G&T published Global Markets Weekly Update. According to the document, the benchmark S&P 500 on Friday advanced marginally for the holiday-shortened week as investors remained on the sidelines amid quarter-end positioning. On Good Friday, which was a trading holiday, the core personal consumption expenditures price index—the Federal Reserve's favored inflation gauge—showed a deceleration in February. Later, Fed Chair Jerome Powell said at a San Francisco Fed conference that it was "good to see something coming in line with expectations." Friday also marked the end of a stellar first quarter for Wall Street, with the S&P surging about 10% and delivering its best Q1 since 2019. For the week, the S&P 500 advanced +0.4%, the blue-chip Dow added +0.8%, and the tech-heavy Nasdaq Composite slipped -0.3%.
Boeing:
Boeing, a prominent figure in the aerospace industry, has undergone significant leadership changes amid ongoing crises, which may profoundly impact its stock performance. With the departure of CEO Dave Calhoun and commercial planes division head Stan Deal, Boeing faces the challenge of restoring investor confidence and addressing manufacturing flaws that have plagued its 737 Max and 787 lines since 2019. These changes reflect a struggle to contain a crisis that has led to regulatory scrutiny and investor skepticism, contributing to Boeing's year-to-date stock price decline of 23.3% and a cumulative drop of over 50% in the last five years.
As Boeing seeks a new CEO to navigate through turbulent times, potential successors include individuals with aerospace backgrounds such as Stephanie Pope, the current chief operating officer, and Dave Gitlin, a Boeing director with experience in aerospace manufacturing. However, challenges loom large, including repairing relations with airline customers, cooperating with regulators, and restoring production amid FAA investigations. Despite uncertainties surrounding FAA-mandated changes and the potential acquisition of Spirit AeroSystems, analysts believe these leadership changes signify a crucial opportunity for Boeing to embark on a cultural overhaul and reset its narrative, possibly influencing its stock trajectory in the coming months.
Disney:
Disney CEO Bob Iger and Nelson Peltz of Trian Partners have been engaged in a fierce proxy battle over control of two seats on Disney's board, culminating in a showdown at the upcoming shareholders meeting. Peltz, backed by Trian's $3.5 billion stake in Disney, seeks to challenge Iger's leadership, citing concerns over Disney's performance, particularly in areas like streaming and creative strategy. Meanwhile, Disney defends against Trian's bid, highlighting Peltz's lack of creative experience and potential negative impact on shareholder value. Despite the contentious battle, Disney stock has surged, rising over 30% since Peltz announced his intentions and up almost 35% year-to-date, signaling investor confidence in the company's future prospects even amidst the proxy fight.
In the midst of this proxy battle, Disney's stock performance remains robust, with Wall Street analysts expressing optimism about the company's
trajectory post-resolution. Barclays analysts, for instance, upgraded Disney stock and raised its price target, anticipating a transition in leadership and potential strategic initiatives that could bolster investor sentiment. Raymond James also reiterated its positive outlook on Disney stock, suggesting continued optimism regarding the company's streaming profitability and long-term growth prospects. Despite the turmoil surrounding the proxy fight, Disney's stock resilience underscores the confidence of investors in its ability to navigate challenges and drive future growth.
Amazon:
Amazon has significantly increased its investment in Anthropic, an artificial intelligence startup, with an additional $2.75 billion commitment, making it Amazon's largest ever venture investment and bringing its total investment in Anthropic to $4 billion. This move solidifies Amazon's position in the fiercely competitive AI sector, where major tech players like Google, Microsoft, and Amazon are racing to dominate. Anthropic, which is separately raising funds from venture capitalists, could ultimately receive billions of dollars in capital and credits, with a valuation exceeding $18 billion. Despite growing regulatory scrutiny over potential anti-competitive risks, Amazon's move underscores its determination to secure a prominent position in AI technology.
The investment in Anthropic positions Amazon strategically against its rivals, Microsoft and Google, as they vie for dominance in the AI space. While the deal reinforces Amazon's commitment to Anthropic as its primary cloud provider, Anthropic retains the flexibility to utilize other cloud services, including Google's, unlike Microsoft's exclusive partnership with OpenAI. Notably, Amazon's stock has risen over 20% year-to-date, indicating positive investor sentiment amid its aggressive investments in cutting-edge technologies like AI.
What to watch next week:
Market participants are looking ahead to the "jobs week" for clues on the labor market. The latest Job Openings and Labor Turnover Survey (JOLTS) is scheduled for Tuesday, followed by ADP's private employment report for March on Wednesday. The main event will be Friday's U.S. non-farm payrolls data, with economists expecting an addition of 216K jobs in March. That would mark a deceleration from the 275K additions in February.
In terms of Federal Reserve speakers, the spotlight will be on central bank chair Jerome Powell who will be delivering a speech on economic outlook at a Stanford forum on Wednesday.
The earnings calendar is quite light next week, with jeans maker Levi Strauss (LEVI) and Canadian technology firm BlackBerry (BB) among the few notable names scheduled to report their quarterly results. Investors will also be watching out for monthly production and deliveries updates from major carmakers, including a highly anticipated quarterly report from electric vehicle giant Tesla (TSLA).
Another important event to keep an eye out for is Walt Disney's (DIS) annual shareholder meeting on Wednesday. The media and entertainment giant is locked in a proxy battle with Nelson Peltz's Trian Fund Management.
Europe
UK slips into recession in Q4
Most European markets advanced in a week of generally light trading ahead of the Easter holiday weekend, with the STOXX Europe 600 Index reaching a record intraday high and gaining 0.59% in local currency terms. The markets’ gains came despite confirmation of a significant slowdown in some major economies.
European government bond yields declined. The European Central Bank (ECB) has flagged a possible rate cut for June, depending on whether wage growth continues to moderate. With data showing eurozone bank lending stagnated again in February, ECB council member Fabio Panetta was the latest to flag a turn in the rate cycle.
The UK’s Office for National Statistics confirmed on Thursday that the country had entered a technical recession for the first time since early 2020, with the economy contracting by 0.3% in the final quarter of 2023, following a 0.1% contraction in the third quarter.
Germany’s economy shows signs of weakness
Germany’s Federal Statistical Office reported that retail sales had plunged 1.9% in February—well below consensus expectations for a small increase and the biggest drop in 17 months. Meanwhile, leading economic institutes in Germany said that they expected the country's economy to grow by 0.1% in 2024, cutting the prior forecast of 1.3%. High interest rates, weak global demand, and political uncertainty dented hopes for a stronger recovery.
Retail sales in Spain tick up; industrial producer prices decline
Some better news arrived about the Spanish economy. Retail sales rose 0.5% in February, reversing two months of declines. The country’s National Statistics Institute also reported that industrial producer prices had plummeted 8.2% over the 12 months ended in February, helped
by a sharp drop in energy prices.
Consumer sentiment improves in eurozone
Perhaps because of the region’s easing energy worries, data suggested that European consumers were growing somewhat more optimistic. On Thursday, the European Commission reported that its gauge of consumer confidence had increased to its highest level in over two years, thanks to “slightly less pessimistic expectations about the general economic situation.” According to the report, consumers’ plans for major purchases remained stable, and industry confidence improved marginally.
Japan
Japan’s stock markets fell through Thursday’s trading. Investor focus was on the sharply depreciating yen, which hovered near JPY 152 against the U.S. dollar — which is perceived by many as a point that could trigger authorities to intervene in the foreign exchange markets to prop up the Japanese currency. The country’s three main monetary authorities suggested after meeting on Wednesday that they could be ready to stage such an intervention, in the strongest hint to date and after the currency dipped to a 34-year low. The historic weakness in the yen has benefited many of Japan’s large-cap exporters, as they derive a significant share of their earnings from overseas.
The yield on the 10-year Japanese government bond fell to about 0.70% on Thursday, from 0.74% at the end of the prior week. This followed the Bank of Japan’s (BoJ’s) historic monetary policy shift, whereby it raised interest rates from negative territory for the first time in about seven years. Market expectations appear to be converging around two more BoJ interest rate hikes within a one-year period.
A member of the BoJ’s Board said that the end of the central bank’s negative rates policy was a first step toward monetary policy normalization. Steps were taken in response to signs that wages were increasing in tandem with prices, an oft repeated precondition for the BoJ to tweak its policy. Nevertheless, Japan’s monetary policy remains among the most accommodative in the world, and financial conditions are expected to remain accommodative as well, for the time being.
Japan’s levels of inbound tourism reportedly exceeded pre-pandemic levels, with travelers from across the world seeking to maximize the benefits of yen weakness. Notably, tourism from China lagged.
China
Chinese stocks declined for the week ended Thursday as concerns about the continuing property sector downturn weighed on investor confidence. The Shanghai Composite Index retreated 1.23%, while the blue chip CSI 300 gave up 0.68%. In Hong Kong, the benchmark Hang Seng Index edged up 0.25%, according to FactSet.
Chinese Premier Li Qiang told participants at the China Development Forum, an annual summit for global business leaders, that the country is open to foreign investment. Premier Li also pledged that the government will step up measures to support growth in several sectors,
including biological manufacturing, artificial intelligence, and the data economy. However, Beijing’s pro-business message came as many investors seek evidence that China will further increase policy support to meet its growth goals. Speaking at the same event, International Monetary Fund Managing Director Kristalina Georgieva said that China’s economy could expand a further 20% over the next 15 years if it conducts pro-market reforms, according to prepared remarks.
In economic news, profits at industrial firms surged 10.2% in the January to February period from a year ago and recovered from a 2.3% decline in 2023, according to the National Bureau of Statistics, aided by policy support and increased overseas demand. The year-over-year increase was also supported by a low base of comparison from last year, when China emerged from nationwide pandemic lockdowns. The latest indicators added to evidence that China's economy was gaining traction following data from the prior week showing that industrial production, fixed-asset investment, and retail sales picked up in the two-month period. However, deflationary pressures and the ongoing property market slump continue to weigh on investor sentiment.
