As the dust settles from DeepSeek, the financial landscape remains as dynamic as ever. U.S. technology stocks made a swift recovery yesterday after Monday's tumble. Investors are coming to terms with the rise of this Chinese artificial intelligence model, touted as more efficient, faster, and cheaper—at least on paper. The initial shock has now given way to controversy and counter-arguments. Microsoft and OpenAI have raised eyebrows, suspecting that DeepSeek might have trained using OpenAI's data, which they find quite objectionable. The irony here is palpable: the very companies that have been systematically mining global data for their own language models are now crying foul. It's almost amusing, if it weren't for the fact that I'm on the side of content creators, who find themselves caught in the crossfire of this data free-for-all.

In short, after plunging 3% on Monday because DeepSeek had the potential to call into question lavish investment trajectories in AI, the Nasdaq has gone halfway back in the opposite direction. The symbol is Nvidia, which lost 17% on Monday before recovering 9% yesterday. Analysts spent much, much energy on Monday explaining that Chinese AI doesn't call the whole ecosystem into question, but just shows that the battle around AI will continue, and that it will always require chips, data centers and energy to keep it all running. The message has borne fruit, at least in the short term. In Europe, which had held up better than in the United States the previous day, indices fared rather well, except in Paris where Schneider Electric continued its slide: clearly, the rebound in AI-related stocks was lost along the way for the French group, which is one of the world's leading suppliers of data centers and energy management solutions.

Today, the financial markets' spotlight shifts from DeepSeek to the Federal Reserve's much-anticipated decision on interest rates, expected at 2:00 pm ET. Investors are nearly unanimous in predicting that the Fed will maintain the status quo, keeping rates steady in the 4.25% to 4.50% range, currently sitting at 4.33%. However, behind closed doors, there's a quiet hope for hints of a possible rate cut at the next meeting on March 19. According to CME's FedWatch tool, the market pegs the likelihood of a March rate cut at 34%. Any dovish signals from Fed Chair Jerome Powell could increase this probability, providing a lift to stock prices. Once the Fed's announcement is digested, attention will turn to the earnings reports from Microsoft, Meta Platforms, and Tesla. Elon Musk will need to justify Tesla's sky-high valuation, while the tech giants will have to persuade investors that their hefty investments in large language models (LLMs) will eventually yield returns. It's shaping up to be an eventful evening in the world of finance.

Donald Trump is once again at the center of headlines, delivering comments that echo the early days of his first term. The spotlight is firmly on customs surcharges, but today's plot twist involves his bold moves against federal spending. A judicial panel has put a halt to the White House's executive order, which aimed to freeze billions in federal grants and loans earmarked for specific education and healthcare initiatives. Meanwhile, the European Union is setting the stage for a gradual embargo on Russian aluminum imports.

In Asia Pacific this morning, many markets are closed today for the Lunar New Year. These include mainland China, Hong Kong, South Korea, Taiwan and Singapore. On the Japanese, Australian and Indian markets, the main indices are up by around 0.5% this morning. Futures on Wall Street are slightly in the red, while in Europe, the Stoxx Europe 600 is up 0.5%.

Today's economic highlights:

Two central banks for the price of one: the Bank of Canada and the Fed will announce their key rates today. See the full agenda here.

  • Dollar: EUR 0.9624 GBP 0.8062
  • Gold: US$2,757
  • Brent Crude Oil Spot: Brent: $76.19 WTI: $73.55
  • US 10Y Cash: $4.52
  • Bitcoin (BTC/USD): US$101,700

In corporate news:

  • REACT Group PLC: React Group announced a FY24 EPS of GBX0.08 and a revenue of GBP20.7 million.
  • Hardide plc: Hardide Plc reported a FY24 loss of £1.90 and a revenue of GBP4.7 million.
  • Velocity Composites plc: Velocity Composites reported a FY24 revenue of GBP23M alongside a loss of GBX-1.58 per share.
  • GSK plc: BioVersys has initiated an IPO aiming to gather 80 million Swiss francs in funding.
  • Diageo plc: Investors are skeptical about Diageo's ambitious growth targets due to prevailing industry trends and broader economic difficulties.
  • Learning Technologies Group plc: General Atlantic has confirmed its final cash offer for the acquisition of Learning Technologies Group.
  • Playtech plc: Playtech's Chairman, Brian Mattingley, is set to retire in 2025.
  • Next plc: Next plc announced its plan to initiate a share buyback program to enhance shareholder value.
  • HSBC Holdings plc: HSBC is set to shut its investment banking operations in Europe, the UK, and the US to concentrate on expanding its presence in Asia and the Middle East.
  • Big Technologies PLC: Big Technologies PLC forecasts a decline in its annual sales and earnings.
  • Allergy Therapeutics plc: Allergy Therapeutics PLC anticipates an increase in annual sales compared to the previous year.
  • Novo Nordisk A/S: The US FDA has approved Novo Nordisk's diabetes drug Ozempic for treating chronic kidney disease in type 2 diabetes patients, aiming to reduce the risk of disease worsening, kidney failure, and cardiovascular death.
  • ASML Holding N.V.: ASML Holding reported better than expected fourth-quarter bookings of 7.088 billion euros due to strong demand for AI chips, despite reporting lower net income for FY24 alongside higher net sales.
  • Banco Santander, S.A.: William Vereker is set to step down as the chair of Santander UK this year and will officially resign in FY25.
  • F5, Inc gains 15% after its quarterly results.
  • Manhattan Associates plunges 25% after its quarterly results.
  • Qorvo loses 5% after its quarterly results.
  • Microsoft and OpenAI investigate whether a group linked to DeepSeek obtained OpenAI data.
  • Boeing and FAA reach agreement on 737 MAX production increase.
  • Zimmer Biomet acquires Paragon 28 for $1.1 billion.
  • Kohl's cuts 10% of its workforce.
  • Apple iPhones to support Starlink direct coverage in the US.
  • Nasdaq reported Q4 adjusted earnings that topped expectations of $0.76 per diluted share, up from $0.72 a year earlier. Revenue for the quarter jumped to $2.03 billion, compared with $1.65 billion a year earlier.

Today's top earnings reports: Microsoft, Meta Platforms, Tesla, T-Mobile US, ServiceNow, IBM, Qualcomm, Alibaba, Danaher, Automatic Data Processing, Lam Research, Waste Management, General Dynamics, Canadian Pacific Kansas City, Norfolk Southern Corporation, Ameriprise Financial, United Rentals, MSCI, Nasdaq...

Analyst Recommendations:

  • At&T Inc.: DZ Bank AG Research upgrades to buy from hold with a target price raised from USD 23 to USD 27.
  • Caterpillar Inc.: Melius Research LLC downgrades to hold from buy with a target price reduced from USD 414 to USD 390.
  • Coinbase Global, Inc.: Mizuho Securities upgrades to neutral from underperform with a price target raised from USD 250 to USD 290.
  • Datadog, Inc.: Stifel downgrades to hold from buy and reduces the target price from USD 165 to USD 140.
  • Dillard's, Inc.: Zacks downgrades to neutral from outperform with a price target reduced from USD 537 to USD 505.
  • Moderna, Inc.: Goldman Sachs downgrades to neutral from buy with a target price reduced from USD 99 to USD 51.
  • Nrg Energy, Inc: Zacks upgrades to outperform from neutral with a target price reduced from USD 116 to USD 112.
  • Verizon Communications, Inc.: DZ Bank AG Research upgrades to hold from sell with a target price of USD 40.
  • Westlake Corporation: Zacks downgrades to underperform from neutral with a price target reduced from USD 122 to USD 100.
  • Apollo Global Management A: Morgan Stanley maintains its market weight recommendation and raises the target price from 137 to USD 169.
  • Boeing: Wells Fargo maintains its underweight recommendation and raises the target price from USD 85 to USD 103.
  • Cheniere Energy, Inc.: Redburn Atlantic maintains a neutral recommendation with a price target raised from 198 to USD 245.
  • F5, Inc.: Barclays maintains its equalweight recommendation and raises the target price from 246 to USD 296.
  • Klaviyo, Inc.: Scotiabank maintains its sector perform recommendation with a price target raised from 35 to USD 45.
  • Royal Caribbean Group: Deutsche Bank maintains its hold recommendation with a price target raised from 181 to USD 244.
  • Servicenow, Inc.: JP Morgan maintains its overweight rating and raises the target price from USD 950 to USD 1250.
  • Sofi Technologies, Inc.: Mizuho Securities maintains its outperform recommendation and raises the target price from 16 to USD 20.
  • Tko Group Holdings, Inc.: Redburn Atlantic maintains its buy recommendation with a price target raised from 134 to USD 167.
  • Metro Inc.: BMO Capital Markets upgrades to outperform from market perform and raises the target price from CAD 92 to CAD 96.