Equities extend rise on cooling inflation

General market commentary

US equity markets ended mixed on Tuesday as investors digested April’s official inflation data, which came in lower than expected, easing concerns about persistent price pressures. The Nasdaq Composite led the gains with a 1.6% rise, driven by strong performances in the technology sector, particularly Nvidia, which surged 5.6% following a new AI partnership. The S&P 500 also gained 0.7%, while the Dow Jones Industrial Average slipped 0.6%, dragged by a steep 18% decline in UnitedHealth Group after it suspended its full-year outlook and announced a leadership change. Meanwhile, bond yields were slightly higher, with the 10-year Treasury yield edging up to 4.48%.

Inflation remains in focus, with April’s Consumer Price Index rising modestly by 0.2% month-on-month and 2.3% annually, marking the lowest annual rate since February 2021. Core inflation also slowed, reinforcing market expectations for potential rate cuts later in the year. While tariffs have not yet significantly impacted prices, analysts expect a delayed effect in the coming months. Despite ongoing global uncertainties, strong earnings reports—particularly from the health care and communication services sectors—have buoyed sentiment. With trade tensions between the US and China easing slightly through a 90-day tariff suspension, markets are cautiously optimistic about sustained economic and earnings growth into 2025.

Latest market and economic update

Asian equity markets were mixed Wednesday, with gains in Hong Kong and South Korea driven by tech optimism and easing US-China trade tensions, while Japan declined amid a stronger yen and growing expectations of a Bank of Japan rate hike. Chinese markets remained flat as reduced trade tensions lessened hopes for further stimulus, and other regional markets were largely subdued.

U.S. equity futures were largely unchanged overnight, following a strong rally in technology stocks during regular hours. S&P 500 and Dow Jones futures both inched up slightly, while Nasdaq futures remained flat as investors digested gains in Nvidia, AMD, and other tech names.

European equities closed higher on Tuesday, with the STOXX 50 rising 0.4% and the STOXX 600 edging above the flatline, bolstered by the easing of US-China trade tensions. The auto sector saw strong gains, with Volkswagen, BMW, and Stellantis up between 3% and 4.5%, while Munich Re fell 4.5% following disappointing first-quarter results.

The dollar index remained around 100.9 on Wednesday, following a near 1% decline driven by weaker-than-expected inflation data, which indicated limited impact from President Trump's tariffs. In EUR/USD trading, the pair stood at 1.1197, as market participants adjusted their expectations for Federal Reserve rate cuts amid easing inflation and a de-escalation in trade tensions.

Oil prices dipped in Asian trade this morning, halting a four-day rally driven by easing US-China trade tensions and soft inflation data, as investors weighed a surprise rise in US crude inventories. Attention also turned to President Trump’s Middle East visit, where he pledged to lift sanctions on Syria and tightened pressure on Iranian oil exports, raising supply concerns.

Equities on the move

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

Major U.S. tech firms including Nvidia, AMD, and Qualcomm announced significant AI partnerships in Saudi Arabia during President Trump’s Gulf tour, which secured $600 billion in investment commitments. Central to these deals is Saudi-backed AI firm Humain, developing large-scale AI infrastructure with support from Nvidia and AMD, as Saudi Arabia aims to become a global AI hub.

UnitedHealth has suspended its full-year financial forecast due to a sharp rise in medical costs, while CEO Andrew Witty has stepped down, with former CEO Stephen Hemsley returning to the role. The company, facing mounting pressure from policy challenges, operational issues, and increased Medicare-related expenses, expects to resume growth in 2026.

Robinhood is entering the Canadian market by acquiring WonderFi Technologies for C$250 million, gaining control of regulated crypto platforms Bitbuy and Coinsquare, and aiming to unlock a potential $250 million annual revenue opportunity. The deal also strengthens Robinhood’s strategic position with new licences, expanded crypto capabilities, and a growing presence in Canada, where WonderFi’s brands and leadership will remain in place.

eToro Group Ltd priced its IPO yesterday and will debut on the NASDAQ under the symbol “ETOR,” raising up to $500 million by offering 10 million shares. The IPO was 10 times oversubscribed, with the company and selling shareholders offering an equal split of shares, and BlackRock committing to purchase up to $100 million worth of shares.

Sony expects a 0.3% rise in operating profit to 1.28 trillion yen this financial year, despite a 100 billion yen hit from U.S. trade tensions, and plans to spin off most of its financial unit in October to focus on entertainment. It reported a 16% profit jump last year, driven by strong PlayStation 5 performance, with further growth expected from upcoming releases like Ghost of Yotei.

JBS reported a 78% increase in net profit for the first quarter, driven by strong poultry and pork sales in Brazil and the U.S., with net revenue rising 28% to 114.1 billion reais. Despite concerns over the global trade war, the company saw minimal impact, with record high EBITDA margins in its Seara and Pilgrim’s Pride divisions, though challenges in the U.S. beef market persisted.

Softbank reported a stronger-than-expected annual net income of 1.15 trillion yen for the year ending March 31, driven by rising tech valuations, particularly in artificial intelligence. The company also posted a net profit of 517 billion yen for the March quarter, supported by its telecom units and gains from investments, though offset by losses in its Vision Fund.

Under Armour plans to raise prices on some products and diversify its supply chain to offset the impact of potential U.S. tariffs, after reporting a smaller-than-expected drop in quarterly revenue. The company continues its turnaround strategy by focusing on full-price sales, reducing discounts, and cutting inventory, though it expects a 4% to 5% revenue decline in the first quarter.

Daimler Truck has lowered its 2025 operating profit forecast, now expecting adjusted EBIT growth of between -5% and 5%, down from the previous 5% to 15% range, due to rising demand uncertainty. The company cited macroeconomic and geopolitical factors, including market disruptions linked to U.S. President Donald Trump’s trade war.

Kering has experienced a significant decline in demand for its luxury and fashion goods in the United States, with CEO Francois-Henri Pinault describing the drop in consumption as "quite strong." This decline contributed to weak first-quarter sales, including a 25% drop in Gucci's performance.

China lifted a month-long ban on local airlines taking delivery of Boeing planes, following an agreement between the U.S. and China to deescalate their trade war. The move comes after a temporary reduction in trade tariffs between the two nations, providing relief to Boeing after its Chinese customers had halted deliveries.

Airbnb launched Airbnb Services, Airbnb Experiences, and a completely redesigned app to enhance the travel experience with hotel-like amenities, local activities, and a more personalised interface. The new services are now available in hundreds of cities, and the company's shares rose nearly 3% following the announcement, reflecting investor optimism.

Baird upgraded Caterpillar to Outperform with a $395 price target, citing improving fundamentals, easing trade tensions, and signs of an earnings recovery starting in late 2025. Despite a projected 18% earnings decline this year, Baird believes the company’s order intake, stabilising dealer sales, and lower inventories will drive growth, with trade de-escalation providing further momentum.

Barclays downgraded Schneider Electric to "equal weight" from "overweight," citing increased supply in the medium voltage market and uncertain demand, alongside challenges in meeting 2025 growth targets. The firm lowered its price target to €235, reducing EBITA estimates for 2026 and 2027, while noting resilient data centre demand but cautioning against a near-term re-rating.

Raymond James initiated coverage on Super Micro Computer with an Outperform rating and a $41 price target, citing its position in AI infrastructure and revenue growth. Despite concerns over valuation, margins, and customer concentration, analysts see Supermicro benefiting from expanding U.S. manufacturing and AI demand, with a bullish case suggesting a fair value of $88.

Bernstein raised its price targets and earnings estimates for major U.S. airlines following stronger-than-expected first-quarter results and signs of booking stabilisation. The firm upgraded United Airlines, American Airlines, and Delta Air Lines, citing improved performance, capacity management, and strong demand for premium and international bookings.

Macquarie upgraded Peloton to Outperform and raised its price target to $10 after strong fiscal Q3 results, including $624 million in revenue and better-than-expected subscriber growth. The firm also raised fiscal 2025 guidance, citing improved EBITDA, revenue, and free cash flow, and believes the turnaround, refurbished equipment, and wealthier user base will support growth.

Upcoming data and events

Today, markets await the EIA Crude Oil Inventories report and speeches from Federal Reserve officials that could signal policy changes. Cisco Systems and Dynatrace are set to report earnings.

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