Equities report: Bullish tendencies renewed

The S&P 500 Nasdaq seem to have renewed their bullish tendencies over the past week, with both indexes forming new all time highs, whilst the Dow Jones seems to have remained near the same levels since the beginning of the week. In this report, we are to discuss Microsoft’s recent announcement, upcoming US financial releases, Volkswagen’s deliveries for Q2 , the upcoming earnings releases and finish off the report with a technical analysis of Volkswagen’s daily chart.

Microsoft gives up its OpenAI  observer board seat

According to a report by the FT, Microsoft (#MSFT) has given up its seat as an observer on the board of OpenAI, the creators behind the now infamous ChatGPT.  The company stated that “we have witnessed significant progress from the newly formed board and are confident in the company’s direction”, implying that Microsoft has regained confidence in OpenAI’s board since the abrupt firing of its CEO Sam Altman who was reinstated just days later. The statement however may not paint the entire picture, as EU and US regulators are gearing up to examine the two aforementioned companies for potential antitrust violations. In our view, the move by Microsoft to abandon its board seat as an observer may be a strategic one in nature. The attempt by Microsoft to distance itself from OpenAI, may be an attempt to alleviate the aforementioned concerns by regulators. In conclusion, should investigations by regulators imply that Microsoft may have violated antitrust laws, it could weigh on the company’s stock price, yet that remains to be seen.

US financial releases

The market’s attention may turn to this week’s release of the US CPI rates for June. The current expectations by economists is for the headline CPI rate to showcase easing inflationary pressures on a year-on-year basis by coming in at 3.1% which is lower when compared to the prior rate of 3.3%. Such a scenario may increase pressure on Fed policymakers to start cutting interest rates sooner rather than later, which in turn may provide support for US Equities should the tight financial conditions surrounding the US economy begin to ease. However, some concern remains as the month-on-month rate which is expected to showcase an acceleration in inflationary pressures, which could cast some concern about the risks of easing monetary policy too soon. Nonetheless, we would not be surprised to see the release of the headline CPI rate on a year-on-year level overshadowing the release of the headline CPI rate on a month-on-month level.

Volkswagen sees a drop in deliveries for Q2 of 2024

Volkswagen earlier on today released the data for the group’s deliveries for the second quarter of 2024. According to the company, group deliveries dropped by 3.8% when compared to the same quarter last year. The reduction in deliveries may imply that demand for vehicles produced by Volkswagen decreased during the 2^nd quarter of 2024, which in turn may weigh on the company’s future revenue. In our view, the most interesting statistic in the report was the significant decline in deliveries to the Chinese market which decreased by 19.3%. Thus with China being one of the largest car markets in the world, it could spell trouble for Volkswagen’s 15.1% market share in China, per the company’s 2023 annual report. As such, the negative implications of the announcement could potentially weigh on the company’s stock price. However, Hildegard Wortmann who is a member of the group’s extended executive committee for sales, did state that “for the full year 2024, we continue to expect a slight increase in global deliveries”, which instead may provide support for the company’s stock price from a more macro perspective. Nonetheless, we remain concerned regarding the future deliveries of the Volkswagen group to China.

Earnings season returns

On a general level, we would like to note that earnings season has returned, with numerous companies set to releases their earnings this week. In particular, we would like to note PepsiCo on Thursday and Wells Fargo (#WFC), Citigroup (#C), and JP Morgan&Chase (#JPM) on Friday. For next week, we would like to highlight the earnings releases of Goldman Sachs (#GS) on Monday, Morgan Stanley (#MS) on Tuesday, Johnson and Johnson (#JNJ) on Wednesday, and Netflix (#NFLX) on Thursday.

التحليل الفني

#Volkswagen Daily Chart

• Support: 103.90 (S1), 98.60 (S2), 91.60 (S3)
• Resistance: 108.20 (R1), 114.00 (R2), 119.70 (R3)

Volkswagen’s stock price appears to be moving in a sideways fashion. We maintain a sideways bias for the company’s stock price and supporting our case is the sideways moving channel which was incepted on the 14^th  of June in addition to the narrowing of the Bollinger bands which may imply low market volatility. For our sideways bias to continue, we would require the company’s stock price to remain confined within the sideways moving channel defined by the 103.90 (S1) support level and the 108.20 (R1) resistance line. On the flip side, for a bearish outlook we would require a clear break below the 103.90 (S1) support level, with the next possible target for the bears being the 98.60 (S2) support base. Lastly, for a bullish outlook, we would require a clear break above the 108.20 (R1) resistance line, with the next possible target for the bulls being the 114.00 (R2) resistance line.    

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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