Markets eagerly await Nvidia results

On Tuesday, US equity markets were mostly flat, with modest gains in the S&P 500 and NASDAQ, while the Dow remained near even. Technology and financials led the S&P 500, but energy lagged due to falling oil prices. The Conference Board's Consumer Confidence Index rose to 103.3, and inflation expectations dropped to 4.9%. In Europe, the Euro Stoxx 50 closed slightly higher at 4,902, bolstered by mining shares and financials, despite losses in luxury equities and weaker German consumer confidence.

Summary for 28.08.2024

Most Asian fell on Wednesday as investors awaited Nvidia’s earnings report to assess the tech rally and AI demand. Technology-heavy indices in South Korea and Japan dropped, while Australian shares fell 0.6% due to stronger-than-expected CPI data, signalling a potentially hawkish Reserve Bank of Australia. Concerns over China's trade relations and geopolitical tensions also contributed to declines across markets in Hong Kong, China, and beyond.

European equity futures were flat this morning while their US counterparts fell as investors awaited Nvidia's earnings report, with ongoing tech fragility and anticipation of a potential September rate cut influencing market sentiment.

Oil prices rose on Wednesday due to a larger-than-expected US inventory draw and geopolitical tensions in the Middle East. Supply disruptions in Libya, where production was halted amid political conflict, also supported the increase. Despite ongoing concerns over economic slowdown and seasonal demand shifts, these factors contributed to the upward pressure on crude oil.

Australia's Consumer Price Index rose 3.5% year-on-year in July, down from June’s 3.8% but slightly above the 3.4% consensus. The increase was driven by higher food prices, though housing and energy costs eased. Inflation for health and education remained steady, while prices for alcohol, tobacco, and communication rose. Core inflation, excluding volatile items, climbed 3.7%, remaining above the RBA’s 2-3% target range.

Germany's GfK Consumer Climate Indicator dropped to -22.0 for September 2024, its lowest since May, due to worries about job security, rising corporate insolvencies, and a weak economy. Income expectations fell sharply, economic outlooks plunged, and buying sentiment declined, while the tendency to save increased. Hopes for a stable economic recovery are postponed amid growing household concerns.

Hindenburg Research has taken a short position in Super Micro Computer, alleging "accounting manipulation" and governance issues. The report claims undisclosed related-party transactions and export control violations. Super Micro’s shares fell 2.6% in regular trading, despite the company’s significant growth driven by AI demand. The company has yet to comment, and the claims remain unverified.

Apple Inc has cut about 100 jobs in its digital services division, including teams for Apple Books and Apple News, Bloomberg reported. The layoffs, affecting some engineering roles, are part of a broader reorganisation towards artificial intelligence. Apple, which had approximately 161,000 employees as of last September, has been facing challenges in China, where sales declined by 6.5% last quarter.

Eli Lilly has started selling the lowest dose of its weight-loss drug, Zepbound, in vials directly to consumers for $399 per month, a significant discount compared to the pen version priced at $650. This move aims to boost availability and address supply shortages. Despite criticism from Senator Bernie Sanders, the new pricing strategy is seen as competitive, potentially capturing market share from rivals and easing supply issues.

On Tuesday, Cava Group shares dropped over 6% following news that its largest shareholder, Artal International S.C.A., and several executives plan to sell significant amounts of shares. CEO Brett Schulman and other top executives are among those preparing to offload shares. Despite a 193% rise this year and a record high close on Monday, the sell-off impacted the equity.

Shares of Ryanair rose 5.4% after CEO Michael O'Leary reported that the decline in average fares has levelled out. O'Leary noted a softer fare trend in April to June, but expects a smaller 5% drop during the summer peak, improving from previous forecasts of over 10%. He also highlighted reduced resistance to last-minute fare increases.

Sony announced a 20% price increase for its PlayStation 5 consoles in Japan, with the new prices set at 79,980 yen ($551) for the standard model and 72,980 yen for the disc-less version, effective September 2. The company attributed the hike to global economic fluctuations and lowered its global PS5 sales forecast to 18 million for the current financial year, down from 20.8 million last year.

Meta Platforms CEO Mark Zuckerberg disclosed that the Biden administration pressured the company to censor certain COVID-19 content during the pandemic, including humour and satire. In a letter to Congress, Zuckerberg admitted the pressure was wrong and expressed regret over not speaking out sooner. He also acknowledged a misstep in demoting a story about the Biden family, clarifying that the reporting was not Russian disinformation and promising improved policies to prevent future issues.

Chinese EV maker Xpeng unveiled its budget MONA brand, with the M03 hatchback priced from $16,813, aiming at the competitive 100,000-150,000 yuan segment. The M03 comes in two versions: a basic model and a higher-spec M03 Max starting at $21,866, which includes advanced autonomous driving technology. Xpeng plans to start deliveries of the M03 Max early next year, targeting annual sales of 100,000 units.

Shares in Trip.com Group surged over 8% in regular trading after reporting stronger-than-expected Q2 results. The company posted an EPS of RMB7.25, beating the estimate of RMB5.23, and revenue of RMB12.79 billion, slightly above the forecast of RMB12.76 billion. Accommodation revenue rose 20% year-over-year, while packaged-tour revenue increased by 42%. The company highlighted strong travel demand and plans to utilise AI for future growth.

Nordstrom reported stronger-than-expected second-quarter profits on Tuesday, bolstered by robust sales from its Anniversary Sale and an improved annual sales forecast. Shares surged nearly 8% after hours. Revenue rose by 3.2% to $3.89 billion, just shy of forecasts. The retailer plans to open 12 new Rack locations and focus on high-demand categories to enhance profit margins.

PVH Corp., owner of Tommy Hilfiger and Calvin Klein, reported Q2 earnings of $3.01 per share, surpassing the $2.29 estimate, despite a 6% revenue decline. The company raised its full-year EPS guidance to $11.55-$11.80, up from $11.00-$11.25, thanks to margin expansion and a favourable tax settlement. Nevertheless, PVH’s shares fell nearly 7% in after-hours trading.

Ambarella, Inc. saw its shares jump over 18% in after-hours trading on Tuesday after reporting a narrower-than-expected Q2 loss of $0.13 per share and revenue of $63.7 million, surpassing estimates. The company forecast Q3 revenue of $77-$81 million, well above expectations. Ambarella highlighted record revenue for its edge AI products and improved demand trends, driving optimism for future growth.

Wedbush analysts project that Apple’s upcoming iPhone 16 launch on 9th September will trigger the largest upgrade cycle in the company's history, driven by AI. They expect initial shipments to surpass 90 million units, exceeding earlier forecasts. The firm estimates Apple could sell over 240 million iPhones in FY25 and sees potential for a $10 billion boost to Apple's Services segment from new AI-driven apps.

Evercore ISI raised its Netflix price target from $710 to $750, maintaining an "Outperform" rating. The upgrade reflects strong survey results, high satisfaction scores, and Netflix’s competitive position. The firm highlights Netflix’s potential growth through live events and gaming, with notable upcoming releases like "Squid Game II" and NFL games expected to enhance the outlook.

Morgan Stanley upgraded Coca-Cola to its Top Pick in the beverages sector, replacing Pepsi, and raised its price target from $70 to $78, reflecting a 10% upside. Analysts highlight Coca-Cola’s strong fundamentals, attractive valuation, and superior volume growth, especially in emerging markets. The company’s solid long-term organic sales growth potential stands out amid industry-wide challenges.

Goldman Sachs downgraded Daimler Truck to "neutral" from "buy" due to concerns over the US trucking market decline and broader industry challenges. The firm expects weakened earnings, particularly in Daimler's largest market, with forecasts of a 3% sales drop in 2024 and 11% in 2025. Goldman Sachs also reduced Daimler's price target from €46 to €39, citing strategic uncertainties and slower market conditions.

Alpine Macro analysts foresee no near-term rebound for Chinese equities, citing persistent economic slowdown and insufficient policy support from Beijing. They described China's economy as in a "slow-motion implosion," with weak private spending and ineffective government measures exacerbating the decline. The firm likened China's situation to Japan's stagnation in the 1990s and recommended a defensive stance for Chinese portfolios.

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