Stocks Recover After Weak Start to the Week
Following a challenging start, global equities regained momentum, driven by a softer-than-expected inflation reading and a rally in the technology sector. The core Consumer Price Index (CPI) recorded its slowest increase since April 2021, reinforcing optimism that inflation remains on a downward path. This provided some relief to investors as they await further details on potential tariff measures from the U.S. administration.
Growth and cyclical sectors outperformed defensive stocks, reflecting a risk-on sentiment. Meanwhile, government bond yields edged higher as markets remained focused on the Federal Reserve’s next moves. The latest inflation data has strengthened expectations of a potential rate cut later this year, but uncertainty remains ahead of the Producer Price Index (PPI) release tomorrow, which will offer further insights into pricing pressures at the producer level.
Investors are also closely monitoring government funding discussions, as the U.S. House of Representatives approved a stopgap spending measure to prevent a shutdown beyond the March 14 deadline.
Wall Street Performance
- S&P 500: +0.5%
- Nasdaq: +1.2%
- Dow Jones: -0.2%
European Markets
European equities also ended higher, benefiting from easing inflation concerns and optimism around central bank policy. However, renewed trade tensions weighed on sentiment as fresh tariffs on steel and aluminium imports led to swift retaliatory measures from the European Union.
Despite these challenges, equities remain around 10% higher year-on-year, with historical data suggesting that market corrections—such as the current one—can present opportunities. Since 1971, equities have typically rebounded strongly following corrections that did not develop into bear markets. Maintaining a diversified portfolio remains essential in navigating short-term fluctuations.
Latest Market and Economic Updates
Asian Markets Mostly Higher
Asian equities traded mostly in positive territory on Thursday as tech shares tracked Wall Street’s rebound following softer U.S. inflation data.
- Japan’s Nikkei 225: +1%
- South Korea’s KOSPI: +0.5%
- China’s Shanghai Composite: -0.4%
- Hong Kong’s Hang Seng: -0.3%
- Australia’s ASX 200: -0.1%
Market sentiment in Asia was impacted by renewed trade tensions after President Trump threatened further tariffs on EU goods.
U.S. Futures Indicate Modest Gains
U.S. equity futures edged higher, with investors balancing cooling inflation data against ongoing trade concerns.
- S&P 500 Futures: +0.3%
- Nasdaq 100 Futures: +0.4%
- Dow Jones Futures: +0.2%
While the softer CPI figures bolstered hopes for rate cuts, concerns over fresh tariffs from President Trump and potential retaliatory measures from the EU introduced uncertainty into the market outlook.
European Markets Close Higher
European stocks rebounded on Wednesday, snapping a four-session losing streak as investors reacted to a softer U.S. inflation report and optimism surrounding a potential Ukraine ceasefire.
- STOXX 600: +0.8%
- France’s CAC 40: +1%
- Germany’s DAX: +0.6%
- Italy’s FTSE MIB: +1.2%
Strong performances in defense and banking stocks supported gains, despite a 7.5% decline in Inditex.
Currency and Commodities
- U.S. Dollar Index: 103.5, holding steady as investors assess rising global trade tensions.
- EUR/USD: 1.0892, reflecting market uncertainty amid tariff concerns and softer-than-expected U.S. inflation data.
- Oil Prices: Edged lower, cooling after a recent rebound, as fears of a U.S. recession and rising global production pressured sentiment. Despite OPEC+ increasing output and maintaining its demand growth outlook, concerns over potential oversupply and U.S. trade policies weighed on the market.
Equities on the Move
Technology and AI Stocks
- Adobe (-4%): Shares fell after forecasting Q2 revenue in line with expectations, as the company faces slower AI monetization and rising competition from startups. Despite strong Q1 earnings, analysts remain cautious about the pace of AI-driven growth. Adobe still expects to double AI-related recurring revenue by the end of fiscal 2025.
- Nvidia & AMD: JPMorgan and Citi view the recent pullback in Nvidia and AMD as a buying opportunity, citing strong AI-driven growth, with Citi highlighting Nvidia’s upcoming GTC conference and JPMorgan expressing confidence in AMD’s AI GPU sales.
- Intel: Appointed chip industry veteran Lip-Bu Tan as CEO, aiming to stabilize operations and reinforce chip-design and manufacturing capabilities.
Retail and Consumer Stocks
- Inditex (-8%): Reported a slower-than-expected start to Q1, with sales growing just 4% in currency-neutral terms, causing its shares to fall. CEO Oscar Garcia Maceiras remains optimistic, citing investments in logistics, store refurbishments, and new market expansions.
- Puma (-20%): Announced 500 job cuts, store closures, and a weaker-than-expected forecast following disappointing quarterly and annual results amid concerns over U.S. consumer demand and competition from bigger rivals. The company also plans to diversify production away from China.
- PepsiCo: Jefferies downgraded the stock to “Hold” from “Buy”, citing ongoing struggles in its Frito-Lay division and weak U.S. beverage performance.
Automotive and Industrials
- Porsche: Announced it will maintain its 2024 dividend despite a 30.4% drop in EPS, as it faces high costs and weak demand in China, along with a 28% sales decline in the region. The company also plans to cut 2,000 jobs and continue efforts to boost profitability toward a long-term target of 20%.
- Siemens Energy: Named Morgan Stanley’s top European capital goods pick, with strong pricing power in gas turbines and grid equipment.
Defense & Aerospace
- Rheinmetall: Forecasts a 25-30% sales increase in 2025, fueled by Europe’s rising defense spending.
- Barclays: Warns that European defense shares may face profit-taking if a Ukraine ceasefire occurs but sees any pullback as a buying opportunity. The bank highlights firms like Hensoldt, Rheinmetall, and SAAB as well-positioned for rising defense spending, with potential ESG investment shifts further supporting the sector.
Financial & Logistics Stocks
- S&P Global: Mizuho initiated coverage with an “Outperform” rating and a $599 price target, favoring it over Moody’s.
- DHL: Jefferies maintained a “Buy” rating, expecting strong air freight demand by 2025.
Other Notable Moves
- Micron Technology: Wolfe Research lowered its price target to $150 from $175, citing near-term challenges such as pricing pressure and a decline in gross margins, though a recovery is expected in the second half of the year.
- US Airlines: Facing a tough start to 2025, with Bernstein downgrading estimates due to policy uncertainty and weaker-than-expected first-quarter guidance. However, improved capacity management and lower fuel costs are expected to support a recovery later in the year.
Upcoming Data and Key Events
- U.S. Producer Price Index (PPI) – Key inflation gauge at the producer level.
- Initial Jobless Claims – Will provide insights into the U.S. labor market.
- Earnings Reports – Companies including Silver Wheaton Corp, DocuSign Inc, and Ulta Beauty will release their latest results.
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