US equities notch 4th consecutive month of gains

General market commentary

Equities ended lower on Friday, with the technology-heavy Nasdaq underperforming the S&P 500 and Dow Jones. Despite the dip, the S&P 500 gained about 1.9% in August, marking its fourth consecutive monthly rise, and remains up nearly 10% for the year, while the Nasdaq has advanced over 11%. Bond yields were steady, with the 10-year Treasury holding near 4.2%. After a strong rally since April, markets may face bouts of volatility in the months ahead, but pullbacks could offer opportunities for investors to diversify and add quality holdings at better prices. Inflation data for July was broadly in line with expectations, with headline PCE inflation steady at 2.6% year on year and core PCE ticking up to 2.9%. Goods prices may face temporary upward pressure from tariffs, while services inflation could ease over the coming months.

Attention remains firmly on the Federal Reserve, with Chair Jerome Powell signalling a potential policy shift at Jackson Hole. The Fed is weighing higher inflation against early signs of cooling in the labour market and is expected to cut rates in September by 0.25%, with further moves dependent on upcoming data. Broader equity trends remain underpinned by enthusiasm for artificial intelligence, with investment in infrastructure and software continuing to support growth. While lofty expectations have tempered reactions to strong results from companies such as NVIDIA, AI adoption remains a dominant driver. Meanwhile, signs of more accommodative financial conditions and potential Fed easing could support a broader rally beyond technology, particularly in small and mid-cap shares and cyclical sectors. Seasonal volatility may test investors in the near term, but the outlook for the next year remains constructive.

Latest market and economic update

Asian equities were mostly lower on Monday as profit-taking hit Japanese tech shares, with Japan’s Nikkei down 2% and South Korea slipping 0.7%. China remained resilient, with blue chips up 0.2% and Alibaba shares jumping nearly 19% on AI and cloud optimism. MSCI Asia-Pacific ex-Japan edged down 0.1%, while thin U.S. holiday trading limited broader market moves.

US equity futures edged higher on Sunday after Wall Street closed August with gains, supported by rising expectations of a Federal Reserve rate cut in mid-September. Traders price in an 89% chance of a 25 bps move, with Powell and Waller signalling readiness to ease. Attention now shifts to Friday’s nonfarm payrolls for policy cues.

European equities extended losses on Friday as rate and growth uncertainty persisted, with the STOXX 50 down 0.8% and the STOXX 600 off 0.6%. Inflation data across major economies offered mixed signals, while higher bond yields pressured banks, with Santander, ING, and Nordea down 1.5%. SAP slipped 1.8%, but Rheinmetall rose 3%, supporting defence shares.

The dollar index held near one-month lows at 97.8 this morning, with trading muted due to the US Labour Day holiday. Markets await key jobs data this week to guide Federal Reserve policy, with an 89% chance priced for a 25 bps rate cut. The euro strengthened slightly, with EUR/USD trading at 1.1712.

Oil prices slipped in Asian trading, with Brent at $67.21 and WTI at $63.78, both down 0.4% after losing over 7% in August. Markets discounted fears of secondary sanctions on Russian crude, focusing instead on weak Chinese factory data and rising OPEC+ output, which fuel concerns over supply gluts and uncertain global demand.

Asian factory activity weakened in August as U.S. tariffs pressured exports, with Japan, South Korea, and Taiwan all recording contractions. Japan’s PMI was 49.7, while South Korea’s stood at 48.3, marking a seventh month of decline. By contrast, China’s private PMI rose to 50.5, signalling modest growth, though analysts warned the rebound remains fragile.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Samsung Electronics’ shares fell 2.3% in Asian this morning after the U.S. revoked authorisations allowing access to semiconductor equipment for its Chinese chip plants, a rule taking effect in 120 days. Over a third of Samsung’s DRAM output is China-based, though analysts expect limited short-term impact as future production is centred in South Korea.

Meta Platforms is exploring partnerships with Google or OpenAI to enhance AI features in its apps, including Meta AI chatbot, while developing its own next-generation model, Llama 5. Temporary integrations with external models may support internal tools, coding, and staff usage. The company continues investing heavily in AI talent and research to compete with rivals.

Alibaba’s US-listed shares rallied 13% on Friday after reporting 26% growth in its cloud business, driven by AI investments, despite overall revenue missing estimates at 247.65 billion yuan. E-commerce rose 10%, with quick commerce and international markets expanding. Operating income fell 3% and adjusted EBITDA declined 14% due to heavy technology and infrastructure spending.

BYD’s quarterly profit fell 29.9% to 6.4 billion yuan as government efforts to curb price wars pressured margins. Revenue rose 14% to 200.9 billion yuan, but vehicle sales in China fell for the third month. Production slowed, capacity expansions were delayed, and working capital deficits widened, raising concerns over meeting full-year sales targets.

Marvell Technology shares fell nearly 19% last Friday after its data center revenue outlook disappointed, due to irregular sales of custom AI chips to cloud providers like Amazon and Microsoft. CEO Matt Murphy cited “lumpiness” in demand, though analysts noted potential benefits from delays in competitors’ in-house chips. Marvell expects stronger custom chip orders in Q4.

Dell Technologies shares fell about 9% on Friday as high AI server manufacturing costs and competition offset strong demand forecasts. The company prioritised fulfilling orders over margins, with Q2 gross margin falling to 18.7%. Despite this, Dell raised its annual revenue forecast to $105–109 billion, driven by AI infrastructure, while share performance outpaces rivals and the S&P 500.

Super Micro Computer shares fell over 5% Friday after reiterating weaknesses in internal financial controls that could affect timely and accurate reporting. The issues follow last year’s delayed filings and auditor resignation. The company could lose over $1 billion in market value.

Rolls-Royce Holdings denied reports that its small nuclear reactor unit, Rolls-Royce SMR, is planning an IPO. The unit, selected to build Britain’s first Small Modular Reactors, aims to construct three reactors with £2.5 billion government backing. Success could position the UK in a growing global SMR market, pursued by countries including the US, Canada, Romania, and the Czech Republic.

Kraft Heinz is reportedly close to splitting into two units, focusing on grocery and sauces, potentially finalising the plan this week. The grocery spinoff could be valued at $20 billion, while remaining brands include Heinz ketchup and Grey Poupon. The move aims to unlock value beyond the company’s $33 billion market cap. Shares rose 2.7%.

Caterpillar raised its 2025 tariff impact estimate to $1.5–1.8 billion, affecting Q3 and full-year results. Despite this, the company maintained its sales and revenue outlook, though full-year operating margins are expected near the lower end of guidance. Mitigation measures are underway, with further updates due in the third-quarter earnings report.

Novo Nordisk has cancelled contracts for new recruits just before start dates amid a global hiring freeze and bonus reductions, following two cuts to its growth forecast due to competition from Eli Lilly. Affected candidates receive one month’s salary and outplacement support. CEO Maziar Mike Doustdar is implementing these measures to restructure the obesity-drug maker.

Morgan Stanley raised price targets on U.S. retail shares after stronger-than-expected Q2 results despite tariff-related margin pressures. Targets were lifted for Dollar General, Dick’s Sporting Goods, Ollie’s Bargain Outlet, and Ulta Beauty. Analysts favoured Ulta and Dick’s, citing strong same-store sales, market share gains, and growth potential amid conservative guidance.

Morgan Stanley highlighted GE Vernova and Siemens Energy as renewable energy shares with strong upside. GE Vernova is expected to raise 2028 EBITDA margins to 18% and revenue to $50 billion, driven by Power and Electrification segments. Siemens Energy may lift 2028 EBITA margins to 13–15%, supported by Gas and Grid growth, with both equities benefiting.

Upcoming data and events

A shortened US week, with markets closed today for Labour Day, centres on labour market data including nonfarm payrolls, unemployment, wages, ADP, JOLTS and job cuts, alongside ISM PMIs and trade figures. Earnings from Broadcom and Salesforce may sway sentiment in technology, while Europe releases inflation and retail sales, and China posts PMI updates.

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