Trump comback lifts Wall Street to record highs

US equities surged to record highs as investors anticipated pro-business policies under Donald Trump’s administration, with banking, steel, automakers, and travel sectors seeing strong gains. The S&P 500 rose 2.53%, the Dow climbed 3.57%, and the Nasdaq increased 2.95%, while the 10-year Treasury yield reached 4.43%, reflecting inflation concerns over potential tax cuts and tariffs. In contrast, the STOXX 50 fell 1.5% to a 2.5-month low, as tariff concerns weighed heavily on European auto shares, with BMW, Mercedes-Benz, VW, and Porsche dropping sharply. Clean energy and banking shares declined, while defence equities like Rheinmetall and MTU Aero Engines gained.

Summary for 07.11.2024

Most Asian equities traded flat to lower on Thursday, as initial optimism over Donald Trump’s U.S. election victory faded. Japanese shares gained, supported by a weaker yen, which boosted exporters like Toyota. Chinese markets edged up 0.4% ahead of the National People’s Congress meeting, where more stimulus is expected, despite U.S. tariff concerns. Australia’s ASX 200 and South Korea’s KOSPI both fell 0.2%.

European markets are expected to open cautiously later today, with focus on the Federal Reserve's rate decision and economic data. US equity index futures are steady, consolidating after recent record highs driven by Trump's 2024 election win. Investors are awaiting the Fed's outlook on interest rates, with S&P 500, Nasdaq, and Dow futures showing slight gains.

Oil prices rose this morning, driven by expectations of increased fiscal stimulus from China, the world's largest oil importer. Traders are also assessing the implications of Donald Trump's recent election victory, which raises concerns about U.S. oil production while potentially leading to sanctions on Iran and Venezuela, impacting global supply dynamics.

China’s exports surged 12.7% year-on-year in October, the fastest pace in over two years, as manufacturers accelerated shipments to avoid potential U.S. and EU tariffs under Trump’s presidency. Imports fell 2.3%, reflecting weak domestic demand. Despite typhoon disruptions, manufacturing expanded for the first time in six months, with analysts urging further stimulus to reduce reliance on exports for economic growth.

Arm Holdings' shares fell 5.1% after its revenue forecast for the third quarter met Wall Street expectations but failed to impress amid high hopes for AI-driven growth. The chip designer's focus on licensing its technology, including the v9 architecture, helped drive second-quarter revenue growth. However, investor expectations for stronger AI-related results have not been fully met yet.

Qualcomm reported stronger-than-expected fiscal Q4 results, with adjusted earnings of $2.69 per share on revenue of $10.24 billion, surpassing Wall Street estimates. The performance was driven by a 12% increase in handset chip sales and a 68% rise in automotive chip sales. The company also announced a $15 billion stock buyback and issued a positive Q1 outlook.

MercadoLibre reported a near 11% increase in third-quarter net profit to $397 million, falling short of analyst expectations of $542 million. While net revenue grew 35% to $5.3 billion, logistics and credit costs pressured profitability. The company saw strong growth in Brazil and Mexico, but EBIT dropped nearly 30%, and its credit portfolio grew 77% year-on-year.

Marathon Oil reported third-quarter profit exceeding Wall Street estimates, driven by higher production and strong oil demand. The company’s total production rose to 421,000 barrels of oil equivalent per day. Marathon also raised its full-year production forecast, expecting 393,000 boepd in 2024. The company’s acquisition by ConocoPhillips is expected to close by late Q4 2024.

UniCredit exceeded third-quarter forecasts and raised its profit outlook, while pushing forward with plans to acquire Commerzbank, which is defending itself by raising financial targets. UniCredit’s CEO Andrea Orcel expressed confidence in the potential merger, despite opposition in Germany. Commerzbank also reported stronger-than-expected results, raising its 2023 forecasts amid growing support for its growth strategy.

Ahold Delhaize's third-quarter results exceeded expectations, with net sales of €22 billion and operating income of €855 million. European performance beat forecasts, driven by a 6% growth in the region, while U.S. sales grew 1.2%. Despite some challenges, the company maintained its full-year guidance and announced a €1 billion share buyback program for 2025. Shares rose 3.6%.

Novo Nordisk's third-quarter sales of Wegovy, its weight-loss drug, surpassed forecasts, easing investor concerns about slowing demand. Despite a 48% rise in Wegovy sales to $2.5 billion, total group sales fell short of expectations due to weaker Ozempic performance. Shares initially rose 9%, but later reversed after the company lowered next year's growth forecast. Novo remains confident about expanding Wegovy production.

BMW reported a 61% drop in third-quarter profit, missing forecasts due to weak sales in China and braking issues, sending shares to a 2.5-year low. The company’s revenue fell 15.7%, and it lowered its full-year profit margin outlook. Despite challenges, BMW remains confident about meeting its 2024 cash flow target, citing stronger deliveries and a better product mix in Q4.

Taiwan’s China Airlines is close to finalising a multi-billion-dollar order, likely splitting up to 20 long-distance passenger jets between Airbus and Boeing, with a freighter order still undecided. The decision comes as Taiwan seeks to maintain strong U.S. ties under Trump’s renewed presidency. Political factors may influence the deal, though China Airlines insists its choice will be based solely on technical and commercial evaluations.

Goldman Sachs maintains a Buy rating on Nvidia with a $150 price target, citing strong AI demand and a unique position in AI infrastructure, while Mizuho adds Nvidia to its top picks with a $140 target, highlighting its 95% market share in AI chips for data centres and dominance in gaming. Both firms foresee continued growth, with Nvidia outpacing competitors like AMD and Intel.

JPMorgan downgraded Super Micro Computer to Underweight from Neutral, slashing its price target to $23 from $50. The downgrade stems from concerns over transparency, delays in appointing a new auditor, and slowing demand for its servers. JPMorgan also highlighted inventory risks, margin pressures, and potential market share losses, reducing revenue growth expectations and applying a lower P/E multiple to its 2026 earnings forecast.

Citi Research has raised its target price for Airbus to €184, despite reducing its 2024 delivery forecast to 750 aircraft due to supply chain challenges. While near-term profit expectations are slightly lower, Citi remains bullish on Airbus’s long-term growth, citing strong demand and its capacity to ramp up production. The firm maintains a "buy" rating, emphasising Airbus's solid market position and future potential.

Wells Fargo raised its 2024 S&P 500 target to 5,830, citing positive economic factors and increased P/E multiples, while advising a shift towards smaller-cap and midcap growth stocks. They are bullish on banks and Communication Services. Evercore ISI forecasts the S&P 500 could reach 6,600 by mid-2025, driven by a potential Trump win, Republican sweep, and deregulation's positive impact on equities.

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