Equity Markets Rebound with Strong Recovery in Tech Sector
Equity markets rebounded on Tuesday, with a strong recovery in the tech sector following Monday’s sharp sell-off. The Nasdaq surged by 2%, recovering from a 3.1% drop, largely driven by Nvidia’s 8.8% rally. This helped the S&P500 rise by 0.9%, while the Dow Jones gained 0.3%. Despite weaker-than-expected US consumer confidence data and a drop in durable goods orders, investor sentiment turned positive after mid-session, with tech shares leading the charge. Bond yields pulled back, with the 10-year Treasury yield at 4.54%, as investors shifted towards riskier assets. Strong performances from Nvidia, Apple, and Microsoft supported the bullish mood.
Focus Shifts to Federal Reserve Meeting and Economic Data
Attention now turns to today’s Federal Reserve meeting, where a status quo on interest rates is expected. Market participants are also eager to hear from Fed Chair Jerome Powell, particularly on President Trump’s former calls for a rate cut. While durable goods orders fell, there was some positive news with a slight increase when excluding the volatile transportation sector. However, the decline in US consumer confidence remains a concern for future economic outlooks. Overall, markets are navigating a mix of cautious macro data and a rebound in tech, with global equities benefiting from a broader risk-on sentiment.
Latest Market and Economic Update
Asia Sees Modest Rebound
Most Asian equities saw a modest rebound on Wednesday, with Australian shares leading the gains following softer-than-expected inflation data, which raised expectations of a Reserve Bank of Australia rate cut. Asian tech companies, particularly Japanese chipmakers, recovered from a two-day rout triggered by concerns over China’s DeepSeek AI model, although trading volumes were light due to the Lunar New Year holidays.
U.S. Equity Futures Edge Lower Ahead of Federal Reserve Meeting
U.S. equity futures edged lower on Wednesday as investors awaited the Federal Reserve’s policy decision, with expectations for interest rates to remain unchanged. Focus will be on Fed Chair Jerome Powell’s remarks regarding potential future rate cuts, especially after President Trump’s call for immediate reductions.
European Markets Close Mostly Higher
European equity markets closed mostly higher on Tuesday, with Germany’s DAX rising 0.7% and the UK’s FTSE 100 up 0.3%, while France’s CAC 40 edged down by 0.1%. Notable gainers included Sartorius (+13%) and Siemens Energy (+5%), while oil prices fell amid concerns over increased US supply and weaker demand from China.
US Dollar Holds Steady Amid Federal Reserve Wait-and-See
The US dollar index held steady around 107.9 on Wednesday, with traders awaiting the Federal Reserve’s policy decision and comments from Chair Jerome Powell on future rate cuts. The dollar saw some strength on Tuesday, bolstered by President Trump’s tariff warnings, and was trading at 1.0438 against the euro as the February 1 deadline for new tariffs approached.
Oil Prices Steady Despite Global Concerns
Oil prices steadied on Wednesday after a smaller-than-expected build in U.S. inventories, though concerns over trade tariffs and a Federal Reserve meeting kept traders cautious. Weaker Chinese economic data and U.S. plans to increase energy production, alongside potential tariffs from President Trump, continued to weigh on market sentiment.
Equities on the Move
LVMH Exceeds Expectations
LVMH exceeded expectations with a 1% rise in fourth-quarter sales, driven by strong demand for fashion and handbags during the holiday season, signalling a positive recovery for the luxury sector. CEO Bernard Arnault highlighted the possibility of expanding production in the United States, attracted by favourable tax conditions and a “wind of optimism,” while expressing frustration with France’s bureaucratic challenges and potential tax hikes.
Starbucks Reports Smaller-Than-Expected Decline
Starbucks reported a smaller-than-expected decline in first-quarter sales, showing early signs of recovery under CEO Brian Niccol, who is working to streamline operations and improve efficiency. However, the company faces challenges, including declining sales in China, ongoing union tensions, and leadership changes as Niccol embarks on restructuring efforts.
Boeing Posts Largest Annual Loss in Four Years
Boeing posted its largest annual loss in four years, driven by production issues and a strike, but its shares rose nearly 8% after it outlined plans to increase plane production. Despite a $11.8 billion loss and a cash burn of $14.3 billion in 2024, the company expects improvements in production and cash flow later in 2025.
Lockheed Martin Revises Profit Forecast
Lockheed Martin has revised its 2025 profit forecast downwards due to delays in upgrading the F-35 fighter jet, which is key to its revenue. The company also reported significant losses on classified programmes, contributing to an 8% drop in its share price.
JetBlue Shares Drop 28%
JetBlue Airways’ shares dropped 28% after the airline forecast lower-than-expected unit revenue and higher costs, expecting a loss of 75 cents per share for 2025. The company cited issues with grounded aircraft, higher maintenance costs, and increased competition as key factors behind its disappointing outlook.
RTX Beats Quarterly Estimates
RTX reported a quarterly profit and revenue that beat estimates, driven by demand for aircraft parts and repair services as airlines keep older planes in service. However, its 2025 sales forecast fell slightly short of expectations, and the company faces challenges related to engine issues and its relationship with Boeing.
Royal Caribbean Reports Strong Q4 Earnings
Royal Caribbean reported stronger-than-expected Q4 earnings, with adjusted EPS of $1.63, driven by high pricing and strong onboard revenue, and forecasted solid growth for 2025. The company also announced the launch of Celebrity River Cruises in 2027, adding to investor optimism.
General Motors Forecasts Stronger Earnings
General Motors has forecasted stronger-than-expected earnings for 2025, driven by its strong US market and efforts to enhance its operations in China. However, its shares dropped after analysts raised concerns about the guidance’s risks, particularly regarding regulatory changes and uncertainties in the market.
BMW Revises Profit Margin Forecast
BMW has revised its 2024 profit margin forecast for its automaking segment to the lower end of the 6-7% range, citing declining premium vehicle sales. Despite this, the company confirmed its free cash flow for 2024 exceeded €4 billion, in line with previous expectations.
SAP Raises Financial Outlook for 2025
SAP is more optimistic about its 2025 financial outlook, expecting operating profit between €10.3 billion and €10.6 billion, driven by growth in cloud computing and AI. The company also reported strong fourth-quarter results, with cloud revenue up 27%, and continues to see AI as a key growth driver.
Siemens Energy Shares Rebound
Siemens Energy’s shares rebounded after a strong preliminary earnings report for Q1 2025, easing concerns sparked by the impact of DeepSeek’s AI model on power demand. Despite short-term uncertainties, analysts remain optimistic about the company’s long-term prospects, citing a robust order backlog and strong growth in key regions like Saudi Arabia and China.
Visa Partners with Elon Musk’s X
Visa has partnered with Elon Musk’s X to provide direct payment solutions, enabling users to fund their X wallet and make peer-to-peer transfers. The move is part of Musk’s plan to turn X into an “everything app,” similar to China’s WeChat, offering a range of services including payments and social networking.
Microsoft Investigates Data Access by DeepSeek
Microsoft is investigating whether a group linked to China’s DeepSeek unlawfully accessed data from OpenAI’s API. The inquiry follows concerns that DeepSeek’s R1 AI model, which competes with ChatGPT, may have been built using proprietary training data.
Wells Fargo Victory in Consumer Financial Protection Bureau Case
Wells Fargo has had a 2022 Consumer Financial Protection Bureau order lifted, bringing the bank closer to having its 2018 asset cap removed. This marks another victory for CEO Charles Scharf, as the bank continues to resolve past regulatory issues.
Mediobanca Rejects €13.3 Billion Takeover Bid
Mediobanca rejected a €13.3 billion takeover bid from state-backed Monte dei Paschi di Siena, citing the lack of strategic and financial benefits. Despite MPS’s backing from the Italian government, Mediobanca argued the merger would harm its business model and earnings potential.
HSBC Shifting Focus to Asia and Middle East
HSBC plans to wind down its M&A and some equities businesses in Europe and the Americas, focusing more on Asia and the Middle East. This move, part of a broader strategy to shift to a financing-led approach, is seen as a way to capture the growing demand for financing in key emerging markets.
Outlook for Today
Eyes will be on the Federal Reserve’s decision, as the market awaits the Fed’s rate decision and comments from Chairman Powell. Earnings reports from key companies, including Microsoft, Meta, Tesla, ASML, ServiceNow, IBM, Alibaba, and Qualcomm, will also provide crucial insights into the economic landscape. In Europe, German GDP data will be released, offering insights into the broader eurozone economy.
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