After a sharp decline on Wednesday, U.S. stocks rebounded on Thursday, with the S&P 500 gaining over 0.9%, driven by a 15% rise since October 27. Falling Treasury yields, down over 1% from mid-October to 3.89%, contributed to the market rally amid positive inflation trends and the Fed's potential rate cut pivot in 2024. Micron Technology's strong quarter lifted semiconductor shares and small-cap stocks surged. Despite signs of volatility, experts predict a sideways market through early 2024, influenced by fixed income volatility. Meantime, European equities closed slightly lower as investors took profits and assessed future interest rate trends, with declines in consumer cyclical and luxury stocks, including Kering, and underperformance from auto giants like BMW, Volkswagen, and Mercedes.

Summary for 22.12.2023

Asian stocks traded narrowly on Friday, showing signs of a slowdown in the recent rally amid mixed cues from Wall Street. Investors awaited US inflation data for insights into early 2024 interest rate cuts. Japanese shares stabilized post-Toyota losses, while Chinese equities lagged due to ongoing economic recovery concerns. The Hang Seng rose but faced a weekly loss, and the Shanghai Composite traded at a 14-month low.

European shares are set for a quiet opening, mirroring cautious US futures after a Wall Street rebound.

Oil prices rose as concerns over Angola's exit from OPEC, accounting for a small share of overall output, eased. Supply disruptions in the Red Sea supported prices, with Brent at $79.85 and WTI at $74.52 per barrel. Tensions in the Red Sea led to a weekly gain, despite mixed U.S. economic signals. Dovish Fed signals have supported oil prices, though concerns over global demand, particularly in China, persist.

Japan's annual inflation rate dropped to 2.8% in November 2023, the lowest since July 2022, with food prices rising the least in 10 months. The core inflation rate also declined to 2.5%, below the Bank of Japan's 2% target for the 20th month. Monthly, consumer prices fell 0.1%.

In the third quarter, US GDP growth underwent a downward revision, moving from an annualized rate of 5.2% in the previous reading to 4.9%, while consumption decreased from 3.6% to 3.1%. Particularly noteworthy, the GDP price index saw a revision from 3.6% to 3.3%, and the core index shifted from 2.3% to 2.0%. These adjustments align with broader inflation data, indicating a continual cooling in inflation across goods and services.

Angola is reportedly set to withdraw from OPEC, as announced by Mineral Resources Minister Diamantino Azevedo. Citing the organization's lack of relevance and failure to serve the country's interests, Azevedo emphasised concerns about potential production cuts if Angola remained within OPEC. Angola had already been producing below its quota for 2024, as reported in October.

Nike reported Q2 earnings of $1.03 per share on $13.4 billion in revenue, surpassing expectations. Improved margins contributed to a gross margin increase to 44.6%. Despite an almost 12% after-hours drop in its share price, Nike plans up to $2 billion in cost cuts over three years, including job cuts. China's revenue rose 4%, but North America fell 4%. Nike warned of a softer second-half revenue outlook, without specific guidance. The company had previously forecast mid-single-digit full-year revenue growth and gross margin growth of 140 to 160 basis points.

Carnival posted a better-than-expected Q4 net loss of $48 million, or 4 cents per share, compared to the previous year's loss of $1.6 billion. The company beat revenue estimates with $5.4 billion and projected a more than doubling of Q1 core earnings. Despite higher ticket prices, Carnival reported strong booking volumes, with nearly two-thirds of 2024 occupancy already booked at considerably higher prices. The company's fiscal 2024 net income forecast of $1.2 billion aligns with Wall Street expectations.

Honda is recalling approximately 4.5 million vehicles globally, including 2.54 million in the US, due to fuel pump failure risks. The recall covers various models from 2018 to 2020, and Honda plans to replace the fuel pump module. Although no injuries have been reported, the company received 4,042 warranty claims related to the issue since 2018. This follows a separate recall of around 106,030 CR-V hybrid vehicles due to fire or injury risks from an overheated battery cable or short circuit.

Santander acquired a 20% stake in a $9 billion US multifamily real estate portfolio from the FDIC for $1.1 billion. The FDIC retains 80% in a joint venture with Santander, which will service 100% of the assets. The deal, accretive from 2024, is part of Santander's strategy to expand in the US market.

UPS lost its court fight for a €1.74 billion compensation claim from EU antitrust regulators. The European Commission had blocked UPS's 2013 bid for Dutch rival TNT, citing inadequate remedies to address consumer concerns.

Morgan Stanley expresses optimism for Detroit automakers Ford and General Motors into 2024. Anticipating eased challenges, they highlight the potential impact of lower interest rates on car sales and emphasize the opportunity for Detroit automakers in refining capital allocation strategies amid the evolving electric vehicle landscape.

Pivotal Research Group upgraded Spotify from Hold to Buy, raising the price target from $170 to $265 per share. The analysts cited solid results, a renewed focus on financial discipline, and the potential for increased unit and average revenue per user growth. They also highlighted Spotify's dominance in digital audio streaming and the possibility of leveraging its 600 million monthly active users to 1 billion.

Brazil's federal police conducted raids as part of an investigation into petrochemical producer Braskem's role in ground subsidence in Maceio, displacing 60,000 people since 2018. The operation, named 'Salty Tears,' aims to uncover crimes related to safety violations and false data presentation during the company's rock salt exploration. Braskem confirmed cooperation with authorities.

Morgan Stanley analysts upgraded Salesforce to Overweight from Equal-Weight, raising the price target to $350 per share. They attribute the recent stock rally to improved profitability outlook, emphasizing over 20% outperformance against large-cap software peers in 2023. The analysts highlight potential top-line growth drivers, including price increases, product bundling, and Data Cloud adoption, presenting an attractive risk/reward scenario.

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