Markets rebound from previous day`s decline

U.S. equities rebounded sharply on Wednesday, driven by a recovering tech sector, firm earnings, and falling Treasury yields. The S&P 500 and Dow Jones rose, while the Nasdaq also saw gains, supported by Nvidia's strength. In Europe, optimism grew ahead of an anticipated ECB rate cut, boosting regional equities. Overall, robust earnings and favorable inflation data lifted investor sentiment on both sides of the Atlantic, despite lingering concerns over market volatility.

Summary for 17.10.2024

Asian shares had a mixed session, with China's property shares dropping 5.5% after a housing ministry briefing, while the broader CSI 300 edged higher. Japan's Nikkei 225 slipped 0.6% amid weak trade data, while Australia's ASX 200 rose 0.4%, supported by positive labour figures. South Korea's Kospi gained slightly, and Hong Kong's Hang Seng advanced 1.1% after policy announcements.

European markets are set to open cautiously as investors digest strong U.S. earnings and await further economic data, including U.S. retail sales and industrial production. U.S. futures dipped slightly in evening trading, with technology shares steady ahead of key earnings from TSMC, which could offer more insights into the AI sector. Speculation of a gradual Federal Reserve rate cut also remains in focus.

Oil prices rose in Asian trade, recovering from recent losses after U.S. inventory data showed an unexpected draw, signalling tighter supplies. Market focus remains on potential Middle East conflict escalation and possible stimulus signals from China. Prices had declined sharply over the past week amid concerns over weak demand, with recent reports suggesting a less severe Israeli retaliation against Iran than initially feared.

China will expand financing for housing projects, increasing bank lending to 4 trillion yuan, as part of efforts to stabilise the crisis-hit property sector. The "white list" of eligible projects has seen significant growth, with approved loans reaching 2.23 trillion yuan. Recent measures also include local government support for buying unsold homes and lower down payment requirements to boost property demand.

Japan's exports fell 1.7% in September, marking the first decline in ten months, amid soft demand from China and slowing U.S. growth. Exports to China dropped 7.3%, and those to the U.S. fell 2.4%. While imports rose 2.1%, Japan recorded a trade deficit of ¥294.3 billion. The Bank of Japan is expected to maintain interest rates amid ongoing global economic uncertainties.

Kamala Harris defended the Biden administration's immigration policies and criticised Republicans in a Fox News interview, stressing that her presidency would introduce new ideas. She faced challenging questions on topics such as Biden's mental fitness and gender-affirming surgery for inmates, while also appealing to Republican voters in Pennsylvania. The Trump campaign labelled her performance weak, but Democrats commended her for reaching a conservative audience.

Expedia shares surged 7.1% in afterhours trading, after reports that Uber considered acquiring the travel booking firm as part of plans to build a “Super App.” Uber's shares dipped 2.6% on the news. A deal would be Uber’s largest acquisition, marking another step to diversify beyond ride-hailing. Earlier this year, Uber expanded its reach by acquiring Foodpanda for around $1 billion.

Morgan Stanley's third-quarter earnings surpassed analyst estimates, with shares rising over 6%. The firm reported earnings per share of $1.88 and revenue of $15.4 billion, both exceeding forecasts. Key growth drivers included a 20.2% increase in Institutional Securities revenues and record Wealth Management revenues of $7.3 billion. The firm maintained a strong capital position, repurchased shares, and declared a quarterly dividend.

Robinhood launched its long-awaited desktop platform, 'Robinhood Legend,' and introduced futures and index options trading features on its mobile app. Aiming to compete with traditional brokerages, the platform offers advanced tools and real-time data at no extra cost. Robinhood's competitive fees for futures and options trading are lower than industry peers, catering to its 11.8 million active users and expanding its market share.

Amazon has signed three agreements to develop small modular reactors (SMRs) to address rising electricity demand from data centers. The plans include funding a feasibility study for an SMR project in Washington state, with a potential capacity of up to 960 MW, enough to power over 770,000 homes. This move aligns with increasing interest in nuclear energy from tech companies amid growing energy needs.

Ryanair will lower its passenger traffic estimates for next year due to expected delivery delays of aircraft from Boeing, exacerbated by an ongoing strike at the company. CEO Michael O'Leary expressed concerns about receiving the 30 planes scheduled for delivery in early 2024. The airline aims to avoid the capacity issues faced this year, where it received fewer aircraft than anticipated.

British American Tobacco plans to launch Velo Plus, a version of its nicotine pouches containing synthetic nicotine, in the U.S. in 2025. This move represents one of the first uses of synthetic nicotine by a major tobacco firm. BAT anticipates significant growth in U.S. vape and nicotine pouch revenues, despite ongoing declines in combustible tobacco sales.

Citi analysts upgraded Cisco Systems to "Buy," anticipating significant growth from its AI operations. Although AI currently accounts for only 2% of revenue, Cisco is expected to capture a larger share of the $10 billion AI switching market, particularly in ethernet switches. The analysts raised their valuation to 16 times forward earnings for 2026, reflecting the company's enhanced prospects. Cisco shares rose over 4% on Wednesday.

HSBC downgraded Estee Lauder's shares to Hold from Buy and lowered the price target to $100, citing concerns about the company's ability to meet guidance, particularly in the challenging Chinese market. Analysts expressed worries over the impact of unregulated daigou trade on brand equity and future growth. Ongoing restructuring may also lead to internal strife and potential departures of key managers.

JP Morgan downgraded L'Oréal from "neutral" to "underweight," citing a weakening global beauty market that is decelerating faster than expected. The analysts expressed concerns about the company's ability to maintain its premium valuation due to factors like reduced consumer demand, rising competition from local brands, and potential inventory adjustments. They set a new price target of €325, down from €390.

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