China`s consumer inflation turns negative

General market commentary

Last week saw a notable decline in US equity indices as economic uncertainty and trade policy concerns weighed on investor sentiment. The S&P 500 closed at 5,770.20, down from 5,954.50 the previous week, while the Nasdaq Composite and Dow Jones Industrial Average also posted declines. Despite Federal Reserve Chair Jerome Powell's reassurance that monetary policy remains flexible, markets struggled with mixed economic signals. February’s nonfarm payrolls report underwhelmed, with a rise in unemployment and mounting layoffs, particularly in the government sector. Meanwhile, Morgan Stanley lowered its US growth forecast for 2025 and 2026, citing persistent inflationary pressures. Adding to the unease, President Trump's temporary suspension of 25% tariffs on Canadian and Mexican imports until April failed to alleviate concerns about trade policy, with potential retaliatory measures from global partners clouding the economic outlook.

Investors have responded by shifting towards defensive sectors such as healthcare and consumer staples in the past few weeks, while technology and consumer discretionary equities have underperformed. This rotation reflects growing caution amid economic uncertainty, with concerns over tariffs, government layoffs, and slowing consumer spending prompting a more risk-averse approach. Additionally, some investors are diversifying regionally, particularly into European and Chinese markets, as they seek better valuations and reduced exposure to US policy risks.

The bond market has also witnessed increased demand, with Treasury yields declining as investors look for stability. The 10-year Treasury yield, which had peaked near 4.8% in January, has since fallen to around 4.3%, highlighting a shift towards safer assets. While near-term uncertainty persists, historical trends suggest that market corrections often lead to new opportunities. With the Federal Reserve potentially cutting interest rates two or three times this year, equities may find support, and long-term investors are encouraged to maintain diversified portfolios to navigate ongoing volatility.

Latest market and economic update

Asian markets were mixed on Monday as investors remained cautious over U.S. tariff concerns, while Chinese equities declined sharply following weaker-than-expected inflation data, with the Shanghai Composite down 0.6% and the Hang Seng slumping 1.7%. Broader regional indices saw varied movements, with Japan’s Nikkei 225 gaining 0.7%, South Korea’s KOSPI rising 0.6%, but Indonesia’s Jakarta Composite falling 0.8%, reflecting ongoing economic uncertainty.

US equity futures fell overnight as investors awaited key economic reports on consumer sentiment and inflation, amid lingering concerns over trade tensions and policy uncertainty. Markets are also focused on upcoming earnings from major companies, including Oracle, Dick's Sporting Goods, and Adobe Systems.

European markets closed lower on Friday, capping a volatile week dominated by shifting U.S. tariff policies, the ECB’s latest rate cut, and German fiscal reforms. Luxury shares were among the worst performers, with Richemont and Burberry tumbling over 5% and 7% respectively, while defence equities surged as the Stoxx Aerospace and Defence Index gained nearly 6% amid commitments to higher EU military spending.

The US dollar remained at a four-month low below 104, pressured by economic concerns and weaker-than-expected jobs data, while investors awaited further insights from upcoming inflation and consumer sentiment reports. The euro traded at 1.0831 against the dollar, reflecting continued weakness in the greenback amid uncertainty over US recession risks and escalating trade tensions.

Oil prices fell this morning as weak inflation data from China, the world’s largest importer, raised concerns over slowing demand, while uncertainty over U.S. trade tariffs added to market jitters. Brent crude dropped 0.4% to $70.10 a barrel, and WTI fell to $66.48, as traders remained wary of China’s economic struggles, U.S. recession risks, and potential supply increases from OPEC+.

Equities on the move

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

The U.S. Department of Justice has dropped its proposal to force Google to sell its AI investments, including its stake in Anthropic, but continues to push for the sale of its Chrome browser and other measures to curb its search monopoly. While Google argues the restrictions would harm consumers and hinder U.S. technological leadership, prosecutors maintain that the measures are necessary to ensure fair competition, with a trial on the proposals set for April.

Apple has delayed some AI enhancements to Siri until 2026, extending its plan to introduce more personalised and context-aware features across apps. The company, which processes 1.5 billion Siri requests daily, is expanding its cloud infrastructure while facing competition from Google's AI-powered Gemini assistant and Amazon’s revamped Alexa.

Intel’s shares declined after Broadcom’s CEO, Hock Tan, dismissed speculation about acquiring part of Intel, stating the company was focused on AI and VMware. The market reaction reflects investor sensitivity to M&A news, as some had viewed a potential deal as a positive move for Intel amid its ongoing competitive challenges.

Hewlett Packard Enterprise shares fell 13% on Friday after warning that U.S. tariffs would hit its annual profit forecast, with the company planning supply-chain adjustments and pricing actions to mitigate the impact. Facing intense competition from Dell and Super Micro Computer, HPE is set to lose over $3 billion in market value, though analysts expect a recovery by the fourth quarter.

MercadoLibre will invest $3.4 billion in Mexico this year, a 38% increase from last year, focusing on tech products and financial services. The company also plans to hire 10,000 new employees, boosting its workforce in Mexico to 35,000, as it continues to grow in its second-largest market in the region.

Rio Tinto has abandoned plans for a $5 billion share sale following investor resistance, despite considering it to help fund its $6.7 billion Arcadium Lithium acquisition and rebalance its UK-Australia shareholding. While an activist investor has urged the company to consolidate its dual listing in Australia, Rio has dismissed the idea as costly and without benefits, though shareholders will vote on the proposal at upcoming meetings.

Porsche SE expects a €20 billion loss in 2024 due to impairments on its Volkswagen and Porsche AG stakes, reflecting declines in their market value and ongoing challenges at Volkswagen. Despite forecasting €5.2 billion in net debt, the company plans to distribute dividends for the past fiscal year, with full financial results set for release on 26 March.

DoorDash, Williams-Sonoma, Expand Energy, and TKO Group saw their shares rise in extended trading on Friday after being announced as new additions to the S&P 500, effective March 24. Their inclusion means index funds tracking the benchmark will need to purchase their shares, replacing BorgWarner, Teleflex, Celanese, and FMC Corp.

The Nasdaq plans to introduce 24-hour trading five days a week by the second half of 2026, following the NYSE’s similar move to extend trading hours to 22 hours per day. The shift comes as retail trading and foreign investment grow, with Nasdaq highlighting the influence of 24-hour cryptocurrency trading and the demand for improved risk management tools.

Mizuho analysts described Broadcom as a "must-own" AI stock, highlighting its strong earnings, growing AI revenue, and leadership in networking and custom silicon. They believe Broadcom is well-positioned for long-term growth, particularly compared to peers like Nvidia and Marvell, with a price target of $240-$250 despite short-term market volatility.

Rosenblatt initiated coverage of Coinbase with a Buy rating and $305 price target, citing the potential for regulatory shifts under the new U.S. administration that could drive institutional adoption of crypto. Despite recent share price declines, Rosenblatt sees Coinbase as well-positioned for growth, highlighting its dominant market position, expanding non-trading revenue, and strong long-term potential in blockchain and stablecoins.

Deutsche Bank initiated coverage of the U.S. transportation sector, assigning a Buy rating to FedEx with a $337 price target, while giving UPS a Hold rating due to concerns over its declining Amazon business and potential revenue struggles. The bank also upgraded DHL Group to "Buy" with a €50 price target, following strong Q4 results and improved guidance, alongside the announcement of a €3 billion share buyback programme for 2025-2026 to enhance shareholder returns.

Bank of America upgraded Leonardo DRS to Buy, citing its focus on shipbuilding, defence technology, and the Columbia-class submarine program. The company’s investments in niche technologies and shareholder-friendly initiatives, such as a dividend and share buyback, position it well for future growth in defence modernisation.

Upcoming data and events

This week, investors will focus on key economic data, including US inflation figures, producer prices, job openings, and consumer sentiment, while the UK reports January GDP, industrial production, and trade balance data. Other major releases include Germany’s trade and industrial production data, Canada’s interest rate decision, China’s credit figures, as well as inflation and industrial production reports from India, Brazil, Russia, and the Euro Area.

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