China announce more support measures

On Monday, U.S. markets experienced modest gains, with the S&P 500 and Dow Jones reaching new record highs, rising 0.3% and 0.1%, respectively, following the Fed's 50 basis-point rate cut. The consumer discretionary sector led the advances, notably with Intel surging 3.4% and Tesla jumping 4.9%. Meanwhile, European shares closed with modest gains, as the Eurozone's Stoxx 50 rose by 0.2%, buoyed by optimism around potential stimulus measures from the People's Bank of China, despite signs of contraction in private sector activity.

Summary for 24.09.2024

Most Asian equities rose on Tuesday, led by Chinese markets after Beijing announced more stimulus measures, including cutting bank reserve requirements and providing liquidity support for local shares. The Shanghai Composite gained 0.7%, and Hong Kong’s Hang Seng surged 1.8%. Broader Asian markets advanced, while Australia’s ASX 200 lagged, losing 0.5% ahead of a Reserve Bank meeting expected to maintain high interest rates due to persistent inflation.

U.S. share index futures fell slightly as Wall Street steadied near record highs, with investors awaiting more signals from the Federal Reserve regarding interest rates. European markets are expected to open mixed, reflecting a diverse economic outlook after recent purchasing managers' index data showed stronger-than-expected growth in services but a notable decline in manufacturing activity, raising concerns about economic stability.

Oil prices rose on Tuesday due to concerns over the Israel-Hezbollah conflict potentially impacting Middle East supply and a looming U.S. Gulf Coast storm threatening output. Brent crude was up 0.3% at $74.11, while U.S. crude increased 0.3% to $70.61. Both contracts fell Monday amid demand concerns from weak euro zone business data and ongoing worries about Chinese fuel consumption.

China's central bank announced broad stimulus measures, including a 50 basis-point cut to banks' reserve requirement ratios and a 0.2 percentage point reduction in the seven-day repo rate, to combat deflationary pressures and support the struggling economy. Interest rates on existing mortgages will also be lowered by 0.5 percentage point. These moves aim to revive growth amid a property crisis, with further easing expected later this year.

The HCOB Flash Eurozone Composite PMI dropped to 48.9 in September, marking its lowest level since January and the first decline in private sector activity in seven months. Manufacturing output fell for the 18th consecutive month, particularly in Germany and France, while service sector growth slowed sharply. Job shedding reached its highest level since December 2020, indicating that the eurozone is moving towards stagnation.

The latest NBC News poll shows Vice President Kamala Harris gaining significant momentum in the 2024 presidential race, leading Donald Trump by 5 points among registered voters and 6 points with third-party candidates included. Harris has seen a 16-point favourability boost since July and is now viewed more positively than Trump. However, Trump still holds advantages on economic issues.

U.S. oil producers began evacuating staff and halting production on Monday as a potential major hurricane, Helene, threatens Gulf of Mexico oil fields. BP, Chevron, Shell, and Equinor have shut in or curtailed output at several offshore platforms. The storm is expected to become a Category 3 hurricane with life-threatening impacts on the Gulf Coast. Preparations are underway to mitigate damage.

U.S. shares of Stellantis NV rose 3.0% on Monday after the automaker announced it was searching for a successor to CEO Carlos Tavares, whose contract expires in 2026. However, shares fell 0.3% in aftermarket trading. Tavares faces increasing pressure to improve sluggish sales and profits in North America, though Stellantis suggested he may extend his tenure.

BNP Paribas has agreed to acquire HSBC's private banking unit in Germany, boosting its assets under management to over 40 billion euros. Expected to close by Q2 2025, the deal strengthens BNP’s position as a leading private bank in the eurozone. HSBC continues to focus on Asia, scaling back operations in Western markets like the U.S., France, and Canada.

Lead times for Apple's iPhone 16 lineup have increased, indicating strong demand, particularly for the base model across key markets like the U.S., China, India, and the UK. Analysts note that while base model lead times rose by about a week, the Pro models saw mixed results, especially with weaker demand for higher-end versions. Goldman Sachs expects lead times to stabilize as supply improves.

The U.S. Department of Justice is set to file a lawsuit against Visa, alleging the company illegally monopolised the U.S. debit card market through anticompetitive practices. This follows a 2023 investigation into Visa's market behaviours and a recent settlement involving Discover Financial Services’ Pulse Network, which accused Visa of hindering competition. Visa maintains that its practices comply with applicable laws.

Microsoft is expected to pay Constellation Energy a premium as part of a long-term power purchase agreement related to the Three Mile Island nuclear plant, according to Jefferies analysts. The agreement aims to restart a unit that was shut down in 2019. Analysts estimate Microsoft will pay around $110-$115 per megawatt hour, significantly above market expectations, reflecting rising demand for sustainable energy to power AI technologies.

Apollo Global Management has proposed a multibillion-dollar investment in Intel, signalling confidence in the chipmaker’s turnaround strategy. This investment could provide Intel with a vital boost and an alternative to a potential takeover by rival Qualcomm. The move highlights the ongoing interest in Intel as it seeks to strengthen its position in the competitive semiconductor market.

Sanofi's CEO, Paul Hudson, highlighted the company's strong growth potential from new drugs, noting it faces no imminent patent expirations. With a pipeline of 12 potential blockbusters, Sanofi aims to bolster its R&D credibility. While avoiding a "me too" approach in the lucrative obesity drug market, Hudson indicated interest in participating. Additionally, the company is considering options for its Opella consumer healthcare unit, with plans to retain a stake post-separation.

The U.S. Commerce Department proposed banning key Chinese software and hardware in connected vehicles on American roads due to national security concerns. This move would block nearly all Chinese cars from the U.S. market and require automakers to remove Chinese components from vehicles. The regulation, set to begin in 2027 for software and 2029 for hardware, aims to prevent potential foreign manipulation and data collection.

According to Morgan Stanley, U.S. data centre power capacity is expected to nearly double by 2027, increasing from 40 gigawatts (GW) in 2024 to 79 GW, driven by high-performance computing needs for Generative AI. Global power usage for GenAI is projected to rise significantly, impacting the data centre market and asset-backed securities (ABS), which may reach $49 billion by 2027.

Bank of America Securities predicts a continued slowdown in the European luxury goods sector through the second half of 2024 and 2025, driven by declining Chinese consumer demand. The bank forecasts muted revenue growth and margin pressure, downgrading major brands like LVMH, Kering, and Hugo Boss. Only Hermes, Brunello Cucinelli, and Pandora remain "Buy" rated, with 2025 EPS estimates cut by 17%.

Bernstein analysts are optimistic about NVIDIA’s Q4 datacentre revenue growth, expecting it to exceed the forecasted $3.8 billion increase. After meeting with Nvidia’s CFO, they clarified that the Blackwell chip could contribute "several billion" in revenue. Nvidia’s gross margins are expected to remain strong, with potential in AI training, inferencing markets, and sovereign AI infrastructure, despite concerns over power consumption.

D.A. Davidson downgraded Microsoft from Buy to Neutral, maintaining a $475 price target, citing intensified competition in AI and diminished lead over rivals like Amazon and Google. Analysts noted that Microsoft's reliance on Nvidia for data centre operations may weaken margins, as increased capital expenditures rise significantly. Concerns also arose about the quality of Azure's revenue growth, influenced by self-funded revenue from OpenAI.

Wells Fargo and Morgan Stanley have raised their price targets for Constellation Energy Group after the restart of the Crane Clean Energy Center and a 20-year power purchase agreement (PPA) with Microsoft. Wells Fargo increased its target from $250 to $300, while Morgan Stanley raised theirs from $233 to $313. Both firms emphasized strong demand for clean energy and the financial benefits of reliable nuclear power.

Deutsche Bank initiated coverage of Pinterest with a "Buy" rating and a $43 price target, citing strong growth potential and an under-monetised user base. They forecast a 6% CAGR in monthly active users and 18% revenue growth over the next three years, driven by Pinterest's unique platform, advertising opportunities, and international expansion. The bank expects EBITDA margins to expand, making Pinterest an attractive investment compared to peers.

A Loop Capital analyst lowered the price target for Super Micro Computer Inc from $1,500 to $1,000, citing concerns over its delayed 10-K filing and efforts to restore gross and operating margins. Despite this, the analyst remains optimistic, believing SMCI can achieve over $40 billion in revenue with the help of NVIDIA's upcoming Blackwell GPU, potentially restoring margins to 14% and 10%.

Raymond James downgraded Palantir from Outperform to Market Perform, citing concerns over its high valuation despite strong AI prospects. With a current valuation of 26.1 times FY25 sales, Palantir is considered the most expensive software stock among its peers. Although revenue growth is forecasted at 21% for 2025-2026, the firm warns that the stock's premium leaves little room for error.

Analysts at Barclays project Tesla's third-quarter electric vehicle deliveries will rise by 8% year-over-year to approximately 470,000 units, surpassing the company’s consensus estimate of 461,000. They expect around 179,000 deliveries in China, a record for the market. The analysts attribute this strength to better macro demand, pricing strategies, and renewed interest ahead of the planned launch of full self-driving technology in 2025.

Nike is under "Negative Catalyst Watch" by JPMorgan ahead of its Q1 earnings report for FY 2025. JPMorgan lowered its EPS forecast to $0.48, below the consensus of $0.52, citing a 10% decline in gross profit. The bank highlighted challenges in China, EMEA, and North America, with a revised FY25 EPS estimate of $2.98 due to anticipated revenue declines.

Goldman Sachs prime brokerage note, reported by Reuters on Monday, revealed that hedge funds accelerated purchases of U.S. tech and media shares last week, driven by expectations of a Federal Reserve interest rate cut. Long positions in technology equities, particularly semiconductors, surged, while consumer discretionary equities, including hotels and restaurants, saw the largest selling in a year.

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