Concerns about AI-driven disruption continue to cloud sentiment. Meanwhile, the massive capital expenditure programmes of the technology giants are no longer seen as a sufficient reason to buy the stocks. We saw this during the latest earnings season in late January and early February: all of them flagged a significant increase in capex for 2026, and the market reaction was broadly negative. Bank of America's latest fund manager survey, published this week, confirms the shift in mood. One third of investors believe companies are investing too much, the highest proportion since the survey began.
The result of this disenchantment is a marked compression in valuations. Among the mega caps, two names have suffered in particular: Microsoft and Amazon, down 18% and 13% respectively since the start of the year. Microsoft now trades on 23 times earnings and Amazon on 26 times. Both stocks are at their cheapest levels in a decade, relative to their average price-earnings ratios over the past ten years.
Yet despite technology's weakness, the indices are not falling. The S&P 500 has been trading between 6,800 and 7,000 points for the past two months, a range of roughly 3%. This is not a broad-based sell-off but rather a rotation into more defensive sectors. As we recently noted, the trend began in late October. Among the beneficiaries are utilities and consumer staples.
Walmart, for instance, is up 16% since the start of the year. The group recently surpassed a market capitalisation of 1 trillion dollars and is now more highly valued than all of the Magnificent Seven except Tesla. At present, Walmart offers something of the best of both worlds. Its valuation resembles that of a technology company, reflecting its growing competition with Amazon through the expansion of its e-commerce operations. At the same time, it remains a defensive stock in a market searching for businesses unlikely to be disrupted by AI.
The US retailer's share price performance has been striking, and the bar now appears set high as Walmart reports earnings tomorrow. Today, the European session will be driven by results from Euronext, Vinci, BAE Systems, Orange, Glencore and Carrefour. In the United States, Booking Holdings, Analog Devices and Occidental Petroleum are also due to report.
On the macro front, investors are awaiting the Federal Reserve minutes this evening. This morning, attention turns to UK inflation. Yesterday's labour market data showed the unemployment rate rising to 5.2%, its highest level since 2015. The figures have revived bets on further rate cuts from the Bank of England.
Elsewhere in the news:
Christine Lagarde is expected to step down as President of the European Central Bank before the end of her term in October 2027, according to the Financial Times.
Ukrainian and Russian negotiators concluded the first day of a new round of US-sponsored peace talks in Geneva on Tuesday, as President Donald Trump, the 47th President of the United States, renewed pressure on Kyiv.
Also in Geneva, Iran and the United States reported progress in their negotiations yesterday, prompting a modest pullback in oil prices.
Mainland Chinese markets remain closed and will not reopen until Tuesday 24 February due to Lunar New Year celebrations. The Hong Kong exchange is closed until tomorrow inclusive. Japanese equities are sharply higher following strong economic data and Donald Trump's announcement of the first Japanese investment projects in the United States under the 550 billion dollar trade agreement.
Today's economic highlights:
On today's agenda: the monthly and yearly inflation rates along with the core yearly inflation in the United Kingdom; In the United States, the MBA 30-Year Mortgage Rate, housing starts and building permits, durable goods orders, industrial production, Fed Bowman's speech, FOMC minutes, long-term TIC flows, and API crude oil stock change will be monitored; In Japan, machinery orders will be released. See the full calendar here.
- GBP / USD: US$1.36
- Gold: US$4,934.19
- Crude Oil (BRENT): US$67.6
- United States 10 years: 4.04%
- BITCOIN: US$67,839.7
In corporate news:
- NatWest Group's financial estimates were revised by RBC Capital Markets following its Q4 2025 results, with increased income projections and unchanged sector perform rating.
- Rio Tinto suspended production at its SimFer mine in Guinea following a fatal incident, causing its shares to fall by 1.5%.
- Antofagasta reported record 2025 results but faced market concerns over copper market risks and restrained production, leading to a 7% share drop.
- SSE plans to invest up to $1.28 billion to upgrade the subsea electricity network connecting Scotland's island communities.
- GSK received European Commission approval for its asthma and rhinosinusitis treatment Exdensur, while also starting a £450 million share buyback tranche.
- Raspberry Pi shares surged 40% amid CEO stock purchases and speculation about AI-related demand for its products.
- Kelso Group invested £1.8 million in CVS Group, citing the veterinary sector's growth potential and undervaluation.
- ITM Power raised its annual revenue guidance to £40-£43 million due to strong project progress and recent contract wins.
- Intertek Group acquired Germany-based Aerial PV Inspection to enhance its solar industry quality assurance services.
- Chesnara agreed to acquire Scottish Widows Europe from Lloyds Banking Group for €110 million, expanding its European footprint.
- Applied Nutrition raised its annual revenue forecast to £140 million, citing strong first-half performance and product demand.
- Vodafone and Nokia expanded their partnership to include network APIs in anti-fraud products across Europe starting April 2026.
- Verallia considers closing European manufacturing sites, potentially affecting 300 jobs.
- Amrize AG reports Q4 revenue of USD 2.839 billion and announces a shareholder-return plan.
- Banca Monte dei Paschi di Siena to acquire and integrate Mediobanca, leading to its delisting.
- Bravida Holding AB reports a 6% rise in Q4 EBITA despite a slight decline in net sales.
- Novartis reports positive Phase III trial results for remibrutinib in chronic inducible urticaria.
- Genmab announces an equity repurchase program worth up to 725 million DKK.
- Scandic Hotels reports higher revenue but lower operating profit in Q4 2025, maintaining a dividend of 2.60 kr per share.
- Borussia Dortmund secures a 2-0 victory in a Champions League play-off against Atalanta.
- Recordati forecasts 2026 core profit (EBITDA) between €995 million and €1.03 billion.
- ASR reports 1.32 bn euros organic capital creation for 2025, surpassing expectations.
- Carrefour unveils a 2030 strategic plan focusing on market-share growth and cost savings.
- Nvidia secures a multibillion-dollar chip deal with Meta, strengthening AI data-center hardware leadership.
- Bayer seeks a multibillion-dollar settlement of U.S. glyphosate lawsuits.
- Netflix and Warner Bros partnership acquisition deal expected to create significant shareholder value.
- Microsoft announces a $50 billion investment by 2030 to expand AI technologies across the Global South.
- Amazon stops using its ‘Blue Jay’ warehouse robot after a few months of operation.
- CSL grants Eli Lilly exclusive rights to develop clazakizumab for end-stage kidney disease, receiving a $100 million upfront payment.
See more news from UK listed companies here
Analyst Recommendations:
- Intercontinental Hotels Group Plc: Oddo BHF maintains its outperform recommendation and raises the target price from USD 145 to USD 158.
- Astrazeneca Plc: Berenberg maintains its buy recommendation and raises the target price from USD 110 to USD 232.
- Watches Of Switzerland Group Plc: RBC Capital maintains its sector perform recommendation and raises the target price from GBX 520 to GBX 560.
- British American Tobacco P.l.c.: Investec maintains its sell recommendation and reduces the target price from ZAR 97500 to ZAR 92000.
- Molten Ventures Plc: Barclays upgrades to overweight from market weight with a target price of GBP 5.75.
- Relx Plc: Oddo BHF maintains its outperform recommendation and reduces the target price from GBP 43.50 to GBP 30.75.
- Admiral Group Plc: Morgan Stanley maintains its equalwt recommendation and reduces the target price from GBX 3475 to GBX 2850.
- Greatland Gold: Argonaut Securities Pty Limited maintains its buy recommendation and reduces the target price from AUD 15.30 to AUD 15.10.
- Admiral Group Plc: JP Morgan maintains its underweight recommendation and reduces the target price from GBP 30 to GBP 27.50.
- Antofagasta Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 4000 to GBX 4200.
- Intercontinental Hotels Group Plc: JP Morgan maintains its overweight recommendation and raises the target price from USD 160 to USD 162.
- Melrose Industries Plc: Citi maintains its buy recommendation and raises the target price from GBP 7.35 to GBP 7.63.
