The Day at a Glance | January 29 2024

The Top

*In China, Evergrande has been ordered to liquidate in a historic moment for the Chinese real estate sector, affected by the crisis. 

*President Joe Biden faces increasing pressure to confront Iran following the attacks on U.S. forces in Jordan by Iranian radical groups.

*Officials from the ECB stated on Monday that the central bank’s will carry out an interest rate cut, although they didn´t specify the exact timing. 

*France will promote changes in EU environmental legislation as farmers block roads in Paris.

*The main indices in the U.S. show moderate variations; Wall Street remains focused on quarterly reports from large-cap technology companies and the Fed’s decision.

Economic environment

In a historic moment, Evergrande ordered the liquidation of the Chinese real-estate sector which was affected by the crisis. On Monday, a Hong Kong court ordered the liquidation of the China Evergrande Group, dealing with the confidence in the country’s fragile real estate market. Meanwhile, Chinese officials are intensifying efforts to hold an increasingly deep crisis. This decision sets the stage for what is expected to be a long and complicated process with possible political considerations as investors watch if Chinese courts recognize the Hong Kong ruling, given the many authorities involved. Investors will focus on how Chinese authorities treat foreign creditors when a company declares bankruptcy.

Markets and companies

U.S. markets rising moderately. U.S. stock futures show moderate variations this morning. This is attributed to Wall Street remaining focused on various quarterly reports from the large-cap technology industry and the Federal Reserve’s interest rate policy decision. S&P 500, Dow Jones, and Nasdaq futures are up +0.51%, +0.32%, and +0.72%, respectively. Last week, the three main indices in the U.S. increased after encouraging economic data. Economic growth in Q4 2023 was stronger than expected, while annual core inflation was lower than economists predicted, suggesting a slowdown in price increases. However, market gains were more moderate compared to the surge logged in the previous week after companies like Intel and Tesla disappointed on the earnings front. Approximately 19% of S&P 500 companies will report earnings this week. Major companies in the large-cap technology industry such as Microsoft, Apple, Meta, Amazon, and Alphabet will make results known. In Europe, markets had a mixed start to the week as investors prepare for a wave of earnings reports, data, and central bank announcements. The regional index increased by +3.1% last week, closing at its highest level since January 2022, according to Refinitiv data. Gains came from some positive Q4 2023 company results and as the market intensified bets that the ECB will begin decreasing interest rates in April. In Asia, Evergrande’s shares suspended trading on Monday after Hong Kong’s high court ordered the liquidation of the troubled Chinese real estate developer. Despite this, Asian markets are on the rise. In Mexico, IPyC futures opened higher, reaching 57,708 points (+1.50%). Oil prices are down. This comes after missiles launched by Iran-backed militants attacked U.S. troops in Jordan over the weekend. Natural gas prices are down -7.3%. The price of gold is at $2,031 per ounce; silver is trading at $22.98 per ounce, and copper at $385.60 per pound. Finally, cryptocurrencies are logging mixed figures. During the night, the exchange rate fluctuated between a minimum of 17.15 and a maximum of 17.19, currently trading at 17.16.

Corporate news

*Shares of the discount retailer, Dollar Tree, increased by almost +2% after JPMorgan upgraded its recommendation from Neutral to Buy. The bank cited higher profitability and a larger market as potential drivers. 

*American Airlines’ shares rose +1.5% after being upgraded from Hold to Buy at Citi. The recommendation upgrade was attributed to diversified revenue sources of U.S. airlines and solid demand for premium cabin offerings, which seem to provide them with a superior position in the post-pandemic environment. 

*Warner Bros Discovery’s shares fell -1.6% after Wells Fargo downgraded the media and entertainment company from Buy to Hold. A higher level of leverage, a less favorable mergers and acquisitions environment, and advertising migration were cited as reasons for a flatter multiple. 

*Boeing will report its quarterly results; investors raise new questions about its 737 Max program. The company’s shares have fallen more than 20% this year after a panel blew off a 737 Max 9 plane earlier this month in an Alaska Airlines flight. 

*Some major pharmaceutical companies, including two reporting quarterly results this week, may have to devise strategies to stay competitive in the coming years. Many high-selling drugs are about to fall off a so-called “patent cliff,” when companies lose exclusive rights to a treatment and competitors can introduce alternate products, often at a lower price. Companies like Johnson & Johnson, Merck, and Bristol Myers Squibb are trying to expand other parts of their businesses or be creative and delay the expiration of their patents.