US Market Overview: Mixed Performance Amid Inflation and Trade Concerns
US shares showed a mixed performance on Tuesday, with the S&P 500 closing nearly flat, while the Nasdaq dipped slightly. Energy equities outperformed, spurred by a 1.2% rise in oil prices, while consumer staples also showed strength. In the bond market, yields rose, with the 10-year Treasury climbing to 4.54%, as investors processed remarks from Federal Reserve Chair Jerome Powell. Powell reaffirmed the Fed’s cautious stance on monetary policy, noting that while inflation remains above target, the economy is strong enough to avoid drastic policy shifts.
In corporate news, Coca-Cola’s stock surged 4.7% after reporting better-than-expected earnings. On the other hand, Tesla’s shares dropped 6.3%, driven by concerns over its performance and outlook.
Trade Uncertainty and Its Impact on Market Sentiment
Ongoing trade uncertainty continued to weigh on market sentiment. President Trump signed new tariffs on steel and aluminium imports, signalling potential reciprocal tariffs. This added to concerns over fiscal and trade policies, which are likely to remain a constraint on business confidence. The drop in small business optimism also highlighted the growing concerns.
Investors are closely awaiting the release of US inflation data on Wednesday, with expectations for a 0.3% rise in the Consumer Price Index (CPI) for January. Gold and silver both saw minor declines, reflecting a shift towards higher bond yields.
Global Market Update: Asian Markets and European Strength
Asian Markets: Modest Gains Amid Caution
Most Asian indices saw modest gains on Wednesday, with Hong Kong’s Hang Seng leading the way with a 2% rise, driven by strong performances in tech and electric vehicle shares. Other regional indices, including Japan’s Nikkei, South Korea’s KOSPI, and mainland China’s Shanghai Composite, experienced more subdued movements as investors remained cautious ahead of the US inflation report.
European Markets: Eurozone Gains Despite Tariffs
European equities closed firmly higher on Tuesday. The Eurozone’s STOXX 50 hit its highest level since 2000, buoyed by strong corporate results and the view that European shares offer favourable valuations compared to their North American counterparts. However, shares of ferrous and base metal miners in London, including Rio Tinto, Anglo American, and Glencore, were under pressure. These stocks lost up to 3% after the US imposed new tariffs on aluminium and steel.
US Dollar and Inflation Data
The US Dollar Index held steady around 108 on Wednesday, following a pullback in the previous session. Investors await crucial inflation data to guide future interest rate decisions. The euro remained under pressure, trading at 1.0358 against the dollar, influenced by ongoing trade concerns and remarks from the Fed.
In his Semi-annual Monetary Policy Report to Congress, Jerome Powell reaffirmed that, with the economy remaining strong and the Fed’s policy stance now less restrictive, there is no immediate need to adjust the federal funds rate. While inflation is closer to the 2% target and labour market conditions have cooled, Powell cautioned against moving too quickly or too slowly on policy changes to avoid disrupting economic progress.
Equities on the Move: Corporate Earnings and Analyst Updates
The following companies saw significant stock movements driven by earnings, analyst ratings, or other news:
- Siemens Energy: Siemens reported a record order book of €131 billion, driven by strong demand for energy equipment, including gas and wind turbines. The company posted a net profit of €252 million for Q1, surpassing expectations, with a 62% rise in orders from the US to €3.9 billion.
- Alibaba: Alibaba’s Hong Kong-listed shares surged over 8%, hitting a four-month high after reports of a strategic partnership with Apple. The companies plan to develop AI features for iPhones in China, with the features expected to launch in April after receiving regulatory approval.
- Super Micro Computer: Super Micro Computer’s shares rose 8% after the company announced it expects to file its delayed annual and quarterly reports by February 25, despite facing subpoenas from the DOJ and SEC over allegations of accounting manipulation.
- S&P Global: S&P Global forecast 2025 adjusted earnings per share above Wall Street expectations, citing increased demand for its data and analytics. The company announced a $650 million share repurchase program and reported a 14% rise in quarterly revenue.
- Coca-Cola: Coca-Cola exceeded expectations with strong fourth-quarter earnings. The company reported a 2% global volume increase and expects 5% to 6% organic revenue growth for 2025, projecting a 2% to 3% rise in earnings per share.
- Shopify: Shopify shares reversed course to close 3% higher after better-than-expected fourth-quarter earnings and revenue results. The company also projected mid-twenties revenue growth for the current quarter.
- UniCredit: UniCredit reported a 2% increase in net profit for FY24, reaching €9.7 billion. The company also raised its dividend by 33%, announced €5.3 billion in share buybacks, and expects FY25 net revenue to exceed €23 billion.
- Kering: Kering shares rose over 1% following fourth-quarter results that surpassed expectations. Despite challenges at Gucci, the company reported a 4% organic revenue increase, with strong performances from Bottega Veneta and Saint Laurent.
- BP: BP’s fourth-quarter profit fell sharply to $1.2 billion, down from $3 billion the previous year. The decline was due to weaker refining margins, lower energy prices, and higher costs. However, the company maintained shareholder returns with a dividend and a $1.75 billion share buyback plan.
- Tesla: Tesla’s stock dropped 6.3%, primarily due to a decline in China sales, intensified competition from BYD, and concerns over CEO Elon Musk’s divided focus. Additional pressure came from a price war in China and tariffs on key materials.
- Commerzbank: Commerzbank is preparing to announce up to 4,000 staff cuts and new financial targets to fend off a potential takeover by UniCredit. Despite a 20% increase in net profit, the bank faces significant political opposition to the merger.
- Bank of America: Bank of America forecasted record net interest income growth of 6% to 7% for 2025, expecting NII to reach $15.5 billion to $15.7 billion by Q4, driven by strong consumer spending.
- Berkshire Hathaway: Berkshire Hathaway increased its stake in Occidental Petroleum by purchasing 763,017 shares for $35.7 million, bringing its total holdings to 264.9 million shares.
- PhillipCapital: PhillipCapital downgraded Spotify to “Neutral” from “Accumulate,” citing limited upside following recent gains. However, the firm raised its price target to $600, noting Spotify’s leadership in audio streaming.
- BMO Capital Markets: BMO Capital Markets raised its price target for DoorDash to $240 from $180, citing better-than-expected user engagement and strong international growth.
- Jefferies: Jefferies upgraded Essilor Luxottica to a “buy” rating, raising its price target to €310 per share. The firm forecasts accelerated earnings growth, especially in the US market.
Upcoming Economic Data and Events
Today’s economic data includes January’s CPI figures for both the US and the EU, as well as US crude oil inventories and the Federal Budget Balance. Among the companies reporting today are Cisco, CVS Health, CME Group, Robinhood, Vertiv, and Reddit.
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