Equities scale new highs on Fed cut and economic strength

General market commentary

Equity markets enjoyed another positive week, buoyed by optimism surrounding the Federal Reserve’s first interest rate cut in nearly a year and the continued strength of Wall Street, particularly in technology shares. The 25 basis point reduction was largely anticipated, but it gave investors renewed confidence that monetary easing is back on the table, even if the Fed is proceeding more cautiously than markets or the White House might prefer. The decision, coupled with resilient growth indicators such as strong retail sales and robust third quarter GDP tracking, helped drive equities higher, with the rate sensitive small cap Russell 2000 outperforming both the S&P 500 and Nasdaq to hit a fresh record high.

That said, the rally was not without moments of volatility, as investors weighed the Fed’s limited forward guidance against persistent concerns over the labour market. With job growth slowing to levels usually associated with recessions and unemployment edging higher, markets are betting heavily on further rate cuts this year. This backdrop has underpinned strong performance across equities, though the path ahead is expected to remain choppy as data on employment, growth and inflation shape expectations. For now, however, the combination of easier monetary policy and hopes for supportive fiscal measures has kept sentiment upbeat, with cyclical and quality equities particularly well positioned to benefit.

Latest market and economic update

Asian equities were mixed on Monday. Japan’s Nikkei rebounded after Friday’s BOJ-driven losses, while South Korea’s KOSPI gained on Samsung’s Nvidia chip supply approval. Chinese and Hong Kong shares lagged amid weak tech sentiment, and India faced pressure from U.S. visa curbs. Elsewhere, Australia rose modestly and Singapore was flat.

U.S. equity index futures slipped on Sunday evening, with S&P 500 futures down 0.1% at 6,715.25, Nasdaq 100 futures down 0.1% at 24,849.50, and Dow Jones futures down 0.1% at 46,587.0. Traders remained cautious ahead of a series of key economic releases and speeches from Federal Reserve officials, which could provide fresh guidance on the outlook for U.S. interest rates.

European shares closed slightly higher on Friday, supported by financials, with Santander, BNP Paribas, and Nordea leading gains. The STOXX 50 rose 0.2% to 5,467, while the STOXX 600 was flat. Airbus and Safran advanced over 1%, offsetting a 6% drop in Moeller Maersk.

The dollar remained steady on Monday, extending its rebound from last week’s Fed rate cut, as investors awaited speeches from Federal Reserve officials for further guidance. Against the euro, the dollar rose slightly, with the euro down 0.07% to $1.1738. Movements were subdued amid market caution following recent central bank decisions globally.

Oil prices rose in Asian trade this morning after last week’s losses, supported by EU proposals for tougher sanctions on Russia and Ukrainian strikes on key refineries. Brent futures climbed 0.6% to $67.06 per barrel, while WTI gained 0.5% to $63.02. Supply risks from infrastructure disruptions are helping underpin the market.

Equities on the move

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

Samsung Electronics shares rose 5% on Monday after meeting NVIDIA’s requirements to supply high-bandwidth memory (HBM3E) chips for AI data centres. The company joins rivals SK Hynix and Micron in the market, as competition intensifies with SK Hynix recently completing development of next-generation HBM4 chips.

Oracle is reportedly in talks with Meta for a multi-year cloud deal worth around $20 billion to support AI model training and deployment. The move follows Oracle’s recent $300 billion contract with OpenAI and reflects growing demand for massive computing capacity. Oracle expects OCI revenue to exceed half a trillion dollars, with more multi-billion-dollar deals anticipated.

Apple has asked suppliers to increase production of the entry-level iPhone 17 by at least 30-40% following strong pre-orders, indicating higher demand for the $799 model over premium Pro versions. The move reflects growing price-sensitive consumer demand, with analysts noting that lower-priced sales may support market share but could pressure profit margins.

Tesla has received approval to begin testing autonomous robotaxi vehicles with safety monitors in Arizona, the state transportation department confirmed. The trials will take place in the Phoenix Metro area, following a limited test in Austin, Texas, in June. Details on the start date and trial duration have not yet been disclosed.

William Blair remains positive on Meta, highlighting the company’s AI and wearable technology progress, including four new smart glasses models. The firm believes Meta could become a long-term AI leader, projecting roughly 25% upside over 12 months and maintaining an Outperform rating, while noting risks from privacy, regulation, user growth, and advertising trends.

Baird upgraded Tesla to Outperform, raising its price target to $548, citing its leadership in the emerging “physical AI” era. Despite recent soft quarters, long-term opportunities in robotaxis, humanoid robots, energy storage, and software underpin growth potential. Milestones tied to Elon Musk’s pay package highlight upside, with share prices potentially reaching $1,400–$3,000 by 2035.

Jefferies views Visa as better positioned than Mastercard for 2026, citing stronger near-term growth, pricing tailwinds, and accelerating VAS revenue. Visa’s FY26 revenue is projected to rise just over 10%, while Mastercard faces headwinds from portfolio shifts and currency volatility. Both retain Buy ratings, with price targets of $410 for Visa and $675 for Mastercard.

Bernstein sees Kering shares as stretched, trading around €260 versus a €180 target, with continued double-digit organic sales declines expected in H2 2025. While cautious optimism exists around CEO Luca De Meo and Gucci’s new creative direction, analysts flag valuation risks and anticipate potential downward revisions for FY25 and FY26, suggesting limited near-term upside.

Goldman Sachs raised its price target on Baidu from $90 to $154, maintaining a Buy rating, citing confidence in the company’s non-search businesses. AI-driven growth and cloud services are expected to account for 54% of core revenue by 2027. The firm also highlighted potential in Baidu’s Apollo Robotaxi business and shareholder-friendly initiatives.

Berenberg upgraded Stellantis to Buy, raising its price target to €9.50, citing inventory clearance in the U.S. and upcoming product launches. Earnings are expected to recover in 2026, with EBIT rising to €7.1 billion and net income turning positive. Structural advantages, including modular platforms and cost efficiency, support the stock despite near-term challenges in Europe.

BofA downgraded Dassault Aviation to Underperform, cutting its price target to €290 from €310, citing weaker margins from new business jet deliveries and limited defence exposure. Analysts forecast lower 2025-28 EBIT, negative free cash flow in 2026-27, and uncertainties around the FCAS program. Despite a 49% YTD gain, further upside is seen as limited.

Upcoming data and events

This week, global markets are focused on central bank guidance, with FOMC speeches, including Chair Powell, following the recent Fed rate cut. Key U.S. data include PCE inflation, Q2 GDP, durable goods, PMI, and new home sales. PMIs in major economies and industrial profits in China are also due, alongside policy decisions in China, Switzerland, Sweden, and Mexico.

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