Markets brace for US CPI and Fed meeting

On Tuesday, the S&P 500 edged up 0.1%, but the Dow Jones dipped over 100 points, while the Nasdaq surged 0.6% to a fresh record, buoyed by reduced bond yields. Tech shares soared, led by Apple, rising 7% after unveiling AI advancements. However, European shares faced a downturn for the third consecutive day amid fears of political upheaval in France, triggered by President Macron's call for snap elections. Banking giants like Societe Generale and BNP Paribas led the losses.

Summary for 12.06.2024

Asian equity markets mostly declined on Wednesday due to caution ahead of a key US inflation report and the Federal Reserve's interest rate decision. Japan's producer prices rose 2.4% year-on-year in May, exceeding expectations and raising inflation concerns. Australian, Japanese, and Hong Kong shares fell, Chinese shares were stable, and South Korean equities advanced with tech gains.

European equity futures are a tad higher this morning and US equities markets are also expected to open steady on Wednesday, with investor focus on the Federal Reserve's rate decision and May's inflation data.

Oil prices rose in Asian trade this morning after US inventories shrank more than expected. Brent futures climbed to $82.09 a barrel, and WTI to $77.79. Gains were limited ahead of key US inflation data and the Federal Reserve meeting. OPEC maintained a strong demand forecast, with the IEA report awaited.

In May, China's CPI rose 0.3% year-on-year, below the expected 0.4%, reflecting weak consumer spending amid economic uncertainty. However, PPI inflation shrank by 1.4%, a smaller contraction than anticipated, signalling industrial sector recovery driven by sustained overseas demand. Despite policy support, consumer spending remains weak, presenting a mixed economic outlook.

Oracle announced partnerships with OpenAI and Google Cloud, boosting demand for its AI infrastructure despite missing Q4 expectations with adjusted EPS of $1.63 on $14.29B revenue. Shares rose over 9% after hours. The company also teamed with Microsoft to extend Azure AI to Oracle Cloud and plans to integrate with Google Cloud by September.

Apple shares surged over 7% to a record high on Tuesday, closing at $207.15, nearly reclaiming its title as the world's most valuable company from Microsoft. The boost followed the unveiling of new AI features aimed at revitalising iPhone demand, positioning Apple in a tight race with Microsoft and Nvidia.

An institutional shareholder filed a lawsuit accusing Elon Musk of insider trading by selling Tesla shares with undisclosed information, seeking the return of "unlawful profits." Musk allegedly sold shares before public news, including plans to acquire Twitter and lower car delivery projections, impacting equity prices.

GameStop completed a $2.14 billion "at-the-market" equity offering, selling 75 million shares following meme equity influencer Keith Gill's livestream. Gill, known as "Roaring Kitty", previously drove a rally in GameStop shares. The offering came after GameStop released disappointing first-quarter results and CEO Ryan Cohen reduced his stake.

Johnson & Johnson has agreed to a $700 million settlement with 42 US states and Washington, DC, over allegations regarding its talc-based products causing cancer. While the company denies wrongdoing, it faces thousands of lawsuits. J&J ceased global sales of talc-based baby powder last year, maintaining product safety.

Trian Fund Management, led by Nelson Peltz, has acquired a significant stake in Rentokil Initial, a UK-based pest-control company. The investment firm, now among Rentokil's top ten shareholders, is reportedly discussing strategies with the company. Rentokil's shares have declined over the past year, with most revenue generated in North America.

Spotify shares rose yesterday after Bloomberg reported plans for a more expensive premium tier with higher-quality audio, costing at least $5 more monthly. This follows recent US price hikes for existing plans. Spotify defended the increases, stating they support product development, amid efforts to cut marketing expenses and boost margins.

Louis Navellier, CIO of Navellier & Associates, predicts Nvidia will surpass Microsoft in market capitalisation, reaching $5 trillion by 2025, driven by new AI chip releases. He downplays antitrust investigations and highlights Nvidia's $2 billion investment in generative AI, asserting its dominance in the equity market.

Moody's warned that France's snap parliamentary elections are "credit negative," increasing fiscal risks and potential political instability. The elections follow President Macron's unexpected call after losing to the far-right in the European Parliament vote. Moody's may downgrade France's Aa2 rating if debt metrics worsen or fiscal consolidation weakens.

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