The ECB takes centre stage

The S&P 500 surged 0.8% on Friday, with the Dow skyrocketing by 574 points, driven by gains in Salesforce and UnitedHealth, while the Nasdaq remained unchanged. Gap and Nordstrom also saw strong gains, while Dell and Costco faced declines. For the week, the S&P 500 stayed flat, the Nasdaq fell 0.4%, and the Dow dropped 1%. European shares closed mixed on Friday. The Stoxx 50 fell 0.1%, influenced by heavyweight tech shares like ASML, Prosus, and SAP dropping between 1.1% and 2.3%. Despite the choppy session, the Stoxx 50 added 1.1% for the week.

Summary for 03.06.2024

Asian share markets rallied on Monday amid expectations of rate cuts in Europe and possibly Canada, boosting sentiment despite concerns about sticky inflation. Positive manufacturing data from China and Japan contributed to the upbeat mood.

European futures climbed, and Wall Street futures indicated a positive open as investors await new catalysts, following strong gains in May driven by technology shares and upcoming economic reports.

Oil prices rose this morning after OPEC+ extended output cuts into 2025, including 3.66 million bpd of voluntary cuts and 2.2 million bpd until Q3 2023. Eight OPEC+ countries will phase out these cuts from October 2024 to September 2025. Recent demand uncertainties and potential prolonged high US interest rates have pressured oil prices.

China's Caixin manufacturing PMI rose to 51.7 in May, surpassing expectations and indicating strength in smaller, private businesses. This contrasts with the official PMI, which showed a contraction. Despite improvements in demand and output, manufacturing prices were sluggish and employment shrank, reflecting ongoing sector headwinds.

Japanese companies increased capital spending by 6.8% in Q1, driven by demand for automobiles and labour-saving investments, suggesting a milder economic decline than initially reported. The data, which showed the 12th consecutive quarter of gains, will likely contribute to a slight upward revision of GDP contraction. Corporate sales and profits also rose.

In April, US personal spending increased by 0.2%, the slowest growth since January, missing market expectations. Expenditure on services, including housing and healthcare, drove the rise, while spending on goods declined. The Core PCE price index, the Federal Reserve's preferred gauge for inflation, rose by 0.2%, the slowest increase in 2024, with annual inflation at 2.8%.

Euro Area inflation climbed to 2.6% in May 2024, marking the first increase in five months and exceeding forecasts of 2.5%. Energy and services prices rebounded, while food and non-energy industrial goods slowed. The core rate, excluding volatile items, rose to 2.9%. Major economies like Germany, France, Spain, and Italy also experienced higher-than-expected inflation rates.

S&P downgraded France's credit rating from "AA" to "AA-" due to failure in controlling the budget deficit, which was 5.5% of GDP in 2023. While improvements are expected, the deficit will still exceed 3% in 2027. Moody's, Fitch, and DBRS maintained their ratings with stable outlooks.

Waste Management Inc is reportedly nearing a $7 billion deal, including debt, to acquire medical waste disposal firm Stericycle Inc. The deal, expected to be announced soon, follows Stericycle's recent reports of seeking a potential sale, leading to a significant jump in its shares.

Delta Air Lines is experiencing strong transatlantic demand, forecasting record second-quarter revenue. CEO Ed Bastian notes healthy international growth, especially in premium travel. Despite Boeing's crisis, Delta remains committed to its order for 737 MAX 10 jets, hopeful for improvements following management changes at Boeing.

Meta reports its flagship app is experiencing its highest engagement among young adults in three years, with over 40 million US and Canadian adults aged 18 to 29 checking it daily. The company aims to regain relevance among younger demographics amidst competition from TikTok.

Online fashion retailer Shein is reportedly preparing to file a prospectus with Britain's Financial Conduct Authority for a potential London IPO, aiming for a valuation of around £50 billion. This follows regulatory challenges in the US, with British lawmakers also scrutinising the company's suitability for a listing.

Fitch Ratings revised down Boeing's 2024 aircraft delivery and free cash flow forecasts due to ongoing investigations and production challenges with its 737 MAX. The adjustments were influenced by regulatory restrictions and oversight. Boeing's negative cash flow statement was unexpected but partially mitigated by liquidity bolstering.

Wells Fargo analysts deem Dell Technologies' recent shares decline as excessive, citing strong momentum in the AI server segment. They maintain an Overweight rating, raising the target price to $175, and anticipate fiscal 2025 revenue of $93.5 billion to $97.5 billion. Morgan Stanley remains bullish, highlighting AI server market strength.

Bank of America raised Qualcomm's price target to $245, citing promising growth opportunities in AI. Qualcomm's ventures into computing and its exclusive partnership with Microsoft for AI-enabled PCs are seen as strategic advantages. Analysts project significant revenue potential and market dominance in the AI-equipped PC market.

Morgan Stanley views Rivian Automotive as uniquely positioned in the auto industry for scaling a fully integrated software stack crucial for AI. Rivian CEO RJ Scaringe reiterated confidence in reaching positive gross margin targets in Q4 2024, emphasising structural advantages in software and perception stack and potential partnerships. The bank maintains an Overweight rating and $13 price target.

Capgemini SE experiences a sharp decline, down 4.5% for the fourth consecutive session following Jefferies' downgrade from "buy" to "hold." Analysts cite delayed market recovery, slowing consensus adjustments, and recent equity outperformance. They forecast a margin of 13.7% for 2025, leading to a revised target of €195.

This week, investors will closely monitor the US labour market report, JOLTs Job Openings, ISM Manufacturing and Services PMIs, and other key economic indicators. Globally, attention will be on interest rate decisions from the ECB, Bank of Canada, and Reserve Bank of India, alongside inflation rates, GDP growth reports, PMIs, and trade data, offering insights into economic conditions and central bank policies.

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