Cautious Optimism Returns as Markets Eye Diplomacy and Data
Global investors opened the week on a cautiously optimistic note, driven by resuming diplomatic efforts and the anticipation of key inflation data. Here’s how this optimism played out across major equity indices.
US Equity Indices Edge Higher Amid Renewed Optimism
- Nasdaq Composite climbed 0.3%
- S&P 500 rose slightly by 0.1%
- Dow Jones Industrial Average held steady
Notably, sectors like consumer discretionary and materials led gains, while utilities and financials underperformed. Oil prices also rose, buoyed by expectations of improved global demand should trade frictions ease.
US equity futures were little changed overnight as investors awaited further developments from U.S.-China trade talks in London and upcoming economic data.
Mixed Signals in Global Markets Reflect Ongoing Economic Uncertainty
While US-China trade optimism offered a boost, global equity performance varied by region, reflecting broader economic complexities.
Asian Equities Mostly Positive Despite Weak Chinese Data
Asian indices saw modest gains:
- South Korea’s KOSPI and Japan’s Nikkei surged
- China’s Shanghai and Hong Kong indexes ticked up, despite underwhelming export figures
European Markets Stall Following Recent Rally
European equities faced a minor pullback after a strong four-day run. The STOXX 600 index dipped slightly, with utilities dragging the most due to falling Eurozone bond prices. Automakers remained relatively stable amid ongoing rare earth concerns.
Currency and Commodity Market Movements Offer Clues
As trade optimism revived confidence in US assets, the US dollar strengthened across the board, pushing the dollar index above 99.2. The euro slipped to 1.1395, reflecting cautious sentiment ahead of key inflation readings.
Oil Prices Advance on Trade Optimism and Sanction Constraints
Oil prices saw modest increases during Asian hours, supported by:
- Prospects of eased US export controls
- Continued sanctions on Iranian oil due to stalled nuclear negotiations
Bond Markets and Inflation Expectations
Investor expectations around interest rates continued to shift, influencing bond market performance.
- The 10-year US Treasury yield dropped to 4.48%
- Inflation for May is expected to rise slightly, influenced by tariffs
- Long-term inflation expectations remain well anchored
Recent earnings results have also helped support sentiment, with S&P 500 companies showing stronger-than-expected profit growth at 12.7% year-on-year.
Company-Specific Updates Driving Share Price Movements
Several notable corporate events and analyst actions influenced market reactions, with select stocks experiencing significant movement in response to earnings, deals, or guidance.
Notable Corporate Developments
- Apple dipped after a muted WWDC, with incremental software upgrades, a delay in Siri AI enhancements, and no major AI breakthroughs.
- Qualcomm surged following a $2.4 billion deal to acquire British semiconductor firm Alphawave, targeting AI data centre growth. The deal is expected to close in early 2026 with minimal regulatory hurdles after Alphawave exited its Chinese joint venture.
- Uber aims to acquire Taiwanese firm Crown Taxi, further expanding its footprint in Asia. Crown, an Uber partner since 2017, is one of Taiwan’s largest operators.
- Parvus Asset Management acquired a stake in Novo Nordisk, aiming to influence the new CEO appointment amid a 50% share price decline. The drop followed disappointing trial results and weak sales of its obesity drug, Ozempic.
- L’Oréal expanded into dermatology with a €1 billion acquisition of UK-based Medik8, enhancing its luxury skincare portfolio. Inflexion retains a minority stake, with L’Oréal gaining an option to acquire full ownership.
Analyst Upgrades and Downgrades
- Oracle received a Buy reaffirmation and target hike to $200 from Jefferies, citing strong backlog growth and easing cloud capacity constraints expected to boost IaaS performance in FY25 and FY26.
- Lululemon was downgraded by Morgan Stanley to Equal-weight, with a price target cut to $280, citing weak US same-store sales growth and international cost pressures.
- Intuitive Surgical was downgraded by Deutsche Bank to Sell, with the price target reduced to $440 from $515, citing rising competition from robotic platforms like Medtronic’s Hugo.
- eToro drew bullish sentiment post-IPO, with analysts forecasting 10% annual account growth and profitability gains tied to its social trading and AI-driven tools. Price targets range from $76 to $85.
- Chewy was downgraded by Mizuho to Neutral after a 55% rally, citing elevated valuation and risks in Q1 results tied to guidance and margin performance.
- AppLovin saw a target increase to $460 from Morgan Stanley, citing the strategic sale of its first-party games unit. Despite a slight EBITDA downgrade, the ad network’s valuation multiple was raised to 29x, reflecting confidence in long-term growth.
Events and Economic Reports to Watch
Key events that could influence markets today include:
- EIA Short-Term Energy Outlook
- API Weekly Crude Stock Report
- US Treasury’s 3-Year Note Auction
Disclaimer: This information is provided solely for educational and informational purposes and should not be construed as investment advice, advice on specific investments or investment decisions, tax advice, legal advice, or any other form of professional or regulatory advice. The information does not take into account your personal circumstances and is provided to you on the express understanding that it does not constitute advice and should not be relied upon in making any investment decision. Investing in financial instruments involves risk. You should conduct your own research before making any investment decisions and seek the assistance of a licensed financial advisor if you are unsure. No person should act on any opinion or information contained in this document without first obtaining appropriate professional advice. Calamatta Cuschieri Investment Services Limited does not accept liability for any actions, proceedings, costs, demands, expenses, damages, or losses suffered as a result of reliance on the information herein.
