Harris` electoral odds improve after debate

On Tuesday, two of the three major US indices rose, with the S&P 500 gaining 0.45% and the Nasdaq up 0.84%, while the Dow fell 0.23%. Investors remained cautious ahead of key inflation data. Energy shares lagged as crude oil prices hit near three-year lows, while financials were pressured by a 5% drop in JPMorgan Chase. Treasury yields fell, supported by strong bond market demand. In Europe, markets also posted modest gains, with defensive and growth sectors leading amid concerns over economic growth and upcoming inflation data.

Summary for 11.09.2024

Asian equities mostly fell on Wednesday amid uncertainties surrounding the US presidential race and trade tensions with China. Chinese shares hit a seven-month low, pressured by US legislative moves and trade tariff concerns. Regional declines also reflected broader global market losses, with Japan's Nikkei and South Korea's KOSPI also trading lower.

Futures indicate European bourses are due for a lower open while US equity index futures were also lower this morning as attention turned to the upcoming inflation data and the remanences of the Harris-Trump debate.

Oil prices edged up from near three-year lows on Wednesday as traders watched Hurricane Francine's potential impact on Gulf of Mexico production and an unexpected US inventory draw. This slight rebound follows sharp declines due to OPEC's reduced 2024 global demand forecast, now at 2.03 million barrels per day, reflecting weaker Chinese demand and a shift to cleaner energy. OPEC also cut its 2025 forecast, and Morgan Stanley reduced its Brent crude price predictions amid ongoing demand concerns.

Kamala Harris and Donald Trump exchanged fierce blows in their first presidential debate, sparking heated classes over the economy, immigration, and foreign policy. Harris criticised Trump’s economic policies and proposed middle-class tax cuts, while Trump defended his record and pushed for higher trade tariffs. They also clashed on reproductive rights and immigration, with Trump dismissing his 2020 loss. Following the debate, PredictIt’s market saw Trump’s chance of winning drop to 48% from 52%, and Harris’ odds rise to 56% from 53%.

China has renewed its offer for talks with the European Commission to address trade frictions and ease impending punitive tariffs on Chinese electric vehicles. Vice Commerce Minister Li Fei expressed China's willingness to engage in dialogue to resolve issues related to countervailing subsidies. The European Commission is set to vote in October on additional duties, with recent reports suggesting potential reductions in proposed tariffs.

JPMorgan Chase shares fell over 5% on Tuesday after President Daniel Pinto warned that the bank's forecasts for net interest income were overly optimistic, citing expected rate cuts and rising expenses. Shares dropped as much as 7.5%, its steepest decline since June 2020, amid concerns over future earnings and a recent Fed proposal to ease capital rules for banks.

Sony will launch the PlayStation 5 Pro on 7 November, priced at $699.99. This upgraded model features enhanced graphics and a more powerful processing unit but lacks a disc drive. At 40% more than the standard PS5 with a disc drive, Sony expects to sell 18 million PS5 consoles this financial year, down from 20.8 million last year.

Oracle's shares surged over 10% on Tuesday following strong first-quarter results, driven by its AI-focused cloud products. Revenue from cloud services rose 21% to $5.6 billion, helping Oracle beat overall revenue estimates. The company’s growth prospects are bolstered by partnerships with AWS, Google Cloud, and its use of Nvidia's AI hardware. Oracle’s shares have increased 32% this year, outpacing Microsoft and Amazon.

Europe's highest court ruled that Apple must pay €13 billion in back taxes to Ireland, which could impact its fiscal 2024 earnings per share by about 10%. Despite the significant charge, Citi analysts view the impact as manageable due to Apple’s strong cash flow and prior reserves set aside for the case. Apple’s shares fell 0.5% following the announcement.

Huawei unveiled its $2,800 Mate XT, a tri-foldable phone, aiming to compete with Apple’s new iPhone 16. The Mate XT has garnered over 4 million pre-orders and features advanced AI capabilities powered by Huawei's Kylin chips. Despite its high price and limited production, the launch showcases Huawei's tech leadership, challenging Apple, which has seen declining sales in China.

BMW cut its 2024 profit margin forecast to 6-7% from 8-10% due to weak demand in China and issues with a braking system from Continental, affecting over 1.5 million cars. BMW's shares dropped nearly 12%, hitting a near two-year low, while Continental’s shares fell over 10%. BMW expects high warranty costs and slightly reduced deliveries for 2024.

GameStop's shares dropped more than 10% after it announced plans to offer up to 20 million shares, as its second-quarter revenue declined due to a shift towards online purchasing. The company, grappling with falling sales and heightened competition, plans to use the proceeds for general corporate purposes, including potential acquisitions. Revenue fell to $798.3 million, missing analysts' expectations.

Shares of Southwest Airlines fell 1.6% yesterday after announcing significant changes to its board of directors, including the planned retirement of executive chairman and former CEO Gary Kelly next year. Additionally, six other board members will voluntarily step down, following pressure from activist investor Elliott Investment Management L.P. Despite these shifts, current CEO Bob Jordan will continue in his position, according to media reports.

Australian property listing firm REA Group announced on Wednesday that its £5.6 billion cash-and-shares takeover offer for Britain’s Rightmove was rejected. The offer, comprising £3.05 in cash and 0.0381 new REA shares per Rightmove share, was declined without explanation. The deal, if completed, would have allowed REA to expand in lucrative international markets.

HSBC is bullish on AMD, citing significant upside in AI-driven revenue and a potential 43% share price increase, with a target of $200. The bank believes AMD can narrow the gap with Nvidia by FY25, bolstered by Nvidia's delayed AI GPU roadmap and AMD's strategic ZT Systems acquisition. HSBC forecasts AMD's AI revenues at $6 billion for 2024 and $12.3 billion for 2025.

DA Davidson has initiated a Neutral rating on Alphabet with a $170 price target, citing challenges in its core Search business and slower AI adaptation, drawing a parallel to Xerox's past struggles. Conversely, Piper Sandler maintains an Overweight rating with a $200 target, viewing recent equity pullbacks as a buying opportunity despite ongoing antitrust litigation. They believe the current regulatory risks are already priced in, presenting a favourable entry point for long-term investors.

Bank of America raised its Palantir price target to $50, citing the company's inclusion in the S&P 500 as a pivotal moment for institutional investors. They compare Palantir’s growth potential to early mobile phone estimates, emphasising its core technology, including the Ontology platform, and its unique sales approach. Analysts believe Palantir's model and strong profit margins position it for significant growth.

BofA Securities upgraded Capgemini to "buy" with a new price target of €250, reflecting a 38% upside. BofA cited Capgemini's improved growth forecasts and attractive valuation, noting it trades at a 45% discount to Accenture. The firm also highlighted positive demand signals in IT services and Capgemini's strong position in digital transformation and Generative AI, despite some ongoing uncertainties in discretionary spending.

The market for weight-loss treatments is set to grow significantly, with analysts predicting it could reach $200 billion by 2031. Sixteen new drugs are expected to launch by 2029, potentially capturing $70 billion of the GLP-1 market. This surge in interest is driven by the success of Novo Nordisk's Wegovy and Eli Lilly's Zepbound, with new competitors like Amgen and Pfizer entering the field. Rising competition may lead to lower prices.

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