On Friday, major U.S. indices hit new all-time highs, with the S&P 500 surpassing 5,800, reflecting a 60% rise since October 2022, bolstered by calm wholesale inflation and strong bank earnings. In Europe, equities also advanced, with the Eurozone’s Stoxx 50 rising 0.7% to 5,003, driven by positive economic data and strong performances from industrial giants like Siemens and Airbus, despite a nearly 4% decline in Stellantis shares.

Summary for 14.10.2024

  • Asian equities edged higher on Monday, with Chinese shares experiencing volatility as Beijing's vague fiscal stimulus plans and weak inflation data weighed on sentiment. Broader markets followed Wall Street gains, with Australia's ASX 200 and South Korea's KOSPI rising 0.4%. Hong Kong's Hang Seng dropped over 2%, while Japan's markets were closed for a holiday.
  • European markets are set for a cautious open, while U.S. equity index futures dipped slightly as investors brace for key third-quarter earnings reports this week. Major firms, including Johnson & Johnson, Bank of America, and Netflix, are set to report this week, with focus on how corporate earnings withstand high interest rates. Upcoming Federal Reserve addresses may also offer cues on future rate policies.
  • Oil prices declined sharply in early trade this morning, driven by weak inflation data from China, signalling continued deflation and underwhelming fiscal stimulus plans. Additionally, talks of a potential ceasefire between Israel and Hezbollah eased concerns over Middle East tensions, which had recently supported oil prices. The market is now looking to an OPEC report for further supply insights.
  • China announced plans to support the property market and boost the economy by increasing debt, enhancing banks’ capital, and providing subsidies for low-income individuals. Finance Minister Lan Foan stated that local governments could use special bonds to purchase unsold homes and hinted at a significant increase in the central government’s deficit. However, the announcement lacked specifics on the additional stimulus spending, disappointing investors.
  • China's consumer inflation grew 0.4% year-on-year in September, down from 0.6% in August and below forecasts, while producer inflation fell 2.8%, marking nearly two years of declines. In the meantime, Goldman Sachs raised its 2024 GDP forecast for China to 4.9% from 4.7%, highlighting a shift in policy focus toward economic support amid persistent weak domestic demand and sluggish activity.
  • In September, U.S. factory gate prices remained unchanged from August, missing forecasts for a slight increase. Service prices rose by 0.2%, driven by a 3% increase in deposit service costs. Meanwhile, goods prices fell by 0.2%, largely due to a 5.6% drop in gasoline prices. Year-over-year, producer price inflation eased to 1.8%, while the annual core PPI accelerated to 2.8%.
  • Wells Fargo's third-quarter profit surpassed expectations, driven by lower provisions for loan losses and a stable outlook for interest income, boosting shares by 6%. The bank reported earnings per share of $1.52, above the anticipated $1.28. Despite a decline in net interest income, executives remain optimistic about consumer spending, although challenges from office loans and regulatory caps persist.
  • JPMorgan Chase shares surged nearly 5% following a profitable third quarter, driven by strong investment banking gains and rising interest payments. The bank reported earnings of $4.37 per share, exceeding expectations. Net interest income grew 3%, prompting an upward revision of the annual forecast. However, JPMorgan set aside $3.11 billion for potential loan losses, reflecting expanded lending amid a resilient consumer market.
  • BlackRock's assets under management reached a record $11.48 trillion in the third quarter, up from $9.10 trillion a year ago, driven by a U.S. equity market rally. The firm reported $160 billion in long-term net inflows, primarily into ETFs and fixed-income products. Net income rose to $1.63 billion, or $10.90 per share, reflecting strong growth amid strategic acquisitions.
  • Shares in Uber Technologies surged nearly 11% on Friday after Tesla's Robotaxi event fell short of investor expectations, with Jefferies analysts stating it was a "best-case outcome" for Uber. They believe Tesla's lack of clear progress on autonomous technology positions Uber favourably to support AV developers. Citi also expressed optimism about Uber's prospects, citing its extensive driver supply and partnerships with AV companies like Waymo.
  • Boeing plans to cut 17,000 jobs, about 10% of its workforce, and delay the first deliveries of its 777X jet by a year amid ongoing strikes and projected $5 billion losses in Q3. CEO Kelly Ortberg emphasised the need for restructuring due to financial challenges, while analysts warn that the company may need to raise up to $15 billion to maintain its credit rating.
  • Sanofi is in negotiations to sell a 50% controlling stake in its consumer health unit, Opella, to U.S. private equity firm Clayton Dubilier & Rice for approximately €15 billion ($16.41 billion). This move is part of Sanofi's strategy to focus on drug development. The French finance ministry supports CD&R's investment, emphasising commitments to maintain operations in France. Shares fell slightly by 0.46%.
  • Siemens Energy received an upgrade from JP Morgan, which raised its rating to "neutral" from "underweight." This change reflects improved investor sentiment driven by stronger-than-expected order intake, particularly in gas turbines and grid technologies, easing concerns about the company's balance sheet. Additionally, JP Morgan increased its price target for Siemens Energy to €32.80, indicating heightened confidence in the company's recovery trajectory.
  • Goldman Sachs raised its price target for Nvidia to $150 from $135, citing an 11% potential upside. Following a meeting with Nvidia's executives, analysts gained confidence in the company's competitive edge, particularly regarding the growing complexity of inference workloads. They also increased FY2026/27 revenue and non-GAAP EPS estimates by 7% and 8%, respectively, maintaining a Buy rating on the shares.
  • Scotiabank initiated coverage on Alphabet and Amazon with "Sector Outperform" ratings, while assigning Meta Platforms a "Sector Perform" rating. The bank highlighted that Amazon and Google show predictable future consumer usage, enhancing their growth potential, whereas Meta’s engagement-driven model is less certain. Scotiabank is optimistic about AI opportunities for Amazon and Google but views Meta's AI efforts as incremental.
  • Pivotal Research Group initiated coverage of Amazon with a "buy" rating, highlighting its strong organic growth potential, particularly from Amazon Web Services (AWS), expected to rise from 17% to over 35% of total revenue in five years. Analysts project operating margins could increase from 10% to 20% by 2029, driven by technological advancements, while setting a year-end 2025 price target of $260.
  • Wells Fargo analysts upgraded Affirm's rating from "Equal Weight" to "Overweight," citing the company's ability to gain market share in e-commerce checkout. They believe Affirm is on track for profitability by Q4 of next year, making its valuation more appealing. Analysts highlighted that easing interest rates will lower funding costs, enabling Affirm to tap into a broader credit spectrum for growth.
  • Moody's downgraded Belgium's rating outlook to negative, citing concerns over its deficit trajectory and political uncertainty after recent elections. Similarly, Fitch placed France's credit rating on a negative outlook, anticipating wider fiscal deficits and a projected government debt increase to 118.5% of GDP by 2028. Both countries face significant challenges, with Belgium's debt ratios exceeding euro area averages and France's fiscal policy risks escalating.
  • In the upcoming week, the U.S. will focus on retail sales and speeches from Federal Reserve officials, alongside key reports on industrial production and housing. The earnings season intensifies with reports from major companies like UnitedHealth and Netflix. In Europe, the ECB's interest rate decision and Germany's ZEW Economic Sentiment index will be pivotal, while China will release its Q3 GDP and various economic data.

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