US equities closed lower on Wednesday, with the S&P 500 and Nasdaq marking a fourth straight session of losses, dropping 0.5% and 1.1% respectively. The Dow edged down 0.1%, buoyed by UnitedHealth gains. Fed Chairman Powell's remarks on inflation hinted at no rush for rate cuts. Semiconductor shares plunged, as ASML slumped more than 6%. However, that did not prevent the Stoxx 50 to edge up 0.1% as luxury leader LVMH surged by 4.5%.

Summary for 18.04.2024

Asian equity markets rose despite Wall Street's tech-led selloff, reflecting improved risk sentiment. Concerns over Federal Reserve policy weighed as the possibility of delayed rate cuts emerged. Australia’s unemployment uptick suggested RBA rate reductions, supporting market sentiment. Shares in Australia, Japan, South Korea, Hong Kong, and China advanced, driven by anticipation of strong TSMC earnings and bargain hunting amid geopolitical tensions and rate worries.

European equity markets are heading for a mixed open while US equity futures stabilised following fourth consecutive declines in S&P 500 and Nasdaq Composite. Today’s earnings include TSMC, Netflix, and L’Oreal.

Oil prices treaded water in Asian trade on Thursday after experiencing sharp losses in the prior session due to fears of higher-for-longer US interest rates, alongside a bigger-than-expected build in US inventories. Summarily, concerns over geopolitical tensions and US sanctions on Venezuela persisted, keeping market sentiment cautious.

Australia's unemployment rate rose to 3.8% in March 2024, up from February's 3.7%, but below forecasts. The number of unemployed increased by 20.6 thousand, with full-time job seekers rising by 19.3 thousand. Unexpectedly, employment fell by 6.6 thousand, while the participation rate slightly declined to 66.6%.

In March, Euro Area's consumer price inflation remained at 2.4%, matching a 28-month low, with moderation in price increases for food, alcohol & tobacco, and non-energy industrial goods, alongside stable services inflation and a cooling core inflation to 2.9%. Monthly prices rose by 0.8%. Meanwhile, Malta's annual inflation rate decreased to a 27-month low of 2.7%, while monthly prices rose by 1%.

United Airlines shares soared over 17% yesterday after an upbeat profit outlook for Q2 and robust Q1 results despite a $200 million Boeing safety crisis impact. CEO Scott Kirby anticipates strong summer travel demand, while CFO Michael Leskinen addressed cost challenges from reduced aircraft utilisation due to delivery delays. Analysts viewed results positively, expecting relief for United's oversold shares.

Eli Lilly & Co. reported positive results from its SURMOUNT-OSA Ph3 study, showing that tirzepatide significantly reduced the apnea-hypopnea index in patients with obesity and sleep apnea. Analysts at Morgan Stanley and Cantor Fitzgerald anticipate broader benefits beyond weight loss and potential Medicare coverage, considering tirzepatide as a breakthrough treatment.

Adidas shares surged over 8% on Wednesday after reporting quarterly results surpassing expectations and raising its 2024 guidance due to strong demand for sneakers, particularly retro styles like Samba and Gazelle. Analysts note impressive revenue performance and expect positive growth across all regions, with North America likely benefiting from inventory improvement.

ASML reported weaker-than-expected first-quarter bookings, but its outlook remains strong due to demand for AI and memory chips. Chinese sales, comprising 49% of total sales, buoyed earnings despite US-led restrictions. While bookings fell short, analysts remain optimistic, citing ASML's market dominance and long-term growth potential, despite CEO Peter Wennink's upcoming retirement.

The US Commerce Department is reportedly set to provide Micron Technology with over $6 billion in grants for domestic chip factory projects. This move aligns with President Biden's initiatives, including the CHIPS Act, aiming to bolster US semiconductor production and reduce reliance on China and Taiwan. With an outlay of $52.7 billion, the CHIPS Act seeks to revive domestic production, addressing the decline in the US share of global semiconductor manufacturing capacity from 37% in 1990 to 12% in 2020.

UBS Group plans job cuts affecting over a hundred positions in its global investment bank, following its takeover of Credit Suisse. Layoffs are expected in wealth management and markets units. The merger, arranged in March 2023, led to over 3,000 job cuts in Switzerland and significant reductions in Hong Kong-based staff.

Morgan Stanley predicts Tesla will rebound from the current electric vehicle downturn, emphasising its potential as an AI beneficiary. The firm advises focusing on stabilising Tesla's core EV business amidst industry headwinds, estimating its core auto business represents only a fifth of its overall value.

Barclays suggests that despite lower Q1 estimates, earnings could still support equities against rising rates. While estimates have fallen sharply, they're now below Q4 growth figures. The bank notes a potential for beats but acknowledges equities may be ahead of earnings, urging caution, especially for cyclicals amid geopolitical uncertainty.

Wells Fargo strategists caution that the equity market's optimism for 2024 is already priced in, anticipating challenges ahead due to inflation and Fed rate uncertainties. However, they suggest viewing market dips as opportunities, foreseeing improved revenue growth and expanding margins through 2025, particularly favouring US large-cap shares.

HSBC strategists remain optimistic amid recent equity market downturns, increasing their bullish stance on shares, particularly in the US, Japan, and Emerging Markets. They also favour high-yield credit and EM hard currency debt, expecting fundamental and technical trends to support market resilience despite potential inflation concerns.

Morgan Stanley analysts anticipate a bottoming out of earnings in Q1, followed by a sequential recovery and expansion throughout 2024. They highlight 14 equities poised for significant movements based on Q1 earnings. Those expected to rise positively include Nvidia, Amazon, AbbVie Inc, Corning, Cullen/Frost Bankers, Devon Energy, Lazard, Lifestance Health Group Inc, Paccar, S&P Global Inc, SBA Communications, and Seagate Technology PLC.

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