Dollar languishes at 4-month low

General market commentary

Equity markets finished higher on Wednesday, buoyed by tariff relief as the U.S. temporarily exempted autos from its newly imposed 25% tariffs on Canadian and Mexican imports, lifting sentiment and driving the S&P 500 up 1.1% and the Nasdaq 1.5% higher. European markets surged as Germany moved to exempt military and defence spending from strict fiscal rules and announced a €500 billion infrastructure fund, providing a significant boost to investor confidence. While trade-policy uncertainty remains a key risk, with Canada and China retaliating against U.S. tariffs and Mexico set to follow, fundamentals remain broadly supportive. Corporate earnings growth is strong, with S&P 500 earnings on track for an 18% rise in Q4 and estimates pointing to 12% growth in 2025. Labour-market conditions, despite a softer-than-expected ADP payrolls report, remain resilient, supporting household incomes and consumer spending. Investors are advised to stay focused on long-term fundamentals rather than reacting to short-term volatility, as markets navigate trade tensions and economic data releases.

Latest market and economic update

Asian equity markets surged on Thursday, led by a 2.3% rise in Hong Kong’s Hang Seng index, as Trump’s temporary exemption of auto tariffs on Mexico and Canada eased trade tensions, while China’s new fiscal stimulus boosted investor confidence. Shares rallied across the region, with gains in Japan, Indonesia, and South Korea, though Australia’s ASX 200 bucked the trend, while China’s focus on AI and tech innovation drove strong performances in its equity markets.

US equity futures remained steady overnight, following a relief rally sparked by President Trump’s one-month auto tariff exemption for Mexico and Canada. Investors will focus on potential further concessions from the administration and monitor Marvell Technology and MongoDB after their sharp declines in afterhours trading following disappointing earnings.

European equities rebounded sharply on Wednesday, with the STOXX 50 rising 1.9% and the STOXX 600 adding 0.9%, driven by expectations of increased EU defence spending. Defence equities such as Thales, Safran, and Rheinmetall rose between 3% and 8%, while auto shares like BMW, Volkswagen, and Stellantis gained over 4% amid reports of the US easing tariffs on Mexico and Canada.

The US dollar weakened on Thursday, with the dollar index falling to around 104, its lowest level in four months, as trade war concerns and a surging euro weighed on the currency. The euro strengthened to 1.0791 against the dollar, supported by Germany’s proposed €500 billion infrastructure fund and planned borrowing rule reforms, which boosted confidence in Eurozone growth, while weak US jobs data and uncertainty over Trump’s tariffs added further pressure on the greenback.

Oil prices rebounded this morning as U.S. tariff concessions lifted risk appetite, though concerns remained over increased tariffs on China, Canada, and Mexico, as well as rising OPEC+ production. Markets found some relief in potential exemptions for automakers and agricultural goods, while Mexico’s Pemex sought alternative buyers in Asia and Europe to counter the impact of U.S. trade measures.

Equities on the move

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

Alibaba’s Hong Kong shares surged 7.3% on Thursday, leading a rally in Chinese tech equities after unveiling its open-source QwQ-32B AI model, which rivals DeepSeek R1 while using significantly less data. Investor confidence was further boosted by Beijing’s stimulus measures, driving gains in major tech firms like Baidu, Tencent, and JD.com, as China continues to assert its position in the AI race.

Marvell Technology's fourth-quarter earnings missed some high expectations, causing its shares to drop as much as 17% in aftermarket trading, although the company still beat market consensus. Despite concerns over US-China trade tensions and AI monetisation challenges, CFRA maintained its "Strong Buy" rating, highlighting Marvell’s continued momentum in data centre revenue and its AI-related custom chip deals, including a significant agreement with Amazon.

Abercrombie & Fitch forecast weak sales growth for the year ahead, citing softer demand for its A&F brand and challenges from higher freight costs, promotions, and U.S. tariffs, causing its shares to fall 14%. Despite a strong holiday quarter, the company expects annual net sales growth of just 3-5%, below market expectations, and warned of potential margin pressure.

MongoDB's fourth-quarter results surpassed expectations, with adjusted EPS of $1.28 on revenue of $548.4 million, but its full-year guidance for fiscal 2025 fell short, causing shares to drop more than 15%. The company’s forecast for fiscal Q1 and fiscal 2025 revenue and EPS missed Wall Street estimates, leading to concerns over its future growth.

Bayer's shares rose to a four-month high after the company projected a return to earnings growth from 2026, despite forecasting a challenging 2025 with lower earnings and free cash flow. CEO Bill Anderson reassured investors by outlining a plan for long-term improvements, including targeted higher margins in its Crop Science division by 2029, while also addressing restructuring efforts and cost cuts, including 7,000 job reductions.

Adidas forecasted lower-than-expected operating profit for 2025, predicting slower sales growth and increased volatility due to U.S. tariffs, with a target operating profit of 1.7 billion to 1.8 billion euros, below analysts' expectations. Despite this, the company expects solid growth in key markets and aims to take market share from Nike, focusing on new product lines like thin-soled sneakers and running shoes, while also planning to cut up to 500 jobs to streamline operations.

Dassault Aviation reported a rise in full-year sales, driven by increased demand for defence spending amid global tensions, with adjusted net sales rising to €6.23 billion in 2024. The company expects 2025 revenue of around €6.5 billion, driven by deliveries of Rafale and Falcon jets, while continuing efforts to address supply chain challenges and securing a strong order backlog.

Tesla is set to build a new Megafactory in Houston, Texas, focusing on producing Megapack energy storage systems, with plans to repurpose a 1-million-square-foot facility. The project, backed by tax incentives from Waller County, is expected to create around 1,500 jobs and follows the company's existing Megafactories in California and Shanghai.

Louis Vuitton will launch beauty products this fall, including 55 lipsticks, 10 lip balms, and 8 eyeshadows, with British makeup artist Pat McGrath leading creative direction. This move comes as the fashion industry, including LVMH, faces slow sales and seeks new growth avenues, following other luxury brands' expansion into makeup.

William Blair upgraded Palantir Technologies to Market Perform, citing positive developments such as the February 26 DOGE executive order, which could benefit the company’s platforms. Despite concerns over valuation and potential contract delays, analysts highlighted Palantir's strong government pipeline, AI premium, and impressive operating leverage.

Bank of America analysts see significant growth potential for Reddit, particularly with the rollout of its AI-powered search tool, Answers, and plans to boost user engagement and ad revenue. However, they maintained a Neutral rating due to concerns over its premium valuation, which may face pressure amid macroeconomic challenges.

UBS upgraded Arista Networks to "Buy" and raised its price target to $115 from $112, driven by strong growth in data centre capital expenditure. The bank anticipates a 25% compound annual growth rate in data centre spending through 2027, benefiting Arista, and believes the company's 2025 revenue guidance of 17% growth is conservative, forecasting up to 25% growth instead, while maintaining a positive view on its valuation despite competition concerns.

HSBC downgraded Deutsche Telekom to "Hold" from "Buy," citing limited upside potential for T-Mobile US and increasing risks in the German broadband market. While raising its price target to €36 from €34, the bank expressed concerns over valuation and competitive pressures in Germany, and sees little room for further gains without additional growth from T-Mobile US.

Bernstein raised price targets for major China internet shares, including Tencent and Alibaba, citing AI momentum as a key driver of valuation gains. The firm also raised its price target for NetEase, highlighted AI-driven improvements for Bilibili, and noted the broader potential for China's tech equities to benefit from rapid AI adoption.

Upcoming data and events

On Thursday, key economic data, including the initial jobless claims report, will be released, potentially impacting Federal Reserve policy decisions. Additionally, major companies like Costco, Broadcom, and Hewlett Packard Enterprise will report their earnings, drawing investor attention.

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