On Thursday, U.S. equities slipped as stubborn inflation data pushed Treasury yields to two-month highs, with the S&P 500 falling 0.21%, the Dow Jones dropping 0.14%, and the Nasdaq dipping 0.05%. The higher-than-expected Consumer Price Index indicated cooling inflation, while a surprise rise in weekly jobless claims may have been hurricane-related. Similarly, the STOXX 50 closed 0.3% lower, reflecting U.S. trends, with insurance shares like Generali gaining while tech equities like Adyen and Prosus underperformed. BMW shares fell 0.8% after a 13% drop in Q3 sales, while Mercedes-Benz shares edged higher despite a slight sales decline.

Summary for 11.10.2024

Asian shares headed for their first weekly loss in five weeks, with MSCI's Asia-Pacific index outside Japan down 1.7%. Chinese blue chips fell 1% on Friday, while Hong Kong's Hang Seng dropped 6.5% for the week, marking its steepest decline in two years. Meanwhile, Japan's Nikkei gained 0.6%, pushing its weekly rise to 2.6%. South Korean shares rose 0.4%.

European markets are poised for a slightly higher open, with investors focusing on U.S. inflation data and upcoming corporate earnings. U.S. equity futures saw modest gains, with S&P 500, Nasdaq 100, and Dow Jones futures each up 0.1%. Earnings season begins with JPMorgan, Wells Fargo, and BlackRock reporting, with analysts expecting muted bank earnings and 4.2% S&P 500 EPS growth for Q3, down from earlier estimates.

Oil prices eased on Friday after a rally, with Brent crude down 0.5% and West Texas Intermediate crude down 0.4%. Despite this decline, both benchmarks were set for weekly gains of 1%-2%, driven by concerns over hurricane damage in the U.S. and potential supply disruptions if Israel targets Iranian oil sites. The market remains cautious amid geopolitical tensions and uncertainties regarding U.S. demand.

In the U.S., the consumer price index (CPI) declined to 2.4% annually in August, slightly above expectations and marking the lowest level since February 2021, while core CPI edged up to 3.3%. Jobless claims rose to 258,000, exceeding estimates and indicating a normalisation of the labour market without a collapse, supporting growth and the "soft landing" narrative. These trends suggest moderate inflation and potential for continued Federal Reserve rate cuts.

Minutes from the ECB's September meeting revealed confidence that inflation would return to target by late 2025, though volatility is expected to persist throughout 2024 due to high core inflation. The ECB indicated a gradual interest rate reduction may be appropriate if data aligns with projections, while emphasising a data-dependent approach without committing to a specific rate path. The deposit facility rate was cut by 25 bps to 3.5% in September.

Tesla unveiled its Cybercab robotaxi at the “We, Robot” event, with CEO Elon Musk aiming for production by 2026 at a price below $30,000. The vehicle, designed without a steering wheel or pedals, will have an estimated operating cost of 20 cents per mile. Tesla also introduced a Robovan and an updated humanoid robot, Optimus, while emphasising its shift towards AI amidst declining sales and competition.

Advanced Micro Devices (AMD) announced plans to ramp up production of its new AI M1325X chip in Q4 2024 to compete with Nvidia. The MI325X chip features enhanced memory for faster AI tasks and will begin shipping in Q1 2025. AMD also plans to launch the next-gen MI2350 chips in mid-2025. Despite these developments, AMD shares fell by 4%.

Delta Air Lines provided fourth-quarter earnings guidance of $1.60 to $1.85 per share, falling short of analysts' expectations of $1.78. The company anticipates a 2% to 4% revenue increase, despite challenges from overcapacity affecting fares. Delta's recent summer computer outage, which led to significant cancellations, cost approximately $380 million and impacted third-quarter earnings, which were $1.50 per share compared to $2.03 a year prior.

Stellantis confirmed CEO Carlos Tavares will retire in early 2026 amid struggles in North America, leading to senior management changes. The automaker's declining earnings prompted a profit forecast cut and investor concerns over bloated inventories. Tavares aims for a shift toward electric vehicles, targeting 100% electric passenger car sales in Europe by 2030, while facing criticism from the UAW and stakeholders for not meeting commitments.

Mercedes-Benz and BMW both faced significant declines in third-quarter sales due to challenging market conditions in China. Mercedes-Benz reported a 3% drop to 594,600 vehicles, with a 31% fall in battery electric vehicle sales, while BMW's sales fell 13% to 540,882 units, impacted by a recall affecting over 1.5 million vehicles. Despite these challenges, BMW noted a 19.1% increase in electric vehicle sales.

Deutsche Telekom announced plans to accelerate revenue and earnings growth, including a €2 billion share buyback program in 2025. This initiative aims to enhance shareholder value by reducing outstanding shares and complements its existing dividend policy. The company targets over €15 billion in revenue by 2027 and aims for €21 billion in free cash flow, despite potential risks from competition and regulation.

GSK plc shares rose over 3% after the company announced settlements for approximately 80,000 Zantac-related lawsuits in the U.S., agreeing to pay up to $2.2 billion to resolve 93% of these cases. GSK maintains it holds no liability but sees the settlements as crucial for financial stability. The company will recognize a £1.8 billion charge in Q3 2024, funded through existing resources.

Jefferies analysts reported weak demand for Apple's iPhone 16, noting shortened delivery lead times in major markets, particularly China and the US. Resale prices in Hong Kong are below official rates, with even the popular Desert Gold variant selling at a discount. Early data indicates a double-digit decline in iPhone sales across all models. Despite a cautious short-term outlook, analysts remain optimistic about Apple's long-term potential due to anticipated AI advancements.

Truist analysts raised their price target for Meta Platforms to $650, anticipating strong advertising demand in Q3 2024. They expect Meta's revenue growth to reach the higher end of its guidance, driven by robust social advertising and increased CPMs. For FY 2024, they project $160 billion in revenue, a 19% increase, with growth accelerating to about 20% by year-end 2025.

Truist Securities upgraded Nike to a Buy rating, raising the price target to $97 from $83, anticipating over 17% upside. The analysts expressed optimism about new leadership, including CEO Elliot Hill, focusing on restoring wholesale relationships and re-engaging retail partners. While recovery may take time, Truist believes near-term catalysts, like marketing investments and endorsement deals, will improve investor sentiment.

TD Cowen analysts downgraded PepsiCo to "Hold" and reduced its price target, citing aggressive pricing strategies that have diminished its appeal as a low-cost option for consumers. Prices for salty snacks and beverages rose 41% since 2021, leading to anticipated volume pressures. Pepsi's organic growth forecasts were cut to 1.9% for the current fiscal year, with lower sales projections for 2024 due to competition from private-label brands and sluggish demand.

Barclays upgraded CVS Health Corp to Overweight and raised its price target to $82, citing a promising outlook for margin recovery in its Medicare business, which could enhance the value of Aetna. Analysts estimate CVS could achieve significant margin improvements, with a projected 2025 EPS of $7.80, exceeding consensus estimates. They also anticipate CVS will implement a $2 billion cost-saving plan over three years, contributing to earnings growth.

Goldman Sachs initiated coverage of Builders FirstSource with a "buy" rating and a $225 price target. Analysts expect the company to benefit from a rebound in residential construction, noting that 82% of sales are linked to new home builds. They highlighted Builders FirstSource's focus on higher-margin services, strong balance sheet, and effective capital deployment as key drivers for future growth and profitability.

Bernstein analysts downgraded PayPal to Market-Perform from Outperform, raising the price target to $80 due to rising competitive pressures and uncertainty about long-term growth. While acknowledging improvements in product execution, they highlighted challenges with the core cash-cow button and concerns about Venmo's share losses. Bernstein expressed caution over potential negative revisions to gross profit linked to interest rate fluctuations, leading them to adopt a more cautious stance on PayPal's outlook.

JPMorgan downgraded several metals and mining shares, including Anglo American and Boliden, citing limited effects from China's recent stimulus efforts. While industrial metal prices briefly rallied, analysts expressed concerns about downside risks from potential trade disruptions related to the upcoming U.S. elections. They foresee a 10-20% downside for major European mining equities, driven by risks from declining metal prices and trade tensions.

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