The week was pot marked with a number corporate stories grabbing client attention. We saw sharp downwards price moves in Airbus, Micron, GSK, Alfen, Nike with the discounts attracting new positions taking for the most part. Novo Nordisk reached a new landmark with the share price breaking DKK 1,00 after Chinese approval of its obesity drug Wegowy. We also note that Nvidia’s three day sell off at the start of the week means we are starting to see slow down in new positions being opened.
Micron falls short of market expectations
Micron shares dropped -9% following its latest earnings release despite the memory chipmaker reporting better-than-expected revenue figures in the previous quarter and indicated higher than estimated revenue figures for the current quarter. AI demand is driving 50% QoQ data centre revenue growth and so the market reaction underscores the high expectations for every company that is part of the AI ecosystem.
- Why Micron is weighing on Nvidia and other chip stocks
Alfen update rocks investors
Shares in Alfen NV almost halved after adjusting 2024 guidance and the assessment of mid-term objectives. The specialist energy equipment and solutions provider now anticipate a slower market for 2024 due to postponed large deals, supply chain issues and slower EV battery sales. 2024 revenue outlook is lowered to €485-520m from €590-660m, free cash flow to be negative. A number of large Energy Storage Systems deals originally anticipated to sign in Q2 are being postponed and will likely only contribute to 2025 revenue, causing ESS 2024 revenue to decline by approximately 20% compared to 2023.
- Alfen rout
Stubborn inflation prints sets up for a key ECB policy meeting next week
French stocks lag their regional peers ahead of Sunday’s parliamentary election. French bonds also dropped, underperforming their German counterparts. Investors retain a cautious stance on French financial assets due to the high event risks and the slim chances of meaningful fiscal consolidation, regardless of the election result. Individual movers among French companies included L’Oreal SA which fell after the beauty-products maker said it expects slower growth in the overall beauty market this year. Planemaker Airbus dropped -9% after lowering its 2024 delivery forecast. Air France-KLM fell -11% over the past week as political risk invited analyst downgrades.
- Market awaits the first round of French election voting
Next week brings the result of the first round of the French legislative election. Economic data highlights include; Germany CPI June, US ISM Manufacturing June (Monday), Eurozone CPI June, Fed Chair Jerome Powel, US JOLTS May (Tuesday), US ISM Non-Manufacturing, FOMC Minutes (Wednesday), UK General Election (Thursday), US Non-Farm payrolls June (Friday). It’s a quiet for earnings with Constellation Brands due to report (Wednesday), from there we will begin to look forward to the Q2 earnings season kick off the following week.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
