Economic data continue to firm up Fed rate-cut expectatio

General market commentary

On Thursday, US equity markets finished higher, with the S&P 500 up 0.85% and the Nasdaq rising 0.72%, both hitting record closing highs. Gains were broad-based, led by materials, healthcare, banks, consumer names, and chipmakers. Tesla shares surged 6% and Micron jumped 7.5%, reflecting strong investor appetite across key sectors. The energy sector was the only laggard, weighed down by declining oil prices. The rally was supported by the Consumer Price Index holding steady at 2.9% annually, in line with expectations, while falling bond yields, with the 10-year US Treasury at 4.02%, reinforced expectations of upcoming Federal Reserve rate cuts.

US labour data showed initial jobless claims rising to 263,000, the highest in four years, signalling a potential cooling in the labour market, though the overall unemployment rate remains low at 4.3%. Analysts expect the Fed to weigh these figures at next week’s meeting and are largely pricing in a quarter-point rate cut. In company news, Warner Bros. Discovery and Paramount Skydance shares jumped on reports of potential acquisition bids, joining other top gainers on the S&P 500 and Nasdaq. Meanwhile, Asian equities were mixed, European shares climbed as the ECB held rates steady, and the US dollar weakened against major currencies, keeping global markets on alert for policy shifts.

Latest market and economic update

Asian shares rallied on Friday, led by technology and chipmakers after Wall Street’s record highs. South Korea’s KOSPI jumped 1.3% on SK Hynix’s surge, while Hong Kong’s Hang Seng gained 1.5% and Japan’s Nikkei hit a fresh record. Australia rose, but China and Singapore dipped, and India’s equities traded flat.

US equity futures were largely flat overnight as investors weighed expectations of upcoming Federal Reserve rate cuts. In after-hours trading, Adobe climbed 2.6% following strong third-quarter results, while Super Micro Computer rose 4.1% after confirming global shipments of its Nvidia Blackwell Ultra systems, boosting investor sentiment in tech shares.

European shares rose on Thursday, with the STOXX 50 up 0.4% and STOXX 600 gaining 0.5%, as the ECB kept rates unchanged. ECB President Lagarde signalled that the rate-cut cycle may be over, following modest inflation revisions. Key movers included Inditex, which rose another 2.5%, Airbus, up 3%, and Stellantis, which surged 9.2% on plans to relaunch Jeep and RAM models.

The dollar index steadied near 97.6 this morning but remained under pressure after U.S. inflation met expectations and jobless claims hit their highest since 2021, reinforcing bets on a Fed rate cut next week. The greenback is set to end the week slightly lower, with the euro holding firm, as EUR/USD trades at 1.1725

Oil prices fell in Asian trade on Friday amid weak US economic data and rising global supplies, despite mild weekly gains. Brent dropped 0.5% to $66.03 and WTI 0.6% to $61.74. Support came from geopolitical tensions and potential US sanctions on Russia, while IEA forecasts of higher production and slowing demand weighed on the market.

The IMF warned that the US economy is beginning to show signs of strain, pointing to easing domestic demand and slowing job growth. Inflation remains on track for the Fed’s 2% target but faces upside risks from tariffs. While there is scope for rate cuts, the IMF urged caution, noting employment had already slowed before the tariff hikes.

Former Brazilian President Jair Bolsonaro was sentenced to 27 years for plotting a coup after losing the 2022 election, becoming Brazil’s first ex-president convicted of attacking democracy. Seven allies, including five military officers, were also convicted, marking a historic crackdown on far-right threats to the country’s institutions.

Equities on the move

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

Adobe raised its fiscal 2025 revenue and profit forecasts, citing strong demand for its design software and AI tools like Firefly. Shares rose around 3% in after-hours trading. The company expects full-year revenue of $23.65–23.70 billion and adjusted EPS of $20.80–20.85, reflecting growth from new users despite competition from rivals like Figma.

Microsoft and OpenAI agreed on OpenAI’s transition to a for-profit “public benefit corporation,” with its non-profit arm holding a $100 billion stake and decision-making authority. Microsoft shares rose 1.7% after-hours. The move lets OpenAI raise capital, expand AI development, and compete with rivals while maintaining social responsibility commitments.

Paramount Skydance is reportedly preparing a bid for Warner Bros Discovery, potentially combining major studios, streaming services, and iconic franchises. Backed by David and Larry Ellison, the deal could reshape Hollywood and face antitrust scrutiny. Shares of both companies surged, though no offer has yet been submitted.

China’s Alibaba and Baidu have begun using their own AI chips, partly replacing Nvidia processors, marking a shift in the country’s AI landscape. Alibaba’s chips now rival Nvidia’s H20, while Baidu experiments with its Kunlun P800. US export restrictions and Beijing’s push for domestic technology are driving this move, though Nvidia remains in use for cutting-edge models.

Kroger raised its annual core sales forecast again, citing strong demand for fresh produce and value-focused shopping as Americans cut back on eating out. Full-year comparable sales are now expected to rise 2.7–3.4%, with adjusted EPS at $4.70–$4.80. Quarterly sales beat estimates, and margins improved due to lower supply chain costs.

AbbVie shares rose 4% after settling litigation over RINVOQ, securing patent protection until 2037. The deal extends exclusivity by five years, boosting long-term value. Analysts called it a “big win,” highlighting potential upside for other drugs like Skyrizi and strengthening AbbVie’s growth outlook in the pharmaceutical sector.

Opendoor Technologies appointed Shopify COO Kaz Nejatian as CEO, with co-founder Keith Rabois returning as chairman and Eric Wu rejoining the board. Shares surged almost 80% after the announcement, reflecting renewed retail interest. Rabois’ Khosla Ventures and Wu will invest $40 million to support growth, as Opendoor, an online real estate platform, rebounds from a June low.

Tempus AI shares surged 16% after receiving FDA clearance for its updated Tempus Pixel cardiac imaging platform. The approval allows generation of T1 and T2 maps from raw MRI data, aiding detection of conditions like fibrosis and inflammation. The move strengthens Tempus’ AI imaging capabilities, supported by acquisitions including Arterys and Paige.

Apple was downgraded to Neutral by DA Davidson, citing underwhelming product launches, limited AI innovation, and China-related challenges. Analysts noted the staggered Apple Intelligence rollout and strong competition, suggesting growth may remain constrained and investors are largely paying for defensive exposure compared with peers like Microsoft and Nvidia.

Morgan Stanley named Amazon a top pick, citing its $600 billion U.S. fresh grocery expansion as a major growth driver. Infrastructure upgrades, cold storage, and physical stores support the rollout, while higher margins and larger baskets should keep incremental costs manageable and boost gross merchandise volume.

D.A. Davidson upgraded Nvidia to Buy from Neutral, raising its price target to $210, citing strong, sustained demand for AI compute. Analyst Gil Luria highlighted Nvidia’s growth potential over the next two years despite risks from hyperscaler spending, China demand, and supply constraints, calling it a compelling AI investment compared with Apple’s slower earnings growth.

Barclays upgraded Thermo Fisher Scientific to Overweight with a $550 target, citing an attractive valuation after a 24% share decline. Analysts highlighted stable demand, manageable China tariff risks, and recovery in academic funding, noting the company’s exposure to multi-omics, semiconductor tools, and applied markets offsets softer trends.

Chewy was upgraded to Buy by Seaport Research and Deutsche Bank after Q2 earnings, highlighting 8.6% revenue growth and initiatives like Chewy+ membership and fresh food products. Analysts cited potential for 10%+ long-term EBITDA margins and stronger long-term earnings, reflecting the company’s robust position in the US pet market.

Bank of America downgraded UPS to Underperform and FedEx to Neutral, citing volume and cost pressures after the end of de minimis exemptions and UPS losing Amazon volumes. International shipments, key to revenue, are affected, leading to cuts in EPS estimates and price targets, highlighting near-term vulnerabilities for both carriers.

J.P. Morgan reaffirmed an overweight stance on European cement producers Heidelberg, Holcim, and Buzzi. Heavyside shares are up 36% year-to-date, supported by strong earnings, regulatory support, and decarbonisation initiatives like Heidelberg’s carbon-capture plant, boosting prices and margins and positioning the sector to outperform Lightside peers.

Upcoming data and events

The economic calendar today features the University of Michigan Consumer Sentiment Index and the Baker Hughes Rig Count, offering insights into consumer confidence and energy markets. Earnings highlights include Costco Wholesale and Accenture, providing potential market-moving updates for investors.

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