Monday’s session opened in the red, as investors feared a continuation of the spectacular purge that had begun at the end of the previous week in gold, silver and some technology stocks. But sentiment quickly reversed after the last short positions were liquidated. The return of precious metals to positive territory after a trying start to the night restored a measure of calm. After two hours of trading, the Stoxx Europe 600 was back in the green as well. Wall Street futures, deep in the red during the Asian session, leaned on the lull observed in Europe to pare back their losses. In New York, it took only a few minutes for the indices to move into positive territory. At the close, the S&P 500 was up 0.54% and brought to an end three consecutive losing sessions.
In the end, equities rebounded, metals rebounded, cryptocurrencies rebounded and the VIX volatility index, a proxy for market nervousness, declined. Oil prices also fell, on assumptions of a de-escalation of tensions surrounding Iran. The energy sector was therefore the poor relation of the previous session. It is worth noting that technology stocks did not rebound uniformly, a sign that investors continue to harbour doubts about the platforms’ strategies regarding AI. Nvidia, Microsoft and Meta, for example, lost ground, while Alphabet and Apple advanced. Alphabet is now less than 10% away from wresting the crown of the world’s largest market capitalisation from Nvidia. The earnings released after the close in the United States by companies more or less exposed to the AI boom are unlikely to provide much clarity: Teradyne and Palantir surged, while Rambus, Fabrinet and NXP fell sharply.
The main takeaway, however, is that Monday did not deepen the losses carved out on Friday, and that volatility eased by a notch.
Tuesday will be marked by a heavy slate of fourth-quarter earnings releases. In Europe, the spotlight will be on Publicis, Banca Mediolanum, Sartorius AG, Akzo Nobel, Sartorius Stedim Biotech and Amundi. In the United States, results are due from AMD, Merck & Co, PepsiCo, Amgen, Pfizer, Eaton Corporation, Chubb, Emerson Electric, TransDigm and PayPal.
On the macroeconomic front, the designation of Kevin Warsh as Jerome Powell’s successor at the helm of the Fed next spring continues to fuel speculation. Market participants will spend the coming weeks probing his intentions. It is already being whispered that Warsh will not be his master’s voice, and that his plans to shrink the Fed’s balance sheet sit uneasily with some White House objectives. These questions, combined with surprisingly buoyant US manufacturing data published yesterday, pushed bond yields higher, with the US 10-year back at the 4.3% threshold. This means the market is increasingly doubtful about the timing of Fed rate cuts. The theory of easing as early as the first meeting under Warsh’s chairmanship, that is to say in June, is now only just holding a slim majority. The influential Ed Yardeni no longer believes in it. It should not be forgotten that the flip side of this situation is decidedly positive: the US economy does not need rate cuts to remain dynamic.
In Australia, the central bank is facing a more complex situation. As the market had anticipated, it was forced to raise rates overnight because of the resurgence in inflation. The RBA moved from 3.60 to 3.85%. Despite the absence of surprise, the Australian dollar surged this morning.
The last macro item of note this morning is the US decision to cut tariffs imposed on India from 25% to 18%, following a meeting between Trump and Modi. The Indian prime minister is said to have agreed to stop buying Russian oil, on the basis of a timetable that remains unclear.
In Asia-Pacific, the news flow shaped index performances. The stabilisation of US indices and precious metals has drawn investors back into what they see as bargain buying in technology. Japan’s Nikkei 225 is up 3.9% and South Korea’s KOSPI 6.8%. South Korea increasingly looks like a market in a state of irrational exuberance. India, buoyed by the agreement with the United States, is finally breaking out of its stock market rut, with the SENSEX up 3%. Australia ends up 0.9%. Hong Kong almost missed the party because of the slump in Chinese internet companies, which could be subjected to higher taxes. The Hang Seng nevertheless ekes out a gain of 0.2%. Western markets are expected to open higher.
Today's economic highlights:
Today's agenda includes: building permits, the RBA interest rate decision, and the press conference in Australia; inflation in France; unemployment change in Spain; in the United States, Barkin's speech, JOLTs job openings, and API crude oil stock change; the Ai Group Industry Index in Australia. See the full calendar here.
- GBP / USD: US$1.37
- Gold: US$4,882.59
- Crude Oil (BRENT): US$66.01
- United States 10 years: 4.29%
- BITCOIN: US$78,671.5
In corporate news:
- GSK is cutting up to 350 R&D jobs in the UK and US as part of ongoing changes.
- Legal & General completes the sale of its US insurance businesses to Meiji Yasuda for $2.3 billion.
- Unilever closes the sale of its healthy snacking brand Graze to Katjes International.
- AstraZeneca begins trading on the NYSE and reports a positive EU recommendation for its Imfinzi regimen.
- Fevertree Drinks initiates a share buyback program of up to £30 million.
- Balfour Beatty wins a £315 million seven-year highways maintenance contract.
- Jupiter Fund Management completes the acquisition of CCLA Investment Management.
- Prysmian has won a £2bn contract to supply cables for Eastern Green Link 4, according to National Grid.
- Orsted has been cleared by a US judge to resume construction of an offshore wind project in New York.
- Givaudan is investing $110m in Mexico.
- Novo Nordisk has unveiled positive results for its CagriSema treatment.
- Sika is opening five new production sites.
- Telecom Italia is said to be in talks to acquire a majority stake in its Brazilian fibre-optic subsidiary, according to Reuters.
- DocMorris has announced the early repayment of its 2026 convertible bond.
- Waymo, Alphabet’s autonomous driving unit, has been valued at $126bn in a funding round that raised $16bn.
- Tesla is offering the all-wheel-drive Model Y in the United States at a price of $41,990.
- Boeing is grappling with an engine sealing issue affecting the 777X’s GE9X engines, Bloomberg has learnt.
- GE Aerospace is also facing a sealing problem on the GE9X engines used on Boeing’s 777X, according to Bloomberg.
- SpaceX has acquired xAI for $250bn, creating a new entity valued at $1.25tn.
- xAI has been bought by SpaceX in a $250bn deal, forming a new group valued at $1.25tn.
See more news from UK listed companies here
Analyst Recommendations:
- Centrica Plc: RBC Capital maintains its outperform recommendation and raises the target price from GBX 200 to GBX 215.
- Wizz Air Holdings Plc: Panmure Liberum maintains its sell recommendation and raises the target price from GBX 950 to GBX 960.
- Flutter Entertainment Plc: Canaccord Genuity maintains its buy recommendation and reduces the target price from USD 300 to USD 270.
- Antofagasta Plc: Morgan Stanley downgrades to underweight from market weight and reduces the target price from GBX 3070 to GBX 3050.
- Reckitt Benckiser Group Plc: Goldman Sachs maintains its neutral recommendation and reduces the target price from GBX 6562.50 to GBX 6300.
- Diageo Plc: Goldman Sachs maintains its neutral recommendation and raises the target price from USD 105 to USD 110.
- Prudential Plc: UBS maintains its buy recommendation and raises the target price from GBX 1385 to GBX 1400.
- Dowlais Group Plc: Peel Hunt maintains its hold recommendation and reduces the target price from GBP 0.80 to GBP 0.65.
- Fresnillo Plc: Peel Hunt maintains its hold recommendation with a price target raised from GBP 36.47 to GBP 36.474.
