US equities closed lower on Wednesday as markets reacted to hawkish signals from the Fed's recent meeting. The S&P 500 and Nasdaq retreated from record highs, down 0.3% and 0.2% respectively, while the Dow lost 0.5%. Concerns over inflation prompted a broad-based decline, with Tesla and Alphabet among notable losers. Nvidia's anticipated earnings report also influenced sentiment. Target plummeted 8% on missed earnings. In the Euro Area, the Stoxx 50 Index declined 0.4% to 5,025, with heavyweight luxury companies like LVMH and Hermes leading losses, down 2.1% and 4.3% respectively, while Kering dropped 1.5%. Energy shares, including TotalEnergies and Eni, also contributed to the downturn, with losses of 2% and 1% respectively.

Summary for 23.05.2024

  • Most Asian shares fell as escalating US-China trade tensions and concerns over higher interest rates dampened sentiment. Chinese markets led losses, driven by fears of a trade war after the US announced new tariffs. Japanese equities rose on strong PMI data and tech gains fuelled by positive earnings from Nvidia.
  • European equities head for a slightly higher open as US equity index futures also rose, led by tech shares following positive earnings from Nvidia, despite ongoing concerns over inflation and interest rates as highlighted by the Federal Reserve's minutes.
  • Oil prices declined this morning due to worries over an unexpected rise in US inventories and doubts about global economic recovery. Brent crude futures for July fell by 0.7% to $81.35 a barrel, while West Texas Intermediate crude futures dropped by 0.8% to $76.98 a barrel. The market remained cautious ahead of the OPEC+ meeting in June, where discussions on extending production cuts are anticipated.
  • Minutes from the latest FOMC meeting revealed policymakers' concerns over inflation not meeting the 2% target in the medium term, suggesting a prolonged disinflation process. Some members expressed readiness to tighten policy further if inflation risks emerged. Despite solid economic growth, maintaining the federal funds rate at 5.25%-5.50% was favoured.
  • UK Prime Minister Rishi Sunak unexpectedly called for a snap general election for the 4th of July, causing pound volatility to surge. Sunak's optimism about the economy contrasts with Labour's Keir Starmer, who warns of severe economic challenges ahead. The sudden decision surprised many, sparking disappointment among Tory MPs and uncertainty in the markets.
  • BHP Group secured a one-week extension to persuade Anglo American on its $49 billion takeover bid, with discussions ongoing. While closer in valuation views, BHP's demand for Anglo to spin off its South African assets remains unresolved. The deadline extension allows further negotiations to address this crucial obstale.
  • Nvidia forecasted quarterly revenue above estimates following the market close on Wednesday and announced a ten-for-one share split, propelling its shares to a record high above $1,000 in extended trading. The chipmaker's strong earnings report, fuelled by robust demand for AI chips, also boosted shares of rival Advanced Micro Devices and Broadcom.
  • DuPont announced plans to split into three independent companies focusing on Electronics, Water, and diversified industrial segments, aiming to enhance shareholder value. Shares surged 5% in afterhours trading. The reorganisation is expected to be tax-free for shareholders and completed within 18 to 24 months, with Lori Koch appointed as the new CEO.
  • e.l.f. Beauty, Inc. reported strong fourth-quarter results, with adjusted EPS surpassing expectations and revenue soaring 71%. The shares plummeted 10% initially as fiscal 2025 guidance fell short of analyst estimates, with adjusted EPS and revenue projections below consensus. However, they recovered to close 2.2% higher. CEO Tarang Amin attributed success to product expansion and international growth.
  • Snowflake reported strong first-quarter revenue of $828.7 million, surpassing expectations and driving shares up 4.1%. Despite a slight earnings per share miss at $0.14, robust product revenue growth of 34% year-over-year and a net revenue retention rate of 128% impressed investors. The company plans to acquire assets from TruEra to bolster its AI capabilities.
  • Target missed profit expectations in its latest quarterly earnings report, with Q1 EPS of $2.03, slightly below the analyst estimate of $2.06. Revenue was $24.53 billion, slightly exceeding expectations. Comparable sales declined by 3.7%, with digital sales growing by 1.4%. Target anticipates modest sales growth for the second quarter.
  • Solar equities surged following reports of potential regulatory measures in China to curb excessive production capacity expansion and price wars. Companies like SunPower, Enphase Energy, First Solar, and SolarEdge Technologies saw significant gains. However, despite discussions, analysts believe new policies are unlikely to address current oversupply issues.
  • Heightened tariff risks from China, potentially reaching 25%, cast shadows over European autos amid escalating trade tensions with the US and EU. Reports triggered share declines in major carmakers like Mercedes-Benz, BMW, and Volkswagen on Wednesday. Analysts warned of increased uncertainty, advocating a cautious approach on German automakers due to potential tariff impacts.

Disclaimer: The article is issued by Calamatta Cuschieri Investment Services Ltd, which is licensed to conduct investment services business under the Investments Services Act by the MFSA.

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