Dow futures jump 850 points as Trump projected to win

US equities posted their strongest session in weeks on Tuesday, with the S&P 500, Dow Jones, and Nasdaq all gaining over 1%, driven by signs of economic strength and easing Treasury yields and volatility. European equities also closed higher, with the Stoxx 50 rising 0.5%. Industrial shares gained, while autos lagged. Hugo Boss dropped 4.5% due to concerns over declining sales in Asia, and Schroders plunged 13.4% following a weak trading update. Investors are focused on the US election outcome and its impact on Congress.

Summary for 06.11.2024

Most Asian equities rose on Wednesday, mirroring Wall Street's overnight gains, with strong technology shares and anticipation of a Federal Reserve interest rate cut. Chinese markets were volatile as Trump led in early U.S. election results, which raised concerns over potential trade tariffs. Japan’s Nikkei surged 1.8% on yen weakness, while broader Asian markets remained cautiously optimistic.

European and U.S. equity futures pointed to a strong open, with S&P 500 futures rising 1.2% and Nasdaq futures up 1.3% as early U.S. election results suggested a potential Trump lead. European equity futures also advanced, reflecting optimism amid climbing Treasury yields and a strengthening dollar—movements typical of "Trump trades."

Oil prices dipped in Asian trade as U.S. crude inventories rose more than expected, suggesting cooling demand. Brent and WTI futures both fell, though recent gains had been supported by OPEC+ production limits and potential supply disruptions from Hurricane Rafael in the Gulf of Mexico. Markets are also watching the U.S. election, China’s fiscal plans, and an anticipated Federal Reserve rate cut.

The dollar rallied broadly, rising 1.42% on the dollar index, while bitcoin hit a record $75,060 as investors responded to early signs of a Trump lead in the U.S. election. Anticipation of Trump’s policies, seen as inflationary and supportive of cryptocurrencies, lifted the dollar. Meanwhile, risk currencies like the Aussie and euro fell amid Trump’s early wins in key states.

Super Micro Computer shares dropped 15.9% in extended trading after the company flagged uncertainty over its annual report timing, following Ernst & Young’s sudden resignation as auditor. Despite an internal probe finding no fraud, investor concerns arose over governance and accounting transparency. Super Micro forecasts second-quarter revenue below expectations and awaits Nvidia’s latest chips to boost production for AI-focused clients.

Archer-Daniels-Midland shares fell 6% after cutting its 2024 profit outlook and announcing new accounting irregularities, marking the second financial revision this year. Investor confidence in ADM's leadership, led by CEO Juan Luciano, was shaken as profitability in its core Ag Services and Oilseeds segment declined sharply. ADM also faces government investigations and delayed earnings reporting amidst internal operational challenges.

Builders FirstSource reported third-quarter earnings that exceeded expectations, with adjusted EPS of $3.07, but missed revenue estimates, posting a 6.7% year-on-year decline to $4.2 billion. The company lowered its full-year guidance for 2024 revenue to $16.25-16.55 billion, citing challenging market conditions. Despite this, it highlighted strong cash flow and share repurchases as part of its strategic focus.

Ferrari's third-quarter core earnings rose 7%, despite a 2% drop in car shipments due to a planned software transition. The company implemented a new ERP system, impacting production and deliveries temporarily. Profit growth was driven by high-end models and increased demand for personalised options. Ferrari's full-year forecasts remain intact, with strong order visibility until 2026. Shares fell 7.4% despite solid results.

Deutsche Post shares fell 4.0% after reporting third-quarter results that missed expectations. EBIT, including a one-time €70 million gain, was €1.37 billion, slightly above the forecasted €1.35 billion. The Freight Forwarding division saw volume growth but lower yields, while Express and letter volumes struggled. The company also lowered its 2024 EBIT and 2026 long-term guidance, reflecting weaker-than-expected performance.

Shares of Schaeffler dropped 7.6% after reporting third-quarter earnings below expectations and announcing a €580 million restructuring plan for its European operations. Revenue missed forecasts by 1%, with a 10% shortfall in adjusted EBIT. The weak performance was driven by challenges in the Automotive Technologies segment and high costs from E-mobility projects, raising concerns over short-term cash flow pressures.

Apple is set to be fined by the EU under its Digital Markets Act, becoming the first company sanctioned under the new rules. The fine follows charges of breaching antitrust laws, adding to its mounting legal issues, including a €1.84 billion fine in March and a court loss in September. The penalty could reach up to 10% of Apple's global turnover.

Bank of America analysts project Broadcom will see strong AI revenue growth, with a compound annual growth rate of 30-35%. Despite lowering fiscal 2025 earnings expectations due to seasonal challenges, they expect growth from new AI contracts and partnerships, notably with Apple and OpenAI. With a price target of $215, BofA highlights Broadcom’s strong AI positioning and steady growth prospects.

Bernstein upgraded its rating on eBay to "Outperform" from "Market-Perform." Despite a fourth-quarter forecast miss due to cautious consumer spending, particularly on higher-priced items, analysts see the equity's recent decline as a buying opportunity. Bernstein highlighted eBay's focus on its core audience and modest gross merchandise value growth, expecting steady growth into 2025.

Morgan Stanley downgraded Air France-KLM to "underweight" from "equal weight," citing concerns over the airline's valuation, high capital intensity, and weaker profitability compared to competitors like Lufthansa and IAG. The downgrade highlights issues such as slower recovery in key markets, high maintenance costs, and negative free cash flow projections for 2025-2026, suggesting significant downside risks for the shares.

Bank of America and UBS both foresee a potential year-end rally in US equities. BofA cites historically strong November performance during election years and current oversold conditions, with a target of 5940-6150 for the S&P 500. UBS highlights the resolution of election uncertainties, strong consumer spending, and Fed support, expecting lower volatility to boost market growth into 2025, despite lingering risks.

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