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U.S. and European equities ended the week on a strong note, with U.S. indices marking a sixth consecutive weekly gain. The S&P 500 rose 0.40% on Friday and 0.85% for the week, while the Dow Jones and Nasdaq Composite also saw gains, driven by strong earnings, easing oil prices, and robust economic data. In Europe, the Euro Stoxx 50 climbed 0.7% on Friday and 1.2% for the week, buoyed by hopes of further ECB rate cuts and support from China’s liquidity measures, boosting shares in luxury, auto, and tech sectors.
Summary for 21.10.2024
Most Asian shares traded within a narrow range on Monday, focusing on the upcoming earnings season. Chinese shares rose about 0.7% after the People’s Bank of China cut rates slightly more than expected, but Hong Kong's Hang Seng dipped 0.2% as optimism remained limited. Broader Asian markets were cautious, with Japan’s Nikkei rising 0.3% and South Korea’s KOSPI remaining flat.
European equity markets are set for a positive open today, supported by recent gains and favourable economic indicators. U.S. stock index futures also rose slightly on Sunday evening, with S&P 500 Futures up 0.1%, Nasdaq 100 Futures gaining 0.2%, and Dow Jones Futures rising 0.1%. Market focus remains on upcoming tech earnings from major firms like Tesla, IBM, and chipmakers, which could shape Wall Street's performance.
Oil prices steadied on Monday after a 7% drop last week, driven by weak signals on Chinese stimulus and reduced demand forecasts. Middle East tensions remain a concern, but the risk of escalation eased after reports suggested Israel won't target Iran's oil facilities. Meanwhile, ongoing hostilities between Israel, Hamas, and Hezbollah continue to influence market sentiment.
Bitcoin surged to a three-month high, reaching $69,400, as improved prospects for Trump in the upcoming U.S. presidential election boosted investor sentiment. Traders view his administration as likely to take a softer stance on cryptocurrency regulation, contributing to an 18% rise in Bitcoin since October 10.
Boeing announced the sale of its defence subsidiary, Digital Receiver Technology, which produces surveillance equipment for the U.S. military, to Thales Defense & Security. While the deal's terms remain undisclosed, Boeing aims to strengthen its finances amid challenges from production delays, safety issues, and a month-long strike in its U.S. operations. Workers are set to vote on a new contract proposal on Wednesday.
Sanofi agreed to sell a controlling stake in its consumer health unit, Opella, to U.S. private equity firm Clayton Dubilier & Rice (CD&R) for around €15 billion. The deal followed guarantees to France on job and production security. French public bank Bpifrance will take a 1% stake. Labour unions had opposed the sale, fearing job losses. Opella generates €5.2 billion in annual revenue.
American Express reported a better-than-expected third-quarter profit due to effective expense management and a focus on affluent customers. Revenue rose 8% to $16.64 billion, missing estimates. Despite raising its 2024 profit forecast, AmEx shares fell over 3%, raising concerns about the sustainability of cost-cutting measures.
Procter & Gamble reported a surprise 0.6% drop in first-quarter net sales to $21.74 billion, amid weaker demand in the U.S. and a 15% decline in organic sales in China. CFO Andre Schulten noted economic uncertainty is driving lower-income consumers toward discount rivals. Despite challenges, the company maintains its annual sales growth forecast of 3% to 5%, aiming to rejuvenate its product lines to sustain growth.
Porsche shares rose on Friday following its investor day at the Silverstone Experience Centre, driven by positive analyst sentiments about its limited-edition and bespoke offerings. Bernstein noted significant revenue growth from customisation, with the company emphasising exclusivity by limiting model production to 2,500 units. Despite mixed demand for electric vehicles, Porsche’s focus on personalisation positions it well, with Bernstein maintaining an €82 price target, indicating a 23% upside.
Gilead Sciences is voluntarily withdrawing its bladder cancer drug Trodelvy after it failed to meet survival goals in a confirmatory trial, which also showed a higher death rate due to complications. Initially granted accelerated approval in 2021, the withdrawal does not affect Trodelvy’s use for other approved cancer treatments. Gilead's shares fell 0.7% following the announcement.
Bank of America reiterated its Buy rating on Nvidia, raising the price target from $165 to $190, suggesting nearly 40% upside. The analysts boosted 2025 and 2026 earnings estimates by 13% and 20%, respectively, citing Nvidia's dominant market share and significant growth potential in a $400 billion total addressable market. They also highlighted Nvidia's robust enterprise partnerships and undervalued free cash flow, projecting over $200 billion in FCF in two years.
Piper Sandler anticipates a "mixed" earnings report for Microsoft on October 30, citing challenges from new KPI metrics, particularly affecting Azure's revenue, which is projected to be over 20% lower. Despite this, Azure is expected to grow at 34%. The firm cut its price target to $470 but maintains an Overweight rating, emphasising Microsoft’s strong AI position and cash flows
Needham & Company analysts are optimistic that Taiwan Semiconductor Manufacturing Co. will achieve $110 billion in revenue by 2025, raising their price target for TSMC shares to $225. They project 2024 revenue at around $90 billion, anticipating 23% growth in 2025 driven by higher wafer shipments rather than price increases. The analysts also expect gross margins to rebound to 60% in late 2025.
Needham & Co. downgraded Boston Scientific to Hold from Buy, citing concerns about future growth and competition. Analysts predict a slowdown in the Electrophysiology (EP) business by 2025, estimating 30% growth versus a 36% consensus. They also noted uncertainty around the ACURATE trial results, which could significantly impact the shares’ performance and valuation.
Wells Fargo analysts are sceptical about China's recent policy announcements, asserting that these measures will not significantly impact the country's economic trajectory. They believe that the focus on the property sector and local banks lacks sufficient support for broader domestic demand, forecasting GDP growth to remain around 4.5%. Without stimulating consumer confidence and spending, current policies are seen as temporary fixes rather than effective long-term solutions.
Bank of America advised clients to buy Chinese consumer shares, citing a new CNY 2 trillion stimulus targeting households, which could double private property purchases. China's consumption is currently only 39% of GDP. In capital flows, the week ending October 16 saw significant outflows from cash funds but strong inflows into bonds and equities. BofA remains bearish on bonds, anticipating negative impacts from the 2024 U.S. elections.
The spotlight turns to corporate America this week as Tesla kicks off U.S. tech earnings, with results under scrutiny following recent share declines. Semiconductor firms Texas Instruments and Lam Research will also report amid chip sector volatility. U.S. economic updates include housing data and the Fed’s Beige Book. Meanwhile, global finance leaders gather in Washington for IMF talks, and Putin hosts a BRICS summit amid geopolitical tensions.
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