Equities seen rising amid easing tariff concerns

General market commentary

Financial markets remained volatile last week as the Federal Reserve held interest rates steady at 4.25%–4.5%, signalling a cautious approach amid slowing economic growth and trade uncertainty. While the Fed still projects two rate cuts in both 2025 and 2026, it downgraded 2025 growth expectations to 1.7% and raised inflation forecasts slightly. In a key shift, the Fed announced it would slow its balance sheet reduction from April, easing financial conditions by reducing the pace of Treasury runoff. However, with monetary policy still restrictive, the Fed is likely to remain on hold until it gains clarity on upcoming trade tariffs, expected to be detailed in early April.

Global markets saw mixed performance, with international equities and bonds outperforming US stocks. European markets benefited from increased infrastructure and defence spending, while Chinese equities rebounded on expectations of further stimulus. US Treasury yields declined on slowing growth expectations, boosting bond prices and delivering strong returns, particularly in investment-grade and emerging-market debt. Economic data signalled a cooling but resilient economy, with steady job growth and a surge in manufacturing output, though tariff concerns loom. While lower interest rates and policy support could stabilise conditions later this year, trade uncertainty and monetary policy shifts are likely to keep markets volatile in the near term.

Latest market and economic update

Asian equities traded in a tight range on Monday as investors assessed the impact of softened U.S. trade tariffs, while Japanese markets fell following weak business activity data. Chinese shares rebounded on optimism over domestic AI advancements, with Ant Group reportedly using local chips to develop cost-effective AI training techniques.

U.S. equity futures pointed to a positive open on Monday, with S&P 500 and Nasdaq 100 futures rising 0.6% and 0.8%, respectively, as investors focused on upcoming economic data and Trump’s proposed tariff hikes. Treasury yields remained steady, while uncertainty over trade policy kept equities markets cautious after a volatile start to the year.

European equities fell on Friday, with the pan-European STOXX 600 down 0.6%, marking a third consecutive session of declines, while the UK’s FTSE 100 also struggled amid a fire-related closure at Heathrow Airport. The travel and leisure sector saw significant losses, with IAG, Lufthansa, and Ryanair down, while basic resources miners and industrials also dropped, while the German market gained 0.5% on the week, boosted by the passing of major economic reforms.

The U.S. dollar hovered just below a three-week high on Monday, with traders awaiting clarity on Trump’s upcoming tariff plans, while the euro rebounded 0.24% to $1.0836 after recent declines and sterling edged up 0.15% to $1.2934. Despite earlier weakness this year, expectations of higher tariffs and slower U.S. growth have supported the dollar, though its performance remains mixed against major peers.

Oil prices dipped overnight as investors weighed the potential impact of Russia-Ukraine ceasefire talks, which could increase Russian oil supply, alongside OPEC+ production plans. While fresh U.S. sanctions on Iran raised supply concerns, the broader outlook remains uncertain amid expectations of increased exports and mixed demand signals.

Equities on the move

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

Jack Ma-backed Ant Group has reportedly developed less costly AI training techniques using Chinese-made semiconductors, potentially reducing costs by up to 20%, while still exploring alternatives to Nvidia chips. This reflects China's broader push for AI self-sufficiency amid US chip restrictions, which has fuelled a rally in Chinese equities throughout 2025.

U.S. President Donald Trump awarded Boeing a $20 billion contract to build the U.S. Air Force's next-generation fighter jet, the F-47, marking a significant win for the company and boosting its shares. The contract, which will replace the F-22 Raptor, also dealt a blow to Lockheed Martin, which had hoped to secure the deal.

Tesla plans to produce 5,000 units of its Optimus humanoid robot this year, leveraging its self-driving technology to accelerate development. CEO Elon Musk reassured employees during an all-hands meeting, urging them to hold onto shares amid the company's current struggles, while highlighting the potential for scaling production to 50,000 units by 2026.

Johnson & Johnson announced plans to invest over $55 billion in the U.S. over the next four years, including the construction of a high-tech biologics manufacturing facility in North Carolina. The investment will create thousands of jobs, enhance research and development, and support the production of next-generation medicines, contributing significantly to the U.S. economy.

Carnival Corporation reported better-than-expected first-quarter earnings and revenue, driven by strong demand and higher onboard spending, with adjusted earnings per share of $0.13 and record revenue of $5.81 billion. Despite raising its full-year earnings outlook, the company's shares fell over 1%, though it expects a 30% increase in adjusted net income for 2025, with continued growth in ticket prices and onboard sales.

Nio's shares fell by 4.5% of Friday after the company reported a larger-than-expected fourth-quarter loss and provided disappointing guidance for the current quarter. The EV maker's revenue missed forecasts, and its first-quarter delivery projections were well below analyst expectations, raising concerns about its future performance despite strong vehicle sales growth in 2024.

Goldman Sachs initiated coverage on Sanofi with a "neutral" rating and a price target of €120, citing potential upside but emphasising the need for strong execution in its R&D pipeline to drive long-term growth. The analysts highlighted the importance of replacing Dupixent's profits, which face patent expiration in 2031, and stressed that further successful pipeline readouts, particularly for itepekimab and tolebrutinib, are critical to de-risking the company’s future earnings outlook.

Berenberg upgraded Airbus from "sell" to "hold" after aligning its forward earnings estimates with consensus, though it remains sceptical about the company's production targets and growing reliance on end-of-year deliveries. Despite improved profitability projections for 2025 and 2026, Berenberg warns that Airbus’s valuation remains unappealing, with ongoing challenges in commercial aerospace and supply chain issues impacting performance.

RBC Capital Markets upgraded L’Oréal to "outperform" from "sector perform," citing stronger growth prospects in hair and skin care, alongside a renewed focus on innovation and product launches. Despite short-term challenges in North America and China, RBC is optimistic about a second-half recovery, driven by L’Oréal’s increased R&D investments and expanding market share in emerging regions and e-commerce.

Barclays upgraded Mercedes-Benz Group to "Equal Weight" from "Underweight" after better-than-expected Q4 profitability, a stronger product mix, and successful cost-cutting initiatives. The bank raised its price target to €57.5, noting improved earnings outlook and ongoing positive momentum, though cautioning about potential tariff risks.

Morgan Stanley upgraded Norwegian Cruise Line Holdings to Equal-Weight from Underweight, citing a more balanced risk-reward profile following the shares, recent underperformance. The firm raised its price target to $22, highlighting the company's struggles with financial leverage and cost efficiency, but believes the worst of the underperformance may be behind it despite ongoing macroeconomic risks.

JPMorgan upgraded Super Micro Computer to "Neutral" from "Underweight," citing improved demand for Blackwell-based server shipments and higher average selling prices, though it cautioned about potential margin pressures and ongoing internal control costs. The firm raised its December 2025 price target to $45, while forecasting significant revenue growth, but noted concerns over gross margin moderation and working capital challenges in FY26, which could limit earnings growth.

Loop Capital downgraded FedEx to "Sell" from "Hold," citing risks from potential U.S. tariffs and rising recession concerns, while reducing its price target to $221 from $283. The firm's downgrade follows FedEx's weaker-than-expected fiscal Q4 guidance and revised earnings outlook, with concerns that trade protectionism and a possible recession could significantly impact the company's performance.

Upcoming data and events

The week ahead will focus on key economic data from the U.S., including personal income and spending, PCE price indices, and Q4 GDP growth, alongside March PMI data from the UK, France, Germany, and the Euro Area. Additionally, inflation reports from the UK, France, and Spain, as well as updates on Germany's unemployment rate and Ifo business climate index, will be closely watched.

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