Equities extend rebound on Fed rate-cut hopes

General market commentary

US equity markets delivered strong gains on Monday as expectations for a December interest rate cut increased sharply. Large cap technology equities led the advance, with the Mag 7 group rising 3.5 per cent and helping to lift the Nasdaq by 2.7 per cent and the S&P 500 by around 1.6 per cent. The Dow Jones Industrial Average also moved higher, though more modestly, while the small cap Russell 2000 gained nearly 2 per cent. Market sentiment improved after recent comments from several influential Federal Reserve members, including New York Fed President John Williams, which encouraged a dovish repricing in interest rate expectations. As a result the CBOE Volatility Index retreated from last week’s highs and most US Treasury yields declined.

The rally was broad based across sectors, with communication services surging 4 per cent and technology and consumer discretionary equities also recording notable gains. Corporate news supported the upbeat tone, including strong moves in Alphabet, Micron and Broadcom following positive developments and analyst updates. Nvidia shares also rose after reports that the administration is considering allowing sales of advanced AI chips to China. Energy and consumer staples were the only sectors to end lower. Overall the combination of improving rate cut expectations and positive company specific catalysts helped equities recover ground lost earlier in the month.

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Asian equities mostly advanced on Tuesday as technology shares rebounded in line with Wall Street and expectations grew for a US interest rate cut in December. Tech heavy markets such as Hong Kong and South Korea outperformed, while mainland China also rose. Japan lagged on fiscal concerns and China tensions, and Australia, Singapore and India were broadly flat.

Wall Street futures were largely steady overnight after a strong tech-led session, with S&P 500 Futures slightly higher at 6,724.50 and Nasdaq 100 Futures up 0.1% at 24,971. Dow Jones Futures remained flat at 24,973.25. After-hours trading saw Alphabet extend a 6.3% gain, while Meta rose 0.4% and Nvidia slipped 1.5%.

European equities closed mixed on Monday, initially rising before giving up some gains amid optimism over a potential December Fed rate cut. Germany’s DAX gained 0.7%, France’s CAC 40 fell 0.3%, and the Euro Stoxx 50 rose 0.2%. Key movers included luxury and energy shares, boosted by higher oil prices and positive sentiment in commodity sectors.

The U.S. dollar remained largely steady on Tuesday even on expectations of a December Fed rate cut, with traders pricing in an 81 per cent chance of a 25 basis point reduction. The euro gained slightly to $1.1522, while the dollar index hovered around 100.2, reflecting only modest pressure on the dollar despite shifting market rate cut wagers.

Oil prices edged lower on Tuesday as hopes for a US brokered Russia Ukraine peace deal raised the prospect of increased Russian supply, adding to concerns over an emerging glut and softening global demand. Brent and WTI slipped slightly despite new US sanctions on major Russian producers, with demand worries and limited broader support keeping prices subdued.

The Fed is increasingly leaning towards a December rate cut, with allies of Chair Jerome Powell laying groundwork for him to push the move through despite a split committee and limited October data. Powell is weighing an immediate cut or a January delay, while markets now price nearly an 80 per cent chance of a 25 basis point reduction.

Equities on the move

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

Google is significantly expanding its AI chip strategy by offering its custom TPUs for deployment in customer data centres, a shift from their previous use solely in Google Cloud. Meta is reportedly in talks to rent TPU capacity next year and integrate the chips into its own facilities from 2027, potentially spending billions and reducing reliance on Nvidia.

Spotify Technology plans to raise its U.S. subscription prices in the first quarter of 2026, its first increase since July 2024, aiming to demonstrate sustained profitability, the Financial Times reported. The move follows earlier price hikes in Europe and Asia and comes after stronger-than-expected Q3 earnings. Shares have risen around 28% in 2025.

Broadcom shares surged 10% Monday on optimism over Google’s AI advancements, with suppliers Lumentum and Celestica up 13.5% and 12%. Alphabet rose 5% on confidence in its Gemini 3 model, powered by Broadcom-partnered TPUs, highlighting Broadcom’s strategic role in Google’s AI infrastructure and its revenue potential from expanding cloud AI capabilities.

Nvidia rejected fraud claims linked to short-seller Michael Burry, denying circular financing and accounting misstatements. The company highlighted $23.8 billion in operating cash flow and proper warranty accounting, stressing investments are a fraction of revenue. Raymond James analysts said the fraud narrative is inconsistent with Nvidia’s fundamentals and AI growth prospects.

Novo Nordisk said its older oral semaglutide drug failed to slow cognitive decline in Alzheimer’s patients, sending shares down 10%. The EVOKE and EVOKE+ trials in 3,808 early-stage patients did not meet the 20% slowing target. The setback dims hopes for a new Alzheimer’s market, though semaglutide remains effective for diabetes and obesity.

Bayer’s experimental stroke drug asundexian met primary goals in the OCEANIC-STROKE trial, significantly reducing recurrent stroke risk without raising major bleeding, potentially generating €3 billion annually. Shares rose 10.9%. The drug, a Factor XIa inhibitor, represents the first successful Phase III in its class and has received FDA Fast Track designation for stroke prevention.

Zoom Communications raised its fiscal 2026 revenue and profit forecasts, boosted by hybrid work demand and AI integration. Third-quarter revenue and adjusted earnings beat estimates, with shares up 3.6% after hours. Strong adoption of AI features, new products like Phone and Virtual Agent, and an expanded share repurchase programme supported growth.

Alibaba shares surged over 5% after its revamped consumer AI app, Qwen, achieved more than 10 million downloads in its first week of public beta, boosting investor optimism in its generative-AI push. The app, powered by Alibaba’s Qwen large language model, can generate research reports and multi-slide presentations, with mobile, web, and international rollout planned.

SanDisk Corporation will join the S&P 500, replacing Interpublic Group, with the change effective before market open on November 28. Following the announcement, SanDisk shares rose 7.3% in after-hours trading, extending gains from a 13.3% increase during the regular session, boosted by strong Q3 earnings and a Morgan Stanley price target upgrade.

Shares of European defence firms fell for a second session as US-Ukraine negotiations over a revised peace plan with Russia continued, pushing the sector index to its lowest since August. Rheinmetall, Renk, Hensoldt, Leonardo, Thales, and Saab all slipped amid investor caution. The decline reflects concerns that progress on the peace talks could reduce near-term defence demand.

Morgan Stanley expects global AI corporate spending to approach $3 trillion, with half financed via public and private credit. AI capex could add 0.4% to U.S. GDP in 2026, boosting earnings across tech, industrials, and financials. While healthy corporate balance sheets mitigate immediate risk, debt-fuelled AI investment warrants ongoing market vigilance.

Morgan Stanley’s Michael Wilson views near-term U.S. equity weakness as a buying opportunity for 2026. Despite a 5% S&P 500 pullback, market breadth suggests the correction is nearing its end. The firm maintains a bullish outlook, forecasting 17% EPS growth and favouring Small Caps, Consumer Discretionary, Healthcare, Industrials, and Financials.

UBS sees the recent equity pullback as a healthy correction, driven by futures and derivative selling, not a broader reversal. CTAs and risk-control funds may add pressure, but retail buying remains strong. Volatility risk premia are easing, technicals show room for downside, yet stabilisation signals, including VIX metrics and option positioning, suggest the weakness is likely short-lived.

Carnival shares fell 6.7% yesterday, leading cruise equities declines as management highlighted Caribbean capacity and US macro concerns. Royal Caribbean and Norwegian Cruise Line dropped 3.3% and 2.5%. Barclays maintains an overweight rating, citing Carnival’s diversification and brand turnarounds as buffers against regional headwinds.

Bank of America said Nvidia’s recent pullback reflects a misreading of its quarterly results, urging investors to focus on strong demand and exceptional free cash flow, which rose 60% QoQ to $22 billion. The bank reiterated a Buy rating with a $275 target, highlighting robust GPU adoption and long-term growth despite short-term working-capital concerns.

Bank of America upgraded Booking Holdings to Buy, citing overblown AI concerns and strong supplier relationships. The firm highlights margin expansion, the Genius loyalty programme, and cost-savings achievements, forecasting 16% earnings growth in 2026. Early Q4 trends remain solid, with RevPAR gains in Europe and robust U.S. nights growth. Price target: $6,000.

Morgan Stanley raised price targets for Micron to $338 and Sandisk to $273, keeping Overweight ratings and naming Micron its top pick. Citing intensifying memory shortages, especially in DDR5 DRAM, strong AI-driven demand, and limited inventory, the firm called the recent semiconductor selloff unwarranted and forecast significant EPS growth with further upward revisions likely.

Bank of America upgraded Barrick Gold to Buy, citing tighter global supply and a clearer path to higher gold prices, raising its 2026 forecast to $2,750 per ounce. The rerating case rests on capital returns, a shift to developed market assets, lower unit costs, and undervalued projects. BofA also lifted long-term gold and silver forecasts to $3,000 and $42 per ounce.

RBC Capital Markets upgraded Inditex to Outperform from Sector Perform, raising its price target to €52, citing market-share gains, improving margins, and a rebound in free cash flow after logistics investments. Analysts highlighted strong like-for-like sales, sourcing tailwinds, and international expansion, particularly in the US, with potential upside to €60 if growth momentum continues.

BMO Capital Markets upgraded MP Materials to Outperform, citing the recent pullback in shares and rare earth prices as an attractive entry point. The $75 price target reflects the company’s strategic role in US domestic supply chains, upside from a Saudi joint venture with Maaden and DoW, and potential growth from Apple recycling volumes and new offtake agreements.

Morgan Stanley’s Michael Wilson views near-term U.S. equity weakness as a buying opportunity for 2026. Despite a 5% S&P 500 pullback, market breadth suggests the correction is nearing its end. The firm maintains a bullish outlook, forecasting 17% EPS growth and favouring Small Caps, Consumer Discretionary, Healthcare, Industrials, and Financials.

Upcoming data and events

Today’s key US economic releases include October PPI, Retail Sales, Core Retail Sales, Pending Home Sales, and November Consumer Confidence. Major earnings reports feature Dell, Autodesk, Workday, Zscaler, and Analog Devices, offering insights into tech and consumer sector performance.

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