Trump wins first round of Presidential debate

Shares in the US closed slightly higher on Thursday as declining US treasury yields signalled economic slowdown, boosting hopes for rate cuts this year. The S&P 500 and Dow Jones each edged up nearly 0.1%, while the Nasdaq gained 0.3%. Initial jobless claims fell, but ongoing claims reached 2021 highs, indicating labour market cooling. Meanwhile, the Eurozone's Stoxx 50 index closed 0.3% lower at 4,900 amid cautious investor sentiment ahead of key economic reports and elections, reflecting broader market uncertainty.

Summary for 28.06.2024

Asian equities rose on Friday, poised for strong June gains amid hopes for Fed rate cuts due to a cooling U.S. economy and stronger-than-expected May industrial production data in Japan. Japanese shares advanced on mixed Tokyo inflation data, while broader Asian markets, including Australia, gained. Chinese equities lagged due to trade war concerns and recovery doubts.

European equity markets are poised for a modestly higher open ahead of the weekend’s first round of French elections while US equity futures rose Friday ahead of PCE inflation data, despite Nike plunging 12% after cutting guidance and Trump leading in the first presidential debate.

Oil prices rose in Asian trade on Friday, set for strong June gains amid supply disruption fears in Russia and the Middle East, despite rising US stockpiles and a strong dollar. Geopolitical tensions and adverse weather conditions drove higher risk premiums, with Brent and WTI futures increasing 0.4%.

In the first debate of the 2024 presidential campaign, Donald Trump, 78, aggressively criticised President Biden, 81, for perceived policy failures and questioned his mental acuity, capitalising on Biden's occasional verbal stumbles. Biden, in turn, portrayed Trump as unfit due to his past actions and policies, leading to mixed reactions and heightened concerns over Biden's performance and Trump's divisive rhetoric.

In the US, initial unemployment claims dropped to 233,000 for the week ending 22nd June, below expectations and marking a second consecutive decline from recent highs. However, ongoing claims rose to 1,839,000, highlighting challenges in the labour market despite its historically tight conditions post-pandemic.

In Q1 2024, the US economy grew at an annualised rate of 1.4%, slightly up from the previous estimate of 1.3%. Non-residential investment, particularly in structures, equipment, and intellectual property, saw revisions upward, while residential investment exceeded expectations. However, consumer spending slowed more than initially forecasted, impacting both goods and services consumption.

In May, new orders for manufactured durable goods in the US edged up 0.1% from April, marking the fourth consecutive monthly increase. Growth was driven by strong demand for computers and transportation equipment, particularly defence aircraft. However, orders declined for communications equipment, capital goods, machinery, and electrical equipment.

Raphael Bostic of the Federal Reserve Bank of Atlanta hinted at potential rate cuts in Q4 2024 and outlined a flexible approach for 2025, suggesting up to 5 rate adjustments depending on economic conditions. He emphasised data-driven decisions and reiterated the Fed's commitment to achieving a stable inflation rate beneficial for economic stability.

In June, the Euro Area's economic sentiment indicator dipped to 95.9 from a revised 96.1 in May, slightly below expectations. Sentiment worsened broadly among service providers and industrials, driven by concerns over past demand and excessive stocks. However, consumer sentiment showed slight improvement, while selling price expectations varied across sectors.

Nike reported a surprise forecast of mid-single-digit percentage revenue decline for fiscal 2025 due to weakening demand and competition from brands like On and Hoka. This announcement caused its shares to plummet over 12% in after-hours trading. Despite cost-saving efforts and growth in wholesale, Nike's direct-to-consumer sales fell 8% in the fourth quarter, with overall revenue missing expectations.

Nokia announced its acquisition of Infinera Corp for $2.3 billion, aiming to bolster its optical network business, particularly in North America. The deal, valued at $6.65 per share, a 26.4% premium to Infinera's closing price, will be mostly paid in cash. Nokia expects the acquisition to enhance earnings per share within the first year and contribute over 10% to profits by 2027.

Walgreens Boots Alliance plans to close 650 to 700 underperforming stores in the US and up to 650 Boots stores in the UK due to weak consumer spending. The company expects pre-tax charges of $3.8 billion to $4.1 billion. CEO Tim Wentworth aims to overhaul operations amid declining profitability and reduced profit forecasts for fiscal 2024.

L'Oreal revised its global beauty market growth forecast to 4.5-5.0% amidst volatility in China, impacting its shares negatively. Despite a dip in net sales during China's 6.18 festival, gross sales rose due to increased promotions. In the US, while mass makeup sales declined, prestige fragrances showed strong performance, aiding overall growth.

Kering SA's shares surged over 5% after Bank of America upgraded its rating from "underperform" to "buy" and raised the price target from €350 to €450. The upgrade reflects optimism about Gucci's recovery efforts, including new products and price increases, with improved earnings forecasts for 2024 reinforcing bullish sentiment.

Micron saw its shares drop 7% in regular trading on Thursday despite beating Q3 2024 earnings estimates, as Q4 guidance fell short of expectations. Analysts from Citi and JPMorgan remain bullish, citing Micron's strong position in DRAM and AI memory markets, forecasting higher revenue and EPS through 2025, with price targets of $175 and $180 respectively.

GSK shares plummeted almost 5% after the CDC restricted its recommendation for the RSV vaccine Arexvy, limiting its use to adults aged 60 and older and those 50-59 at high risk. This curtailed GSK's anticipated market expansion, contrasting with Moderna's approval and potential broader usage pending further safety data.

H&M's quarterly earnings miss and projected June sales decline prompted a 15% drop in its shares. The retailer casts doubt on achieving its full-year profit margin target due to higher costs and lower-than-expected sales. Despite improved product reception, achieving the 10% operating margin goal for 2024 now appears challenging amid competitive pressures from fast-fashion rivals.

HSBC analysts have revised Stellantis NV's target share price down to €22 per share from €23.50, citing challenges such as weak retail sales and slow inventory reductions in the US market. They emphasise that Stellantis' future growth hinges on successful new product launches amid competitive pressures in North America and Europe.

Berenberg downgraded Anglo American to Sell from Hold and slashed its price target from £3,000 to £2,000 following Anglo's rejection of BHP's takeover bids. Analysts believe Anglo must execute its new strategy perfectly to justify its valuation, expressing doubt that it can achieve the value implied by BHP's final bid.

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