buy rating and a $1,100 price target, citing the company’s robust core business and potential gains from the VMware acquisition. The analysis also emphasized Broadcom’s ability to double AI revenue from $4.0 billion in FY23 to over $8.0 billion in FY24. Cigna’s shares surged more than 16% yesterday, its largest increase since 2009, after retracting its bid to acquire Humana due to financial disagreements. The potential $140 billion merger faced antitrust scepticism, causing Cigna’s initial drop in its share price. Cigna’s pivot includes a $10 billion share repurchase plan, reflecting confidence and commitment to strategic growth amid industry challenges. Snapchat’s shares rose 4.4% on Monday after a Wells Fargo analyst upgraded the stock to Overweight from Equal Weight and raised the price target to $22, citing the company’s reinvestment in ad tech, new ads management, and renewed focus. Renault is reportedly exploring partnerships, including with Volkswagen, for the development of its new Twingo electric vehicle by early 2024. While Renault confirmed the talks, Volkswagen declined to comment. Renault aims to make electric vehicles more accessible, with its latest Twingo EV model, Legend, priced under €20,000. Volkswagen previously disclosed plans for a sub-€25,000 all-electric vehicle by 2025. Fast fashion giant Shein is reportedly exploring the possibility of a public listing on the London Stock Exchange (LSE). Chairman Donald Tang held talks with LSE executives during a recent visit to London. Shein had also confidentially filed for an IPO in the United States, with Goldman Sachs, JPMorgan Chase, and Morgan Stanley as lead underwriters. Wells Fargo initiated coverage on Stellantis with an underweight rating and a €18 price target, citing structural challenges in the automotive industry. Analysts foresee headwinds like price deterioration, excess capacity, and mix issues with Battery Electric Vehicles. Despite STLA’s impressive past performance, Wells Fargo expects a significant drop in adjusted EBIT from €22.5 billion in 2023 to €12.7 billion in 2024, below consensus estimates. Wedbush analysts increased Apple’s price target by $10 to $250 per share for 2024, predicting it to become the first $4 trillion market cap by year-end. They express confidence in robust iPhone 15 growth during the holiday season, particularly in the US and China, with a target of 220-230 million units for FY24. Analysts highlight a significant upgrade opportunity in China, emphasizing a bullish outlook for Apple in 2024. Citi analysts upgraded Nike from Neutral to Buy, raising the price target to $135 per share, citing the athletic apparel retailer as an appealing margin recovery story in a turbulent macroeconomic environment. Factors include anticipated gross margin recovery, strategic innovations ahead of the Paris Olympics in 2024, and Nike’s resilience in the Chinese market. Despite expected conservative 2H sales guidance, Citi believes strong gross margins and expense control will safeguard earnings per share. Nike stock rose 2.3% following the upgrade. Eli Lilly & Co. shares declined 2.3% yesterday as a recent study indicated patients discontinuing the obesity drug Zepbound tend to regain half the lost weight after a year. BMO analysts view the pullback as a buying opportunity, noting the concerns as overblown, and Evercore ISI emphasizes the study is well-known, with no new developments prompting the market reaction.
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