Last week saw record highs for the S&P 500 and Nasdaq 100, propelled by indications of slower US hiring and speculation of a forthcoming Fed rate cut amid higher unemployment. Communication services shares like Meta and Alphabet surged, supported by solid consumer staples performance, while energy equities struggled. Concurrently, European equities, particularly the Stoxx 50, advanced 0.5% on Friday, buoyed by UK election optimism and positive US job data, contributing to a week where European markets closed more than 1.5% higher.

Summary for 08.07.2024

Asian equities fell this morning, led by Chinese markets amid trade war fears with the West and anticipation of interest rate signals. Chinese indices dropped due to EU tariffs on Chinese EVs, while Japan's indices slightly retreated despite strong foreign buying. Broader Asian markets were subdued with middling economic data from Japan and Australia.

European equity markets are seen poised to open higher while US equity futures slipped on Monday as investors awaited Jerome Powell's testimony and key inflation data for interest rate cues, and ahead of major banks' earnings reports.

Oil prices remained steady in Asian trade on Monday amid concerns over tropical storm Beryl's impact on Gulf of Mexico production and strong summer demand. Fears of slower Chinese demand tempered gains, but geopolitical risks and record-high US travel demand during the Independence Day holiday kept prices supported.

France's snap legislative elections resulted in a hung Parliament with no majority for any major political group. The left-wing New Popular Front led with 178 seats, followed by Macron's centrist coalition with 150 seats, and the National Rally with 142 seats. The outcome reflects deep political uncertainty and challenges for coalition formation.

Several senior House Democrats urged President Biden to end his re-election campaign during a private call, citing concerns over his age, mental acuity, and campaign strategy. Despite mounting pressure, Biden remains adamant about continuing his candidacy and focused on reassuring supporters in Philadelphia.

The US economy added 206,000 jobs in June, slightly below revised figures for May and forecasts. Job gains were notable in government, healthcare, social assistance, and construction sectors, while losses occurred in retail, manufacturing, and professional services. Average hourly earnings rose 0.3% to $35.00, with annual growth slowing to 3.9%, the least since June 2021.

Paramount Global's board approved a merger with Skydance Media, signalling the end of an era for the Redstone family's media empire. The deal, led by David Ellison of Skydance, aims to address Paramount's financial challenges amidst a shifting entertainment landscape, potentially involving veteran executive Jeff Shell post-merger.

Boeing has agreed to plead guilty to a criminal conspiracy charge for false representations to the FAA related to the 737 MAX crashes in Indonesia and Ethiopia, resulting in a $243.6 million fine. The deal avoids a trial but could impact future contracts, requiring Boeing to invest in safety programs and face ongoing monitoring.

Jean-Jacques Guiony, CFO of LVMH, linked China's anti-dumping probe of European cognac to retaliatory measures over EU tariffs on Chinese electric vehicles, highlighting challenges for global brands like Hennessy amid trade tensions. He stressed European unity in navigating protectionism. Meanwhile, Peter Wennink, ex-CEO of ASML, criticised U.S.-China disputes over semiconductors as ideological, foreseeing prolonged tensions amidst efforts to balance stakeholder interests and geopolitical uncertainty.

Elon Musk aims to dismiss a lawsuit by former Twitter shareholders who accuse him of delaying disclosure of his 9.2% stake, allegedly causing them to miss out on substantial gains. Musk contends the delay was a genuine mistake, not fraud, citing a misunderstanding of SEC rules. The case persists amid previous judicial scrutiny of Musk's disclosure practices.

Arkhouse Management Co. and Brigade Capital Management have raised their buyout offer for Macy's to around $6.9 billion, equating to $24.80 per share. This revised bid follows earlier increases and prompts Macy's board to consider whether to proceed with the privatisation offer amid ongoing turnaround efforts led by CEO Tony Spring, who aims to revitalise the retailer's operations.

Aixtron SE, a German semiconductor equipment supplier, reported strong second-quarter order intake of €176 million, led by demand for silicon carbide products. Despite revising down its 2024 revenue forecast to €620-660 million and adjusting margins, Jefferies remains optimistic. They see this adjustment as positive, dispelling market concerns about declining demand and positioning Aixtron well for future growth.

Bank of America analysts have identified Broadcom as a top pick in the US semiconductor sector based on their "Triple Momentum Rank" indicator, which assesses momentum in earnings, price, and news sentiment. They highlight global strength in Tech Hardware and Semiconductors, with Broadcom standing out alongside IFF in this ranking system.

Morgan Stanley has raised its price targets for S&P Global and Moody's Corp., expecting strong second-quarter performances driven by a 35% increase in year-to-date issuance activity. They anticipate both companies to surpass analyst forecasts, with adjusted earnings estimates lifted, despite their shares underperforming so far this year.

New Street Research downgraded Nvidia from Buy to Neutral, citing expectations of slowing revenue growth and limited upside beyond 2025. They highlighted risks from potential capital expenditure slowdowns and competition from ASICs and AMD. The firm set a target price of $135, indicating minimal upside, but noted Nvidia's strong franchise quality amid market fluctuations.

Wedbush analysts are optimistic about the tech sector, predicting a further 15% upside for the Nasdaq in 2024 driven by the AI revolution. They highlight Nvidia and Microsoft as pioneers, expecting a "tidal wave" of tech spending on AI to reach $1 trillion. Wedbush sees strong growth ahead, likening it to a new technological era akin to 1995.

Yardeni Research raises concerns about the AI technology sector, citing risks from excessive capital influx into startups and overhyped expectations leading to a potential bubble. Despite AI's transformative potential, the firm advises investors to approach the current rally cautiously due to financial instability among startups and volatile market dynamics in semiconductor industries.

Wells Fargo analysts highlighted the healthcare sector's lag behind the S&P 500, attributing it to limited exposure to artificial intelligence and concerns over higher interest rates impacting defensive shares like biotechnology. Despite these challenges, they view the current period as offering an attractive buying opportunity for healthcare equities, buoyed by potential gains amidst anticipated Federal Reserve interest rate cuts.

This week, markets will closely monitoring several key events, including US Federal Reserve Chair Jerome Powell's testimony in front of Congress, pivotal US inflation data, and jobless claims. Investors are also awaiting UK GDP figures and the Producer Price Index. Earnings reports from major global companies like TSMC, PepsiCo, JP Morgan Chase, and others will continue to drive market sentiment throughout the week.

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