The latest Market Talks covering the Auto and Transport sector. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0843 GMT - European auto fundamental earnings remain structurally challenged, but severe underperformance by the sector between April and September 2024 suggested that auto stocks were likely oversold, Citi analysts Harald C Hendrikse and Soumava Banerjee write. Investors are pricing extreme bearish outcomes on China, tariffs, EU carbon dioxide liabilities and China electric vehicle competition. This suggests any change in those assumptions could lead to short-covering, Citi says. "Yesterday's article in the Washington Post suggesting U.S. incremental tariffs may be levied only on critical components, excluding automotive, has led to a sharp short-covering rally." Risks are still there, but they may not be as bad as assumed, which could allow the sector to continue to rally. Citi likes Porsche, Renault and Volkswagen. (dominic.chopping@wsj.com)

0659 GMT - Cathay Pacific's earnings will likely see strong near-term momentum, analysts at HSBC Global Research write in a note. Cathay's November traffic update included positive guidance for 2H and flights are back to pre-pandemic levels, the analysts note, adding that Cathay also expects higher profit contributions from Air China. HSBC raises its estimates for 2H earnings before interest and taxes by 52% to reflect strong cargo and lower fuel prices, and raises its 2024-2026 recurring profit estimates by 10%-29%. HSBC upgrades its rating to hold from reduce, lifting its target price to HK$9.70 from HK$8.30. Shares are 0.3% lower at HK$9.57. (kimberley.kao@wsj.com)

0259 GMT - Road construction has slowed right down in China, a bearish sign for metals demand. "Fixed asset investment $(FAI)$ in China is one of the two key drivers of global metals demand (the other being Chinese property construction) and road construction is the largest component of FAI," Citi analysts say in a note. Spending on roads, historically steadier than spending on rail or power, has been slower than overall FAI for the past eight quarters and is now contracting, say the analysts. "If contractor order intake starts picking up from next quarter onwards, it will be positive for sentiment," they say. "But the impact on underlying metal demand from infrastructure will likely be seen only from FY25 onwards." (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0152 GMT - The outlook for Malaysia's oil and gas sector in 2025 remains positive but selective, with a focus on defensive midstream plays, floating production storage and offloading providers like Dialog and Bumi Armada, Maybank IB analyst Jeremie Yap says in a note. Robust global demand for FPSOs is expected to benefit Yinson and Bumi Armada as the industry remains in an upcycle, Yap notes. Brent crude oil prices are forecast to average $70/bbl in 2025, down from $80/bbl in 2024. However, reduced capital expenditure by Petronas could put pressure on upstream oil and gas services and equipment players, he adds. Meanwhile, the petrochemical sector may face another challenging year, with polymer prices likely to remain under pressure due to regional capacity expansions. Maybank IB maintains sell ratings for Petronas Chemicals and Lotte Chemical Titan, citing declining profitability and narrowing spreads. (yingxian.wong@wsj.com)

1847 GMT - American Airlines has emerged from transitory challenges that clouded it last year, TD Cowen analysts Tom Fitzgerald and Helane Becker say in a research note. The airline is enjoying tailwinds from better domestic flight pricing, a resurgence of business travel and improved credit card economics, the analysts say. Consensus estimates for the company seem too low as it approaches favorable comps in 2025, they say, adding that they failed to appreciate the transitory nature of last year's headwinds when they downgraded the stock in July. They upgrade the company to a buy rating. Shares rise 4.5% to $17.73. (dean.seal@wsj.com)

1603 GMT - Expect U.S. carriers to post fourth-quarter results that beat consensus estimates, starting with Delta Air Lines later this week, on strong consumer demand, price increases and favorable fuel costs, TD Cowen analysts say in a note. They forecast every airline to beat Wall Street estimates for the quarter with the exception of Sun Country, which they have as in line. "We believe the December quarter was characterized by robust demand and pricing that continued to firm against tightening supply," the analysts say. TD's bright outlook for the sector extends into the first quarter. Their checks indicate that bookings are solid and that companies are benefiting from capacity cuts. For 2025, the analysts say they are above earnings per shareconsensus estimates for every airline except JetBlue and Frontier. (adam.cataldo@wsj.com)

(END) Dow Jones Newswires

January 07, 2025 04:20 ET (09:20 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.