Equities rise amid falling oil prices

U.S. and European equities rose on Monday as easing Middle East tensions led to a sharp 5% drop in oil prices, with WTI Crude falling below $68 per barrel. The S&P 500 gained 0.27%, the Dow Jones rose 0.65%, and the Nasdaq added 0.26%, while Europe's Stoxx 50 closed 0.7% higher. Media and construction shares strengthened, though oil and gas equities slipped. Philips’ shares plunged nearly 17% after lowering its sales forecast due to weak demand in China.

Summary for 29.10.2024

Most Asian equities traded flat on Tuesday, with attention on upcoming major U.S. tech earnings. Japan’s Nikkei 225 and TOPIX indexes gained, supported by a weaker yen following the ruling coalition’s loss of its parliamentary majority, sparking bets that the Bank of Japan will pause rate hikes. Elsewhere, Australia’s ASX 200 rose ahead of inflation data, while China’s indices dipped slightly.

U.S. and European markets are set to open cautiously on Tuesday as investors await key U.S. labour market data and a heavy week of corporate earnings. Ford’s weak full-year guidance and VF Corp's positive results have impacted futures trading.

Oil prices rose in early Asian trade on Tuesday, recovering from recent losses after concerns of a worsening Middle East conflict eased slightly. Brent and WTI crude futures gained 0.7% following Monday's 6% drop after an Israeli strike avoided critical Iranian oil infrastructure. Tensions remain elevated, however, as Iran has warned of retaliation. Traders are also eyeing key U.S. economic data and the upcoming presidential election, both potentially impacting demand and price stability.

Boeing launched a share offering on Monday, aiming to raise up to $22 billion to bolster finances strained by a prolonged workers' strike. The offering includes 90 million common shares and $5 billion in mandatory convertible securities, crucial to maintaining Boeing's investment-grade credit rating. Funds may support debt repayment as the company faces significant cash pressures and rising costs.

CrowdStrike has sued Delta Air Lines in a Georgia court after a faulty software update led to a global outage in July, causing 7,000 flight cancellations and $500 million in losses for Delta. CrowdStrike aims to clarify that it wasn't responsible for the harm claimed and alleges Delta rejected assistance. Both parties are seeking damages and legal fees.

Meta Platforms is developing an AI-based search engine to reduce its reliance on Google and Bing. The new web crawler will provide conversational responses about current events via Meta AI, the company's chatbot across its platforms. This move comes amid increasing competition in the AI search market, with concerns over copyright infringement in data scraping for training AI models.

Shares of Trump Media & Technology Group surged 20% on Monday to their highest since June, as betting odds favoured Donald Trump in his presidential campaign. The shares have nearly quadrupled since late September, with Trump’s stake now valued at over $5 billion. Despite its $9 billion market value, the company reported only $837,000 in revenue last quarter, raising concerns about its financial sustainability.

Volkswagen plans to close at least three factories in Germany and lay off tens of thousands of workers as part of a significant restructuring effort. The company's works council head, Daniela Cavallo, indicated that the firm faces mounting pressure from high costs, competition, and declining demand. Upcoming negotiations will discuss potential salary cuts and measures to regain competitiveness amid fears of strikes and a weakening automotive market.

Philips announced a significant decline in demand in China, leading to a 16% drop in its shares and a lowered sales outlook for the year. CEO Roy Jakobs attributed the decline to deteriorating consumer confidence and an anti-corruption campaign affecting hospital orders. The company now expects 2024 sales growth of only 0.5% to 1.5%, down from a prior forecast of 3% to 5%.

VF Corp turned a profit in Q2, beating sales estimates with a 6% revenue drop to $2.76 billion, surpassing expectations of $2.71 billion. CEO Bracken Darrell’s turnaround, including executive changes and Supreme’s sale, fueled 9% revenue growth in China. Improved inventory management lifted gross margins by 120 basis points to 52.2%, and adjusted profit reached 60 cents per share, beating analysts' forecast of 37 cents. Shares rose 23%.

Cemex's Q3 earnings fell short of expectations, with EPS at $0.14 versus the anticipated $0.20 and revenue down 3% year-on-year to $4.09 billion, missing the $4.26 billion forecast. Despite this, net income rose 222% to $406 million. CEO Fernando González cited portfolio optimisation efforts, including $2.2 billion in divestitures, and prioritised US growth, debt reduction, and shareholder returns. Shares dropped 8%.

JPMorgan expects Apple’s strong Q4 earnings but anticipates weaker guidance for the holiday quarter due to slower initial iPhone 16 sales, though recent demand has improved. Despite near-term challenges, JPMorgan forecasts long-term growth driven by AI-powered upgrades and improved product mix, maintaining a $265 price target and an Overweight rating, highlighting Apple’s strategic potential for 2025 growth.

Bank of America has raised price targets for cruise lines Royal Caribbean to $205 and Norwegian Cruise Line to $25 ahead of their Q3 earnings reports. Strong consumer spending, lower crude prices, and rate cut expectations have driven cruise stocks up an average of 26%. BofA forecasts positive earnings for both companies, with Royal Caribbean expected to announce a share buyback during its earnings call.

Deutsche Bank analysts anticipate Tesla will launch its robotaxi services as early as 2025, with small-scale operations likely starting in Texas next year. The rollout hinges on advancements in its Full Self-Driving (FSD) software, which is expected to significantly improve performance. Tesla aims to retain control of the robotaxi value chain, with expectations for the first "Cybercab" by 2026.

Shares of Advanced Micro Devices (AMD) rose after Northland Capital Markets projected the company would exceed its third-quarter revenue guidance. They expect AMD to gain market share in server CPUs and AI accelerators, with non-GAAP earnings likely surpassing $0.92 per share. Analysts anticipate revenue growth driven by AI and server product lines, with potential 2027 revenue reaching $55 billion.

Citi has placed AT&T Inc. on its positive catalyst watch list ahead of the company's analyst meeting on December 3, expressing optimism based on strong third-quarter results. Analysts anticipate insights into AT&T’s multi-year strategy, financial prospects, and potential share repurchase programmes. Citi maintains a Buy rating, highlighting AT&T's financial flexibility and growth trajectory as key factors for investor confidence.

Monness, Crespi, Hardt has initiated coverage of Coinbase Global with a Buy rating and a $245 price target, citing its strong foundation for long-term success despite near-term volatility. The analysts praised Coinbase’s first-mover advantage, technology, and compliance, as well as its large user base. They believe regulatory challenges present buying opportunities, while subscription services are expected to boost average revenue per user.

BTIG has initiated coverage of Lottomatica Group SpA with a "Buy" rating and a target price of €17, reflecting a 53.4% upside from its recent closing price. The firm believes Lottomatica can benefit from Italy's shift towards online betting, which currently has low penetration compared to other markets. They project 2024 revenue of €2.04 billion, with significant growth expected in the coming years.

UBS has revised its top picks, reflecting a “soft landing” expectation for the U.S. economy. They added Bank of America and Truist Financial to their financials list, citing their potential benefits from lower interest rates. In energy, Suncor Energy was included for its attractive valuation. In utilities, Entergy and Sempra Energy were added due to their growth prospects and regulatory advantages.

Bank of America’s recent analysis finds the S&P 500 overvalued by 19 out of 20 metrics, indicating limited long-term price growth, with projected annualised returns of 1-2% over the next decade. The equal-weighted S&P 500 offers a higher 4-5% return, and with potential dividend growth, total returns could reach 8.3%. Nonetheless, BofA remains cautious due to inflation concerns and premium valuations.

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