Soft landing hopes are back to lift equities

US and European equities ended the week on a strong note, buoyed by easing recession fears and encouraging economic data. The S&P 500 and Nasdaq each rose 0.2%, with the Dow Jones gaining 96 points, marking their best week since November 2023. Meanwhile, the Euro Stoxx 50 climbed 0.6% to 4,834, achieving a 3.6% weekly gain. Softer inflation, strong retail sales, and fewer unemployment claims lifted sentiment. Notable gainers included Nvidia, Alphabet, Inditex, Allianz, and UniCredit, reflecting broad market optimism.

Summary for 19.08.2024

Asian equities took a breather on Monday after global shares had their best week in nine months. MSCI’s Asia-Pacific index rose 0.2%, while Japan’s Nikkei slipped 0.4% after last week’s 9% rally. Hong Kong’s Hang Seng edged up 0.3%, and China’s CSI 300 gained 0.1%. Markets reflect optimism around easing inflation, potential rate cuts, and a soft US economic landing.

European equity markets are set to start the new trading week in mixed territory while US equity futures rose on Monday after a strong week, with investors eyeing Fed Chair Powell’s upcoming speech and key earnings reports.

Oil prices dipped in early Asian trading this morning due to concerns over weaker demand in China and focus on ceasefire talks in the Middle East, which could reduce supply risks. Brent and U.S. crude futures both fell by 0.2%, continuing last Friday’s decline driven by China’s slowing economy and easing demand expectations.

The University of Michigan’s US consumer sentiment rose to 67.8 in August 2024, the first increase in five months, exceeding forecasts. Strengthened expectations for personal finances and the five-year economic outlook drove the gain. The expectations index improved, while current conditions slightly declined. Inflation expectations remained steady at 2.9% for one year and 3% for five years.

Walmart raised its annual sales and profit forecasts, driven by strong consumer demand for essentials amid inflation concerns. Shares surged 8% to a record high as the retailer reported a 4.2% rise in U.S. comparable sales and robust online growth. Walmart’s investments and broad market-share gains continue to outperform competitors.

Bayer won a legal victory when a US appeals court ruled federal law shields it from a Pennsylvania landscaper's lawsuit over Roundup's cancer risks. Shares surged 13.2% on optimism that this could reduce Bayer's legal liabilities. The ruling conflicts with other courts, potentially leading to a Supreme Court review.

Mastercard will cut 3% of its global workforce, affecting about 1,000 employees, as part of a reorganisation to focus on core businesses. The company plans to redirect resources towards growth areas, including new markets and cyber security. A one-time restructuring charge of $190 million will be recorded for the quarter ending 30th September.

In June, iPhone shipments in China surpassed Huawei’s, driven by a significant discount and a 5% rise in shipments, while non-Huawei Android devices declined. Smartphone shipments overall grew 3% year-over-year, with Huawei's shipments up 24%. Bernstein noted iPhone inventories might still be high but does not view this as a major issue.

German battery maker Varta reached a restructuring deal with creditors, involving Porsche and major shareholder Michael Tojner. Debt will be reduced from €485 million to €200 million, with €120 million in new capital. Porsche will take a majority stake in Varta's V4Drive Battery division. Job cuts will be minimal, and Varta will be delisted from the stock exchange.

Chile’s Escondida copper mine, the world’s largest, avoided a prolonged strike after its union reached a deal with BHP on Sunday. The union had earlier threatened renewed action over contract disagreements following a strike on Tuesday, which was tentatively resolved with a preliminary agreement on Friday.

Deutsche Bank's proposed settlement to shareholders over Postbank's acquisition has been rejected as too low by plaintiffs' lawyer Jan Bayer. The offer of €36.50 per share is considered insufficient compared to the €1.3 billion provisioned. A Cologne court will review the case later this week and has urged both parties to negotiate.

Cisco Systems received Buy upgrades from HSBC and New Street Research, with target prices of $58 and $57, respectively. Analysts cited improving order flows, normalised inventories, and Cisco’s focus on high-growth areas. Despite recent layoffs, both firms expect strong revenue growth and margin expansion driven by subscription-based and software-defined products.

Jefferies analysts expect Nvidia to continue delivering earnings beats, though smaller, due to strong demand for its Hopper platform and solid production support. While Blackwell chip delays might impact short-term revenue, analysts remain confident in Nvidia’s performance and guidance for the coming quarters, despite some debate over future product details.

JPMorgan has upgraded JD.com to Overweight with a target price of $36, citing the share's undervaluation and potential 30% upside. The bank highlights JD.com's improved operating margins and strategic shift, forecasting revenue growth to accelerate in the latter half of 2024 despite a conservative growth outlook.

Wedbush analysts predict significant gains for the Nasdaq and tech shares by year-end, driven by the accelerating AI revolution. Despite recent earnings weaknesses, the firm remains bullish, citing robust overall performance and solid cloud and AI foundations. Key upcoming events, like Nvidia's earnings report, are seen as pivotal for tech investors.

Wells Fargo's latest list of “shares for all seasons” features Microsoft and Apple at the top, noted for their reliability in both volatile and stable markets. The list includes companies recommended for various investment strategies, with other notable mentions like Alphabet, Broadcom, and Visa. The institute values these equities for their solid performance across different time horizons.

This week’s focus will be on the Federal Reserve’s Jackson Hole symposium, where Fed Chair Powell’s comments could signal policy shifts. Economic updates include new home sales and July Fed minutes. Key earnings reports come from Target, Palo Alto Networks, and Baidu as Q2 season winds down.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.