On Thursday, U.S. markets rallied, driven by a 22% surge in Tesla shares, the best performance since 2013, alongside positive earnings from American Airlines and T-Mobile that boosted the consumer discretionary and information technology sectors. However, mixed results from Honeywell and IBM pulled the Dow Jones Industrial Average down by 140.59 points. Meanwhile, European shares closed slightly higher, with the Stoxx 50 gaining 0.3% as Hermès’ strong sales lifted its shares and boosted the luxury sector.

Summary for 25.10.2024

Asian equities were rangebound on Friday, with Japan's Nikkei 225 sliding 1.1% amid pre-election uncertainty and yen volatility, as weak inflation data raised fears of government intervention. Broader markets saw muted performance, heading for weekly declines. China's indices edged up after steady policy rates, while Hong Kong's Hang Seng led gains. Australia's ASX 200 and South Korea's KOSPI rose slightly, but India's Nifty 50 remained under pressure.

European equity markets are set to open higher later today, supported by strong corporate earnings and a recent ECB rate cut, with technology and healthcare sectors likely to lead gains. U.S. futures remained steady, as investors anticipate major tech earnings next week. Despite recent gains driven by Tesla's results, Wall Street remains cautious due to election concerns, slow rate cuts, and Middle East tensions.

Oil prices rose in Asian trade on Friday, heading for weekly gains amid fears of a Middle East conflict disrupting supply. Brent and WTI futures were up between 1% and 2%, despite a build in U.S. inventories and a strong dollar. Concerns over slow Chinese demand also lingered, with markets awaiting details on potential fiscal stimulus measures from Beijing in November.

Tesla shares surged nearly 22% on Thursday, their biggest single-day gain in over a decade, after CEO Elon Musk forecast 20%-30% sales growth for next year and promised a cost-effective vehicle by 2025. Reduced production costs boosted margins, and optimism over future growth, including Full Self-Driving technology, spurred the rally. Tesla's market value rose by $150 billion, with several brokerages raising their price targets.

In Q3 2024, Apple's iPhone sales in China fell 0.3%, while Huawei surged 42%, reflecting intensifying competition. Apple held a 15.6% market share, slightly down year-on-year, with Huawei close behind at 15.3%. Vivo led with 18.6%. Huawei's resurgence, bolstered by its Mate 60 and Pura 70 models, challenged Apple's position, while Apple used discounts and new iPhone 16 sales to boost its market standing.

A U.S. judge blocked the $8.5 billion merger of Tapestry and Capri, siding with the FTC's argument that it would stifle competition and raise prices. The ruling is a significant win for the Biden administration ahead of the election. Capri shares plunged 47%, while Tapestry's rose 13%. Tapestry plans to appeal, insisting the merger would enhance competition against European brands.

Siemens AG is reportedly exploring the acquisition of Altair Engineering Inc., a Michigan-based software firm, as it seeks to enhance its software division. Analysts suggest the purchase could be strategically beneficial but may be slightly earnings dilutive due to Altair's high valuation. The discussions are ongoing, with no final decision made, and other potential buyers may also emerge.

S&P Global raised its annual profit forecast and exceeded Wall Street expectations for the third quarter, driven by strong demand for its data and analytics products. The company reported adjusted earnings of $1.21 billion, or $3.89 per share, up from $1.02 billion a year earlier. Total revenue rose 16% to $3.58 billion, with significant growth in its ratings and market intelligence segments.

Hermès International reported a strong third-quarter revenue of €3.7 billion, reflecting an 11.3% increase at constant exchange rates, in line with analyst expectations. The luxury brand's performance surpassed competitors, particularly in EMEA and the Americas, despite a slowdown in China. While analysts noted risks in non-leather categories, Hermès plans to maintain its medium-term revenue growth guidance and continue recruitment efforts.

Barclays shares increased by 4.2% after the bank reported a 23% rise in attributable profit for the third quarter, reaching £1.6 billion. Year-to-date, profits total £4.4 billion, slightly surpassing last year’s figures. Total income grew by 5% to £6.5 billion, bolstered by robust UK net interest income despite mortgage margin pressures. The bank maintained a steady cost-to-income ratio of 61% and a return on tangible equity of 12.3%.

Renault shares rose 4.7% after the company reported third-quarter sales of €10.7 billion, surpassing its own estimate of €10.4 billion. Analysts noted strong new product performance and a controlled inventory with a two-month order backlog, indicating solid demand. Renault maintained its full-year guidance, targeting an operating margin of at least 7.5% and free cash flow exceeding €2.5 billion.

Valero Energy reported an 86% drop in third-quarter profit, with net income falling to $364 million, or $1.14 per share, despite beating Wall Street expectations. Refining margins plummeted due to weak demand, particularly in China, leading to operating income of $565 million in the refining segment. However, revenue rose to $32.87 billion, driven by increased renewable diesel sales.

Vale's Q3 net profit fell 15% year-on-year to $2.41 billion, impacted by lower iron ore prices and a $956 million provision for the 2015 Mariana dam collapse. Despite the decline, profits exceeded analysts' expectations. Revenue dropped 10% to $9.55 billion. New CEO Gustavo Pimenta aims to enhance product quality in iron ore and expand the company’s base metals unit, particularly in copper.

IBM shares fell over 6% on Thursday as reduced enterprise spending on non-GenAI projects affected its consulting segment, despite strength in its software unit. Total revenue rose 1% to $14.97 billion, missing estimates. The software segment achieved 9.7% growth to $6.52 billion, driven by cloud infrastructure expansion. Analysts expect ongoing challenges in consulting but anticipate improved software performance in 2025.

United Parcel Service reported better-than-expected quarterly profit and revenue, causing shares to soar by over 5%. The company posted an adjusted profit of $1.76 per share and revenue of $22.2 billion, driven by rebounding volumes. UPS raised its full-year operating margin forecast to 9.6% and expects to profit from its recent contract with the United States Postal Service.

Deckers Outdoor surpassed Wall Street estimates for Q2, driven by strong demand for UGG boots and Hoka running shoes, prompting the company to raise its annual sales forecast to $4.8 billion. Shares surged more than 13%, adding to a 35% gain this year. Hoka sales rose 35% and UGG sales 13%, with robust wholesale channels. Deckers reported 20% revenue growth, with adjusted profits of $1.59 per share.

Skechers USA shares jumped over 6% after reporting strong third-quarter results, with adjusted earnings per share of $1.20 exceeding estimates and revenue rising 15.9% year-on-year to a record $2.35 billion. The company raised its full-year revenue outlook to between $8.925 billion and $8.975 billion, driven by robust wholesale and direct-to-consumer sales growth, particularly in international markets.

Danone shares rose after reporting Q3 2024 sales of €6.83 billion, a 4.2% increase on a like-for-like basis, exceeding analyst expectations. Strong performance in North America and China drove growth, with volume and mix contributing 3.6%. The company confirmed its 2024 guidance of 3-5% growth. While the Waters segment fell short due to adverse weather, analysts remain optimistic about Danone's recovery in infant formula and U.S. dairy.

Hapag-Lloyd raised its full-year EBITDA guidance to between $4.6 billion and $5 billion, up from $3.5 billion to $4.6 billion, due to stronger demand and higher freight rates. Despite facing increased costs from rerouting vessels around Africa, the company noted tight capacity leading to rising rates, particularly on the Far East to Europe route. Preliminary EBITDA for the first nine months is approximately $3.6 billion, down from $4.5 billion last year, with final results expected on November 14.

HSBC downgraded Adidas from Buy to Hold, citing a lack of short-term catalysts and limited earnings upgrade potential. Despite a strong Q3 with a 10% organic sales increase, shares underperformed the DAX index, marking a shift in investor sentiment. HSBC lowered its target price from €300 to €260, while maintaining long-term optimism for Adidas' growth amid ongoing challenges.

HSBC raised its year-end target for the S&P 500 to 5,900, citing a ‘Goldilocks scenario’ of above-trend GDP growth, easing inflation, and lower interest rates. They expect significant benefits for non-tech equities and project a 13% earnings per share growth for 2024. Despite potential risks like US elections and geopolitical issues, HSBC sees a bullish outlook with valuations at historically high levels.

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