Equities languish as Fed rate decision looms

General market commentary

US equities drifted lower on Tuesday as investors awaited the outcome of the Federal Reserve’s policy meeting. The S&P 500 and Nasdaq Composite both slipped 0.1% from record levels, while the Dow Jones Industrial Average lost 0.3%. Technology shares, which have driven recent market strength, pulled back slightly, with Nvidia down 1.6% after reports of subdued demand for its new China-focused AI chip. Warner Bros. Discovery was the weakest performer on the S&P 500, falling 6.2% after a broker downgrade. Sector performance was mixed, with utilities lagging and energy shares leading gains on the back of firmer oil prices. European equities also closed lower, extending a softer tone across other markets, while Japan’s Nikkei bucked the trend to finish higher.

In broader markets, US government bonds rallied after a well-received Treasury auction, pushing the 10-year yield to 4.03%, while the dollar softened against major peers. Gold touched a record high above $3,700 per ounce, buoyed by expectations of lower borrowing costs. Economic data offered a more constructive backdrop, with retail sales posting a third consecutive monthly rise and industrial production surprising to the upside, hinting at resilience despite labour market concerns. Investors now turn their attention to the Fed, widely expected to deliver a 25 basis point rate cut, with the focus firmly on Chair Jerome Powell’s guidance on the pace of further easing.

Latest market and economic update

Asian equities were mixed this morning as investors awaited the Fed’s policy decision. Japan’s Nikkei edged 0.2% higher near record levels, supported by resilient trade data, while the TOPIX slipped 0.4%. Hong Kong’s Hang Seng surged over 1% on tech gains, Shanghai’s CSI 300 rose 0.4%, but South Korea’s KOSPI fell over 1%, with Australia and Singapore also lower.

US equity futures held near flat overnight as investors awaited the Federal Reserve’s policy decision, widely expected to include a 25 basis point rate cut amid a cooling labour market and subdued inflation. On Tuesday, major indices fell modestly, led by utilities, real estate and tech, with megacap tech names like Nvidia, Broadcom and Microsoft posting notable losses.

European shares slipped 0.2% on Tuesday, pausing after three sessions of gains, as investors eyed Fed and BoE policy decisions and US–China trade talks. Germany’s ZEW Economic Sentiment Index beat expectations, while UK labour data pointed to a slowing job market. L’Oréal fell 2%, Banco Santander dropped 1%, BNP Paribas eased 0.5%, and ASML rose nearly 3%.

The dollar index hovered near 96.7 on Wednesday, close to 2½-month lows and about 1% weaker so far this week, as investors awaited the Fed’s policy decision. Softer labour market data and firm expectations of rate cuts weighed on the currency, which slipped broadly and hit a four-year low against the euro at 1.1853 this morning.

Oil prices steadied in Asian trade on Wednesday, holding near two-week highs amid concerns over potential Russian supply disruptions from Ukraine’s strikes. Brent fell to $68.39 a barrel and WTI to $64.09. Gains were supported by a weaker dollar, expectations of a Fed rate cut, and a larger-than-expected US inventory draw, though caution remained.

Equities on the move

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

Alibaba shares surged 4.8% to HK$160.10 in Asian this morning, their highest level since November 2021. Gains were driven by progress in China’s homegrown AI chip development, including contracts for Alibaba’s T-Head unit, and speculation over founder Jack Ma’s increased involvement, signalling a potential easing of Beijing’s regulatory pressure on tech giants.

Eli Lilly’s experimental weight-loss pill, orforglipron, could qualify for the FDA’s fast-track review, potentially cutting approval to one–two months. As an oral GLP-1 treatment, it may offer a lower-cost alternative to injectable drugs like tirzepatide. Analysts highlight strong demand, affordability, and rapid U.S. manufacturing as key advantages for Lilly.

According to the Wall Street Journal, TikTok’s U.S. operations would be controlled by a consortium including Oracle, Silver Lake and Andreessen Horowitz, with U.S. investors holding around 80% and a U.S.-dominated board. A new app will host American users, with Oracle managing data in Texas, while Trump delays divestiture enforcement until December 16.

Hims & Hers Health shares fell 8% yesterday after the FDA issued a warning over “false or misleading” marketing claims for its compounded semaglutide products. The agency flagged statements implying equivalence to FDA-approved drugs like Ozempic and Wegovy. The company has 15 working days to respond or face potential legal action.

Vinci reported year-on-year growth in August traffic across its intercity networks and airports. Vinci Autoroutes saw a 0.7% rise in intercity traffic, while Vinci Airports recorded a 5.2% increase in passenger numbers. The results highlight a continued recovery in travel demand, supporting the French concessions and construction company’s transportation operations.

Mizuho upgraded Micron Technology to Outperform, raising its price target to $182, citing strong high-bandwidth memory demand and tight supply supporting pricing. Analysts highlighted robust NVDA GB300 orders, potential HBM4 upside, and projected November-quarter revenue of $11.9 billion with EPS of $3.05, while HBM sales are expected to grow through 2027.

J.P. Morgan reiterated ASML as a top pick, citing improving orders, strong logic and memory demand, and a clearer path for 2027 growth. AI-driven spending, TSMC’s 2nm ramp, and high-bandwidth memory support orders, while ongoing caution surrounds 2026. Extreme ultraviolet lithography dominance and High-NA EUV adoption position ASML for strong mid-term sales.

Berenberg initiated Ferrari with a Buy rating and €484 price target, highlighting strong margins, brand strength, and pricing power. Sales and EPS are projected to grow steadily through 2027, supported by limited production, high personalisation, and luxury appeal. Upcoming EV launch and hypercar ramp-up offer catalysts, though demand for electric models poses potential risks.

Jefferies downgraded L’Oréal to Underperform, cutting its price target to €340, citing slower growth and weaker profitability. Organic sales are expected to moderate, margins may rise less impressively, and balance sheet flexibility offers limited near-term upside. Revenue is projected to reach €48.1 billion by 2027, with slower sales and earnings growth weighing on valuation.

Citizens upgraded CoreWeave to Market Outperform, citing strong demand for outsourced GPU computing from hyperscale customers. Despite recent share losses, analysts see growth potential, with the GPU-as-a-service market projected to reach $300 billion by 2030. Large contracts with Nvidia, Oracle and Microsoft boost visibility, outweighing near-term margin and pricing risks.

UBS upgraded Nio to Buy from Neutral, raising its price target to $8.50, citing new model launches and a $1 billion equity raise that have eased concerns over losses. Improved finances, guidance to fourth-quarter breakeven, and strong ES8 sales are expected to boost revenue, margins, and consumer confidence, narrowing the valuation gap with XPeng.

Upcoming data and events

Today’s key economic releases include the Federal Reserve’s interest rate decision, US housing data and oil inventories, the UK’s August CPI and CPIH figures, and the EU’s August CPI MoM and YoY readings. Investors will closely monitor these for insights into inflation, consumer trends, and potential central bank policy moves.

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