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General market commentary
Equities are on track for a robust year-end, supported by solid fundamentals and optimism over potential policy shifts under the incoming U.S. administration. While valuations in mega-cap technology shares remain elevated, pointing to moderated long-term returns, other areas, including small- and mid-cap companies, present more attractive opportunities. Recent market dynamics have seen a rotation away from tech into cyclical sectors like industrials, retail, and auto manufacturing, bolstered by resilient earnings and hopes for stronger U.S. growth. The broadening of market leadership is a healthy development, suggesting the rally is becoming more sustainable.
Last week, Wall Street capped a pre-holiday rally with a fifth consecutive winning session, with optimism about pro-business policies driving gains across most sectors. Cyclical shares, including automakers, steel producers, and retailers, led the charge, propelling the Dow Jones Industrial Average to a record close and outperforming broader indices. Conversely, mega-cap technology shares, including Nvidia, Alphabet, and Amazon, underperformed amid concerns over tighter export restrictions to China and the challenges of meeting lofty expectations.
Despite headwinds in the semiconductor sector, overall market sentiment remained positive, with the S&P 500 and Nasdaq posting solid weekly gains. Bond markets reflected easing volatility, with the 10-year Treasury yield dipping and the VIX sharply lower. As equities head into 2025, a well-diversified allocation across value-oriented and U.S.-focused investments appears key to navigating risks and capitalising on evolving opportunities.
Latest market update
U.S. equity futures rose in Sunday evening trading, with the S&P 500, Nasdaq 100, and Dow Jones gaining 0.4% to 0.5%, buoyed by optimism over Scott Bessent's Treasury Secretary nomination and potential Middle East deescalation, though tech shares lagged.
Most Asian equities rose on Monday, buoyed by optimism over Scott Bessent’s Treasury Secretary nomination and strong Wall Street momentum, with Japan’s Nikkei 225 and South Korea’s KOSPI leading gains. However, Chinese shares lagged, with the CSI 300 and Shanghai Composite falling on concerns over weak industrial data.
US shares ended Friday higher, with the Dow up 426 points and the S&P 500 gaining 0.3%, while the Nasdaq edged up 0.1%, as stronger-than-expected PMI data pointed to a pick-up in private sector growth. For the week, all three major indices posted solid gains, with the Dow rising 2.1% and both the S&P 500 and Nasdaq up 1.7%.
European equities closed higher on Friday, with the Euro Stoxx 50 gaining 0.7% to end at 4,789, led by strong performances in tech shares such as ASML, Adyen, and Infineon. For the week, the Index was broadly flat, supported by gains in consumer cyclical shares like Stellantis, LVMH, and Hermes, despite concerns over slowing economic activity in the Eurozone.
The dollar weakened on Monday, dropping 0.7% against the yen and 0.6% versus the euro, as markets reacted to Scott Bessent’s nomination as U.S. Treasury Secretary and a subsequent rally in risk assets. Sterling and commodity-linked currencies like the Aussie and Kiwi also rebounded after recent declines.
U.S. Treasury yields slid sharply, with the benchmark 10-year yield falling 7 basis points to 4.341%, as Bessent’s selection eased fears of an unorthodox Treasury pick. This bolstered demand for bonds, reflecting a "safe hands" narrative welcomed by markets.
Oil prices held steady in early Asian trading, near two-week highs, as traders weighed reports of a potential Israel-Hezbollah ceasefire against escalating Russia-Ukraine tensions, which heightened supply disruption risks.
Equities on the move
The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:
Vinci raised its guidance for its Energies division, aiming for a 7.5% operating margin by 2030 and 100% cash conversion from 2024-30, exceeding market expectations. Analysts are optimistic about the division’s growth potential, supported by energy transition trends and international expansion plans.
Snowflake was upgraded to Outperform by Wedbush, citing its strong position to capitalise on AI-driven growth and expected improvements in product revenues ahead of an AI-fuelled 2026. Wedbush also hiked Palantir’s price target to $75, highlighting confidence in its AI platform strategy, and raised Salesforce’s target to $375, citing growing demand for its AI offerings.
Novo Nordisk received a bullish outlook from Barclays analysts ahead of the December release of pivotal data for its next-generation obesity treatment, CagriSema, which could transform the obesity market. Despite recent challenges, including a 27% decline in its shares, Barclays projects a 14% upside if the trial met its 25% weight loss target, maintaining an "Overweight" rating.
Palo Alto Networks was downgraded by HSBC to "Reduce" from "Hold," with its price target lowered to $291, due to concerns over the equity's valuation and overestimated growth expectations. Despite strong Q1 results, HSBC questioned the sustainability of the company's growth and warned that the shares were priced for a higher growth rate than likely.
Porsche AG has seen its shares halve since their peak in May-June 2023, but Citi Research maintains a "buy" rating, viewing the recent selloff as an opportunity for recovery. Despite concerns over Chinese sales, pricing issues, and EU regulations, analysts project a rebound in earnings from FY2025, with a price target of €85, offering significant upside from the current €56.62.
Upcoming data and events
The week ahead sees a holiday-shortened schedule in the US, with key economic data releases, including U.S. GDP growth, personal income figures, and the Fed's preferred inflation gauge, alongside earnings from Dell, CrowdStrike, and Analog Devices. Traders will also watch for the IPO of autonomous driving firm Pony AI.
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