US and European equity markets mostly rose on Wednesday in a shortened trading in the US, with the S&P 500 and Nasdaq 100 hitting record highs. Strong corporate earnings and expectations of Fed rate cuts drove the gains. In Europe, the Eurozone’s Stoxx 50 surged 1.3% to a three-week high, benefitting from tech sector gains and lower bond yields. Tesla surged over 24% this week, while banking giants like BNP Paribas and Santander rose over 2.5% amid falling borrowing costs.

Summary for 04.07.2024

Asian shares rose on Thursday, buoyed by expectations of a US interest rate cut in September. Japanese shares led gains, nearing record highs despite weak economic data. Broader Asian equities, including South Korea and Australia, advanced, while Chinese equities lagged due to ongoing economic concerns and disappointing services sector growth.

Shares in Europe are anticipated to open higher this morning as US markets will remain closed today for Independence Day.

Today, the UK decides whether Keir Starmer can lead Labour to victory after 14 years in opposition, challenging Prime Minister Rishi Sunak. Polls consistently favour Labour by over 20 points, with forecasts suggesting a potential majority in Parliament, possibly exceeding Tony Blair's 1997 landslide.

At the 11-12th June meeting, Federal Reserve officials were divided on maintaining elevated interest rates, awaiting more evidence of cooling inflation. Some favoured patience, while others stressed a weaker labour market's role. Rate cuts were seen as premature without meeting the 2% inflation target, amidst cautious economic outlook and rising unemployment concerns.

The ISM Services PMI in the US contracted sharply to 48.8 in June, the lowest since April 2020, below expectations of 52.5. The Business Activity Index also contracted at 49.6, with declines in new orders and employment. Challenges in transportation and higher commodity costs were cited amid easing inflation pressures.

Also in June, US private sector payrolls increased by 150,000 jobs, below expectations and the lowest in five months. Job gains were led by the service-providing sector, notably in leisure/hospitality and professional/business services, while the goods-producing sector saw mixed results with gains in construction but losses in manufacturing and natural resources/mining.

European Central Bank Governing Council member Yannis Stournaras supports additional interest-rate cuts this year, citing recent inflation and economic expansion data. He suggests two more cuts are appropriate to align with forecasts and ease restrictive monetary conditions.

Novo Nordisk and Eli Lilly shares declined after a report linked semaglutide, used in drugs like Ozempic and Wegovy, to a higher risk of a serious eye condition called nonarteritic anterior ischemic optic neuropathy. Research from Massachusetts Eye and Ear indicated a significant risk increase among patients using semaglutide for diabetes or weight loss.

Amazon founder Jeff Bezos plans to sell nearly $5 billion in company equity after the shares hit a record high of $200.43. This follows a $8.5 billion sell-off earlier in 2023 amid substantial equity gains. Bezos will retain 8.8% of Amazon shares, holding a net worth of $214.4 billion as the world's second-richest person.

Leonardo and Rheinmetall have announced a 50-50 joint venture to produce tanks and other land defence systems, focusing initially on developing new vehicles for the Italian Army. The partnership aims to leverage technological synergies and strengthen European defence capabilities, following reports of a significant tank purchase by Italy from Rheinmetall.

Hapag-Lloyd CEO Rolf Habben Jansen reported increased container shipping demand since May, driven by limited capacity due to Yemen-based Houthi attacks in the Red Sea. This has led to higher freight rates and forced ships to reroute around Africa. Global container demand is forecasted to grow 3-4% in 2024 amid ongoing supply chain disruptions.

Bank of America added Dell to its US 1 List of top investment ideas, citing a positive outlook driven by AI server and storage demand, as well as expected PC refresh cycles. They raised Dell's target price to $180, highlighting recent product innovations and the potential for inclusion in the S&P 500 as additional catalysts.

UBS analysts anticipate the US equity market rally broadening beyond tech giants, emphasising opportunities in sectors such as energy transition, blue economy, and water scarcity amid rising environmental concerns. They advocate investing in companies positioned to benefit from these trends, foreseeing strong earnings growth from such equities.

Bank of America Securities analysts anticipate European companies to report positive earnings growth in the second quarter, driven by improved sales and margins. Energy sectors are expected to lead this turnaround, while financials may drag on overall earnings. However, forward-looking projections suggest a potential decline next year amid global economic uncertainties.

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