AI revival drives gains in global equities

Equity markets finished higher on Friday, building on modest gains from the previous session. Technology shares led the advance, with the Nasdaq outperforming both the S&P 500 and the Dow Jones, while smaller companies also rallied strongly, pushing the Russell 2000 sharply higher. Industrials and healthcare joined technology among the best performing sectors, whereas consumer staples and utilities lagged. In bond markets, Treasury yields edged higher across the curve, with the 10 year yield around 4.15 per cent, close to levels seen at the highs of the past 15 years, continuing to support the appeal of bonds for income focused investors.

For the week as a whole, equities recorded solid gains, supported by easing inflation data and upbeat results from Micron Technology, which helped offset lingering concerns about stretched valuations in parts of the technology and AI space. Treasury yields moved modestly higher over the period, reflecting ongoing uncertainty about the Federal Reserve’s policy path. With the holiday period approaching and market participation thinning, trading activity is expected to remain subdued into year end. Nevertheless, for the year to date both equity and bond markets remain firmly positive, reinforcing investor confidence as markets look ahead to 2026.

Latest market and economic update

• Asian markets advanced on Monday, driven by technology and chip shares as optimism over artificial intelligence returned. Japan’s Nikkei and South Korea’s KOSPI jumped about 2%. Chinese equities edged higher after the central bank kept key lending rates unchanged, signalling policy stability, while investors followed firmer Wall Street cues during holiday trading across the region.

• US equity futures were higher this morning, supported by a rebound in technology and AI-related shares. S&P 500 and Nasdaq futures gained around 0.4–0.5%, boosted by strong chip forecasts and Oracle’s TikTok-related news. Soft US inflation data also eased rate-cut expectations, underpinning Treasury yields and broader market sentiment ahead of a holiday-shortened week.

• The US dollar remained steady in Asian trade, supported by recent gains and market caution ahead of December’s inflation data, which could influence Federal Reserve policy. The euro showed little movement, reflecting muted risk appetite and broader currency market caution amid geopolitical tensions and a firm dollar backdrop.

• European equities closed higher on Friday, with the STOXX 50 up 0.6% and the STOXX 600 reaching a record, driven by expectations of US rate cuts and fading bets on ECB tightening. Key movers included ASML +1%, Novo Nordisk +2%, Rolls-Royce +2.7%, Prosus +2.3%, and Roche +2.2%, while Puma -1% and Adidas -3% underperformed.

• The US dollar remained steady in Asian trade, supported by recent gains and market caution ahead of December’s inflation data, which could influence Federal Reserve policy. The euro showed little movement, reflecting muted risk appetite and broader currency market caution amid geopolitical tensions and a firm dollar backdrop.

• Oil prices edged higher in early Asian trade as reports said the US was pursuing a third Venezuelan oil tanker, raising supply disruption fears. Brent and WTI rose 0.6%. Prices were also supported by concerns over renewed Israel-Iran tensions, despite recent losses driven by oversupply worries and possible Russian supply returning.

Equities on the move

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

• The Delaware Supreme Court reinstated Elon Musk’s 2018 Tesla share-based pay package, overturning a lower court ruling. Valued at nearly $140 billion, the equity plan had been blocked by a shareholder lawsuit. The court ruled cancelling it was inequitable, recognising Musk’s compensation for six years of work despite previous claims of unfairness.

• Meta board member Dina Powell McCormick has resigned after eight months, though she may continue advising on investments and strategy. A former deputy national security adviser under Trump, she joined amid CEO Mark Zuckerberg’s board restructuring. Meta does not plan to fill her seat, following multiple board changes over the past year.

• President Trump and nine major drugmakers, including Merck, Bristol Myers, and Gilead, agreed to cut prices for Medicaid and cash-pay patients, offering up to 70% off list prices. Deals include direct-to-consumer sales via TrumpRx, most-favoured-nation pricing, and US investment commitments exceeding $150 billion, while shielding companies from tariffs for three years.

• Moore Threads, often seen as China’s rival to Nvidia, lifted shares 2% after unveiling new GPUs for gaming and artificial intelligence. The firm teased an AI chip to rival Nvidia’s latest models, but gave no benchmarks and warned products remain unreleased, with losses likely to continue as China pushes domestic chip development.

• Morgan Stanley is seen as a leading contender to lead SpaceX’s potential 2026 IPO, leveraging long-standing ties with Elon Musk. The offering, possibly exceeding $25 billion, could include Starlink and Starship projects, funding AI data centres, lunar bases, and Mars plans. Final bank selection and IPO timing remain uncertain, dependent on market conditions.

• Goldman Sachs expects the global equity bull market to broaden in 2026, with returns driven by earnings growth across regions rather than valuations. Diversification is key, with emerging markets, sector dispersion, and AI beneficiaries outside tech offering opportunities. Strategists forecast 13% price returns, highlighting a shift from U.S.-centric, concentrated equity performance.

• JPMorgan downgraded Lockheed Martin to Neutral, citing weaker long-term cash flow despite strong aerospace and defence demand. Pension outflows and portfolio pressures may limit growth. The bank favours Boeing, StandardAero, ATI, GE Aerospace, Howmet, L3Harris Technologies, and Leidos for clearer growth prospects and attractive valuations.

• Wells Fargo downgraded several large US chemical companies, citing weak demand, margin pressure, and limited visibility through 2026. Air Products, Celanese, Eastman Chemical, and LyondellBasell were cut to Equal Weight. Earnings recovery is expected in H2 2026, while Linde, DuPont, and International Flavors & Fragrances remain preferred for growth potential.

• Bernstein maintained an Outperform rating on Nvidia with a $275 price target, citing historically attractive valuations after multiple compression. Despite lagging the SOX index, forward P/E is under 25x, placing the equity in the 11th percentile over 10 years. Strong historical returns and manageable AI capex support a positive outlook.

• Citizens upgraded Stryker Corp to Market Outperform, citing strong execution, attractive valuation after a 12% share decline, and a robust decentralized operating model. The $440 price target reflects confidence in acquisition strategy, margin expansion, and double-digit earnings growth through 2028, with the equity poised for potential recovery at decade-low valuations.

• Wedbush downgraded Lyft to Underperform, cutting its price target to $16, citing long-term risks from autonomous vehicles disrupting the US ridesharing market. While near-term impact may be limited, Lyft’s undiversified model faces potential declines in value, with weaker growth confidence and 2026 seen as a pivotal year for AV expansion.

• Goldman Sachs initiated coverage of Technip Energies with a “buy” rating, citing strong LNG project momentum and order visibility. Revenue is forecast to rise from €7.22 billion in 2025 to €9.31 billion in 2027, with EBITDA growth supporting earnings. Shares trade below medium-term projections, with a €40 price target implying 24.5% upside.

Upcoming data and events

This week’s economic calendar is light due to the holiday week. In the US, key releases include Q3 GDP revision, durable goods orders, corporate profits, industrial production, and consumer confidence. Europe sees car registrations and Q3 GDP updates, while Asia-Pacific focuses on RBA and BoJ minutes, Japan’s inflation, industrial production, and retail sales.