China announces plan to boost consumption

General market commentary

Global equities experienced significant volatility last week, with the S&P 500 entering correction territory after falling more than 10% from its February highs, while the Nasdaq declined around 14% year-to-date. Concerns over slowing U.S. economic growth, weaker consumer sentiment, and escalating trade tensions, particularly between the U.S. and Europe, contributed to the pullback. However, corrections of this magnitude are historically common, and there are no clear signs of a prolonged bear market or imminent recession. Despite the turbulence, markets rebounded on Friday, with equities rising and U.S. Treasury yields increasing, although gold hit a record high earlier in the session as investors sought safe-haven assets.

Diversification has been a key theme, with bonds outperforming equities as investors shifted towards safer assets amid heightened uncertainty. Other markets, particularly in Europe and China, have also outperformed the U.S. as investors sought better valuations and policy support. The EuroStoxx index gained over 10% year-to-date, helped by central bank rate cuts and fiscal stimulus, while Chinese technology shares also saw positive returns. Meanwhile, the euro strengthened on optimism about Germany’s fiscal policies, while the dollar gained against the yen. Commodity markets remained active, with gold briefly surpassing $3,000 an ounce before retreating, and oil prices fluctuating as investors weighed geopolitical risks. While volatility may persist, market pullbacks can present opportunities for long-term investors to rebalance and add quality investments across equities, bonds, and other markets.

Latest market and economic update

Asian markets rose on Monday, driven by optimism over China's targeted stimulus measures, though gains were limited by U.S. trade tensions and upcoming central bank meetings. China’s plan to boost consumption through income growth, financial support, and investment in key sectors lifted sentiment, while Japan’s Nikkei gained ahead of the Bank of Japan meeting.

US equity futures fell overnight, signalling renewed market caution ahead of a key Federal Reserve meeting and ongoing uncertainty over trade tariffs. Investors remain wary of potential economic risks, with concerns over Trump’s trade policies and the Fed’s stance on interest rates shaping the week’s market outlook.

European equity markets rebounded on Friday, with the DAX rising 2%, the CAC 40 gaining 1.2%, and the FTSE 100 up 1.1%, recovering from recent losses driven by trade war concerns. Key market movers included BMW, which saw a 0.8% decline following a profit drop, and Daimler Truck, which also reported weaker performance, while oil prices edged higher amid sanctions on Iran.

The US dollar remained around 103.7 on Monday, near five-month lows, as concerns over trade and economic uncertainty weighed on the currency. The euro pushed the dollar lower, with the EUR/USD exchange rate reaching 1.0884 after Germany's fiscal deal, which is expected to boost defence spending and stimulate economic growth in Europe.

Oil prices rose this morning as concerns over trade disruptions grew following U.S. airstrikes against Yemen’s Houthis, while China’s new plan to boost domestic consumption further lifted sentiment. The conflict threatens global shipping routes, potentially tightening oil supplies, while China’s stimulus measures, including wage growth and investment in key sectors, signal a rise in energy demand.

Equities on the move

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

Porsche SE denied reports that it is considering selling its voting shares in Volkswagen, reaffirming its commitment as a long-term anchor shareholder. The holding firm stated there were no concrete plans or investor discussions regarding a sale, despite previous suggestions of a potential reallocation between its Volkswagen and Porsche AG holdings.

Baidu has launched two new AI models, including ERNIE X1, which it claims rivals DeepSeek R1 in performance at half the cost, and ERNIE 4.5, which boasts enhanced multimodal understanding, logic, and memory. Despite competition from DeepSeek and global AI leaders, Baidu continues to push its AI advancements, aiming for broader adoption of its Ernie large language model.

Apple is facing significant delays in key enhancements for Siri, with senior director Robby Walker admitting the setbacks are "ugly and embarrassing" during a recent internal meeting. Despite these challenges, Apple remains committed to delivering advanced features for Siri, although the timeline for their release has been pushed back to next year at the earliest.

GE Aerospace secured a $5 billion contract from the U.S. Air Force to supply F110-GE-129 engines for F-15 and F-16 fighter aircraft under an indefinite delivery/indefinite quantity agreement. The company also plans to invest nearly $1 billion in its U.S. factories and supply chain in 2025 to improve manufacturing and incorporate new technologies.

PepsiCo is reportedly in advanced negotiations to acquire healthier soda brand Poppi for over $1.5 billion, with the deal potentially being announced as soon as this week. The discussions, which are at a late stage, could still be delayed, according to sources familiar with the matter.

Thyssen-Krupp has cancelled the partial sale of its marine division, TKMS, to Rheinmetall due to disagreements at multiple levels. CEO Miguel Lopez personally contacted Rheinmetall to end the deal, citing cost considerations, a request for government intervention, and personal reasons.

BMW warned that newly imposed trade tariffs could reduce its earnings by €1 billion this year, with tariffs on its China-made EVs and U.S. imports impacting profitability. Despite a 34% slump in net profit for 2024, the company remains optimistic, forecasting a 5-7% earnings margin for its car segment in 2025 and maintaining its dividend payout ratio.

The European Central Bank has approved UniCredit's bid to acquire up to 29.9% of Commerzbank, though UniCredit will likely wait until next year before deciding on a full takeover. The move has sparked opposition in Germany, with Commerzbank remaining determined to stay independent, while UniCredit’s CEO Andrea Orcel emphasises the need for stakeholder support before proceeding further.

Kering's shares dropped by up to 13% on Friday after appointing in-house designer Demna to lead Gucci, a decision that has sparked concern among analysts due to his streetwear background and Gucci’s need for timeless elegance. The move follows Gucci’s ongoing sales decline and leadership changes, with Demna facing the challenge of revitalising the brand and balancing its heritage with modern trends, particularly in the critical Chinese market.

Daimler Truck's shares rose last Friday after it reported better-than-expected fourth-quarter results, with strong performances in North America and Europe driving revenue and earnings growth. The company also provided an optimistic 2025 outlook, projecting EBIT growth of 5% to 15%, despite challenges such as potential trade tariffs and regulatory changes in North America.

Country Garden Services has forecast a significant increase in its full-year profit for fiscal 2024, with a net profit of between 1.60 billion yuan and 2 billion yuan, up from 292.3 million yuan last year, due to lower impairment charges. The company’s parent, Country Garden, is also working on a proposal to reduce its debt by $11.6 billion after facing significant financial difficulties in the past few years.

Wells Fargo has reiterated its Underweight rating on Tesla, lowering its price target to $130 due to weak fundamentals, slowing sales, and margin pressures, with further risks to volumes and pricing. The bank sees more than 40% downside in the shares, citing a 16% drop in Tesla's sales year-to-date and a significant decline in European sales, alongside concerns about competition and the effectiveness of price cuts.

Canaccord has upgraded Peloton Interactive to a "Buy" rating, citing the company's progress in returning to profitability, its strong position in connected fitness, and improved financials. The analysts predict significant growth for Peloton, with strong EBITDA and free cash flow forecasts for FY25, and view the company's compelling valuation as an attractive investment opportunity.

Goldman Sachs has upgraded Ahold Delhaize to a "buy" rating, raising its price target to €40 per share, citing improved sales growth in Europe and signs of a turnaround in the U.S. business. The firm forecasts an 8% increase in earnings per share for fiscal year 2025, driven by strong sales growth, including from the recent acquisition of Romanian retailer Profi.

Bank of America has lowered its 2025 revenue and earnings projections for L’Oréal by 2% and 3%, respectively, citing weaker-than-expected like-for-like sales in the first quarter. The downgrade reflects a broader slowdown in the beauty sector, including a decline in pharmacy sales in the UK and weaker growth in Europe, despite some positive trends in China.

Upcoming data and events

This week, investors will focus on the Federal Reserve's interest rate decision and economic projections, as well as key US data on retail sales, industrial production, and housing market indicators. In Europe, attention will be on UK unemployment data, German economic sentiment, and Eurozone consumer confidence, while inflation figures from Japan will also be closely watched.

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