Equities ease, yields inch up, ahead of US inflation data

On Tuesday, technology shares boosted the Nasdaq Composite for its third consecutive daily gain, while other sectors displayed weakness ahead of key inflation updates and bank earnings. Semiconductor giant Nvidia led tech mega-caps higher. The S&P 500 dipped 0.2%, the Dow Jones fell 0.4%, and the Nasdaq rose 0.1%. Energy shares were weak despite a crude oil futures rally, and small-cap stocks remained under pressure. Market sentiment, though stretched, shows healthier breadth compared to 2023. European equities slipped in a broad-based decline, with the Stoxx 50 ending 0.4% lower, led by declines in basic resources and banks, while healthcare shares limited some losses by extending gains to a second consecutive day.

Summary for 10.01.2024

Most Asian markets retreated, with Japan's Nikkei 225 hitting a 34-year high amid delayed Bank of Japan policy tightening expectations. Concerns over US inflation and Fed rate cuts persisted, causing caution in broader Asian markets. Australia's ASX 200 fell on lower-than-expected inflation, and Chinese indices remained weak. South Korea's KOSPI declined as well.

European shares are set for a muted open on Wednesday while US equity futures were seen steady as investors await the latest US inflation data and major banks’ earnings later this week.

Oil prices rose this morning, extending a recent rebound due to ongoing supply disruptions in the Middle East. Despite a sharp drop earlier in the week, prices recovered as the Israel-Hamas conflict and Libya's oilfield suspension impacted supply. However, concerns about weakening global oil demand persist, highlighted by a winter storm affecting US fuel demand and data showing continued builds in gasoline and distillates inventories. US crude inventories saw a significant draw, but product stockpiles surged, reflecting ongoing market challenges.

The global IPO market is set for a robust 2024, with key listings including Alibaba's Cainiao eyeing a $1 billion Hong Kong IPO, Tokyo Metro's approved $5 billion offering, Ola's $660 million IPO plan in India, and European companies Douglas and Tendam exploring market debuts. Sanofi is also considering a spin-off of its consumer-health division in Europe, potentially valued at over $20 billion. In the U.S., Reddit targets a $15 billion valuation.

HSBC has upgraded Citigroup to 'Buy,' citing potential for improved return on equity and book value growth. In contrast, Morgan Stanley received a 'Hold' rating due to less optimistic revenue projections in its wealth management sector, despite a raised price target of $96. Citigroup's shares rose 0.2%, while Morgan Stanley's dropped 0.7%.

Intuitive Surgical announced Q4 preliminary results, reporting revenue of $1.93 billion, surpassing the estimated $1.87 billion. Instruments and accessories revenue matched estimates at $1.14 billion, while systems revenue exceeded expectations at $480 million. The company experienced robust worldwide procedure growth of approximately 21%, leading to a 3.8% after-hours rise in its share price.

Bank of America downgraded Nio Inc. to Neutral with a $9.00 price target, citing lower-than-expected sales growth and valuation concerns. Analysts anticipate hurdles in Nio's sales trajectory for the first three quarters of 2024 due to the absence of new model launches, potential price discounts on existing models, and increased spending on marketing for new brands. Despite this, they maintain a positive outlook for Q4 2024 and 2025, expecting an improved financial standing with the CYVN investment.

Barclays analysts identified Amazon as their preferred mega-cap stock for 2024, maintaining an Overweight rating with a $190 price target. They highlighted new disclosures supporting their bullish view, emphasising the high productivity of Amazon Web Services (AWS) and anticipating re-accelerated revenue growth in 2024.

Citigroup analysts downgraded Netflix from "Buy" to "Hold" due to concerns about future revenue growth and profit margins. The shift is rooted in apprehensions over escalating content costs, projecting a surge to $20.4 billion by 2025, potentially straining Netflix's finances.

Boeing announced 1,314 net new orders for 2023, despite recent safety incidents involving the 737 Max 9. Avolon Aerospace Leasing, Ethiopian Airlines, Lufthansa, and SunExpress were key contributors. Boeing also achieved its highest delivery count since 2018, delivering 528 aircraft. While trailing Airbus in orders and deliveries, Boeing's 5,626 aircraft backlog signifies strong market position, reflecting customer confidence and resilience in overcoming challenges.

BMW Group reported record sales in 2023, exceeding 2.5 million units and achieving a 15% market share in battery-electric vehicles. Q4 sales reached 718,778 cars, up 10.3% YoY, contributing to a 6.5% annual rise. The US market saw significant growth (9.4%), reaching nearly 396,000 units, while China experienced slower growth at 4.2%, with sales reaching 824,932 units. BMW is confident in maintaining its battery-electric sales trajectory in the coming year. Full-year results are scheduled for 21st March.

Volkswagen Group reported a 12% increase in deliveries to 9.24 million vehicles in 2023, indicating a post-pandemic sales recovery as supply chain issues eased. The Volkswagen brand's sales were 4.87 million cars, still below pre-pandemic levels but higher than the previous year. All-electric sales across the group rose 35% to 0.77 million vehicles, with battery-electric vehicle deliveries in China reaching 191,800. Volkswagen emphasizes profitability amid competition in the Chinese electric vehicle market.

Deutsche Bank upgraded JPMorgan to Buy from Hold, raising the price target to $190 from $140, citing potential benefits from net interest income upside, strong capital markets revenues, and robust capital and loan loss reserve levels. Meanwhile, Wells Fargo was downgraded to Hold from Buy, with expectations of a weak net interest income guide for 2024 and a fair valuation. Analysts highlighted three key themes for 2024: lower interest rates, credit quality, and regulation/political backdrop.

Grifols' Madrid-listed shares experienced a sharp decline after a report from UK-based short-seller Gotham City Research raised concerns about the Spanish healthcare firm's financial figures. Gotham City alleged that Grifols manipulated reported debt and EBITDA figures, artificially reducing reported leverage. Grifols denied the allegations, calling them false information and speculation, and emphasized its commitment to transparency and integrity. The stock shed nearly $3.83 billion of its market value in response to the fraud allegations.

Bank of America analysts downgraded JetBlue Airways (JBLU) to Underperform, citing a challenging domestic environment and issues such as GTF engine problems. JBLU's price target was cut to $3 from $6 per share. Conversely, United Airlines (UAL) was double-upgraded to Buy from Underperform, with a new price target of $56, up from $40, as analysts see a valuation disconnect versus UAL's execution and a more favourable leverage outlook.

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