Equities rebound on Trump`s tariff delays

General market commentary

Global markets remained volatile as investors reacted to President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China, though a last-minute delay on Mexican tariffs helped limit losses. Equities struggled, with the Nasdaq Composite falling 1.2% to 19,392, the S&P 500 declining 0.8% to 5,994.6, and the Dow Jones Industrial Average slipping 0.3% to 44,421.9. Technology shares saw the steepest declines, with Apple down 3.4% and Tesla dropping 5.2%, while consumer staples outperformed. US Treasury yields showed mixed movement, with the 10-year yield falling to 4.54% as investors sought safe-haven assets, while the two-year yield rose on shifting interest rate expectations. Meanwhile, economic data provided some support, as US manufacturing expanded for the first time in over two years, lifting investor sentiment.

Attention now turns to upcoming trade negotiations between Trump and Chinese President Xi Jinping, which are set to address ongoing tensions and the impact of tariffs. Beijing has urged Washington to engage in direct dialogue, arguing that trade restrictions harm normal economic relations and plans to challenge them at the World Trade Organisation. Despite concerns that the dispute could push inflation higher and slow GDP growth, corporate earnings have remained strong, rising 7.4% year over year, with major firms like Amazon and Alphabet set to report this week. Analysts believe pro-growth policies and corporate resilience may help offset some economic headwinds.

Latest market and economic update

Asian equities rebounded on Tuesday after President Trump postponed tariffs on Canada and Mexico, easing trade war concerns and reducing short-term uncertainty. Hong Kong stocks surged 3% on AI optimism, with tech firms like SMIC and Alibaba leading gains, while Chinese markets remained closed for the Lunar New Year.

U.S. equity futures were higher this morning as markets reacted positively to President Trump’s decision to delay tariffs on Canada, mirroring the reprieve given to Mexico. Investors were buoyed by Palantir’s impressive double-digit surge after hours and are now focused on Friday’s key nonfarm payrolls report for further economic insights and further earnings releases.

European equities fell on Monday following President Trump's announcement of tariffs on China, Canada, and Mexico, with the STOXX 50 dropping 1.4%. Auto manufacturers, including Stellantis and Volkswagen, led the losses, alongside industrials and banks such as Schneider Electric, Siemens, and Santander.

The US dollar stabilised around 108.7 on Tuesday after market volatility, as President Trump temporarily paused tariffs on Mexico and Canada, while optimism grew over potential trade negotiations with China. Against the euro, the dollar remained firm, with EUR/USD trading at 1.0320, as investors assessed the impact of tariffs and awaited key US labour market data.

Oil prices retreated in Asian trading after President Trump delayed tariffs on Canadian and Mexican imports for a month, easing concerns over potential supply disruptions. Brent crude fell 0.7% to $75.47 per barrel, while WTI crude dropped 1% to $71.70, with attention now shifting to upcoming tariffs on Chinese imports.

Eurozone inflation increased to 2.5% in January 2025, up from 2.4% in December, driven by a sharp rise in energy costs. Monthly movements showed that energy prices surged by 1.8%, while inflation for non-energy industrial goods remained stable. The core inflation rate held steady at 2.7%, slightly above expectations, marking its lowest level since early 2022.

Equities on the move

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

Palantir Technologies reported stronger-than-expected fourth-quarter results, with earnings of $0.14 per share and revenue of $827.5 million, surpassing Wall Street estimates. The company’s positive guidance for 2025, along with strong growth in U.S. and government revenue, sparked a 22% surge in after-hours trading.

NXP Semiconductors reported Q4 earnings slightly above estimates, with a 9% drop in revenue year-over-year, but its Q1 forecast fell short of Wall Street expectations. Despite this, the company highlighted resilient performance, maintaining strong gross margins and healthy free cash flow amid a challenging market.

Berkshire Hathaway increased its stake in SiriusXM by purchasing 2.3 million shares worth $52 million, bringing its total investment to around $2.9 billion. The move follows SiriusXM's strong fourth-quarter performance, driven by demand for live sports shows and partnerships with auto manufacturers like Toyota and Tesla.

UBS analysts estimate that about a third of Apple's iPhone business could be directly impacted by the potential U.S. tariffs on China, Canada, and Mexico, potentially affecting earnings and gross margins. The firm highlights that while Apple's risk is most significant, many tech hardware and networking companies also face varying levels of exposure due to reliance on manufacturing in tariff-impacted regions.

Vanguard has announced its largest-ever fee reduction, cutting expense ratios by one to six basis points across 87 funds, which will save investors more than $350 million in 2025. The fee cuts apply to a range of funds, including bond, equity, and money market funds, reinforcing Vanguard's commitment to lowering costs for investors

Cboe Global Markets plans to expand U.S. equities trading to a 24-hour, five-day-a-week format to meet growing global demand, particularly from Asia Pacific markets. This move will allow retail investors to trade overnight and provide overseas investors with access during U.S. market hours.

Robinhood is launching event contracts that allow U.S. users to bet on the outcome of the Super Bowl, expanding its offerings beyond stock trading. The move follows the success of similar contracts for the U.S. presidential election, as the platform seeks to engage retail investors with real-time, high-profile events

EssilorLuxottica has received FDA approval for its over-the-counter Nuance audio glasses, which combine hearing solutions with prescription eyewear. The smart glasses will be available in the U.S. and Italy in the first quarter of 2025, followed by other European countries like France, Germany, and the UK later in the year.

L'Oreal sold 29.6 million shares of its stake in Sanofi for €3 billion, reducing its shareholding to 7.2%. This move aims to optimise L'Oreal's balance sheet, providing financial flexibility for potential acquisitions or further investments, including a possible Nestlé sell-down or a larger acquisition.

Oppenheimer reiterated Uber as its top stock pick ahead of Q4 results, highlighting that concerns over the impact of Robotaxi technology have created an attractive entry point for investors. The firm anticipates that Uber’s consistent performance, particularly in its Mobility segment, will drive stock value, setting a price target of $85 based on projected growth and a higher growth rate than its peers.

UBS upgraded Caterpillar from Sell to Neutral, citing a reset in investor expectations after two consecutive quarterly EBIT misses and a more balanced risk/reward outlook. Despite disappointing Q4 results, UBS raised its price target to $385, reflecting potential for a rebound in 2026, though risks such as further pricing pressures and oil and gas sales declines remain.

Piper Sandler analysts view Tesla as one of the most defensive equities in the auto sector, highlighting its strong U.S. production base amid tariff concerns on Canada, Mexico, and China. Despite facing short-term production challenges, the analysts maintain a positive long-term outlook for the company, reiterating their $500 price target based on 120 times estimated 2026 earnings.

Baird downgraded major cybersecurity stocks Cloudflare, CrowdStrike, and Fortinet to "Neutral" due to their high valuations and limited upside. The analysts highlighted macroeconomic uncertainty and risks as potential concerns, advising caution and waiting for better entry points in the sector.

Upcoming data and events

Key economic releases today include the JOLTs Job Openings report and Factory Orders data, which will offer insights into the labour market and manufacturing sector. Earnings reports from major companies like Alphabet, AMD, Amgen, Electronic Arts, and Mondelez International will also be in focus, potentially influencing market sentiment.

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