Fed reiterates it is in no rush to lower rates

General market commentary

US shares were mixed on Tuesday, with the S&P 500 closing nearly flat, while the Nasdaq dipped slightly. Energy equities outperformed, driven by a 1.2% rise in oil prices, while consumer staples also showed strength. The bond market saw yields rise, with the 10-year Treasury climbing to 4.54%, as investors digested Federal Reserve Chair Jerome Powell's remarks. Powell reaffirmed the Fed’s cautious stance on monetary policy, highlighting that while inflation remains above target, the economy is strong enough to avoid drastic policy shifts. In corporate news, Coca-Cola surged 4.7% after reporting better-than-expected earnings, while shares of Tesla dropped by nearly 6.3%, reflecting concerns over its latest performance and outlook.

Trade uncertainty continued to weigh on market sentiment, with President Trump signing new tariffs on steel and aluminium imports and signalling potential reciprocal tariffs. This uncertainty, along with a drop in small business optimism, highlighted the growing concerns over fiscal and trade policy, which are likely to remain a constraint on business confidence. Investors will be watching the release of US inflation data on Wednesday, with expectations for a 0.3% rise in the Consumer Price Index (CPI) for January. As markets await further economic signals, gold and silver both saw minor declines, reflecting a shift towards higher bond yields.

Latest market and economic update

Most Asian indices saw modest gains on Wednesday, with Hong Kong’s Hang Seng leading the charge, rising over 2% driven by strong performances in tech and electric vehicle shares. Meanwhile, other regional indices, including Japan’s Nikkei, South Korea’s KOSPI, and mainland China’s Shanghai Composite, saw more subdued movements as investors remained cautious ahead of the US inflation report.

U.S. equity futures were little changed on Wednesday as investors awaited the release of the January consumer inflation data, which could offer insights into future Federal Reserve actions. Following mixed results on Tuesday, equity sentiment remains cautious amid concerns over trade tensions and Powell's reiteration of the Fed's cautious approach to interest rate cuts.

European equities closed firmly higher on Tuesday, with the Eurozone’s STOXX 50 hitting its highest level since 2000, supported by strong corporate results and the view that European shares offer favourable valuations compared to their North American counterparts. However, shares of ferrous and base metal miners in London were under pressure, with Rio Tinto, Anglo American, and Glencore losing up to 3% following the US's imposition of new tariffs on aluminium and steel.

The dollar index held steady around 108 on Wednesday, following a pullback in the previous session, as investors awaited crucial inflation data to guide the future path of interest rates. The euro remained under pressure, trading at 1.0358 against the dollar, with ongoing trade concerns and Fed remarks weighing on the currency.

In his Semiannual Monetary Policy Report to Congress, Fed Chair Powell reaffirmed that, with the economy remaining strong and the Fed's policy stance now less restrictive, there is no immediate need to adjust the federal funds rate. While inflation is closer to the 2% target and labour market conditions have cooled, Powell cautioned that moving too quickly or too slowly on policy changes could disrupt economic progress and employment.

Equities on the move

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

Siemens Energy reported this morning a record order book of €131 billion, driven by strong demand for energy equipment such as gas and wind turbines, as well as power converter stations and electrolysers. The company also posted a net profit of €252 million for the first quarter, surpassing expectations, with significant growth in orders from the US, which saw a 62% rise to €3.9 billion.

Alibaba's Hong Kong-listed shares surged over 8% to a four-month high following reports of a strategic partnership with Apple to develop AI features for iPhones in China. The collaboration, driven by Alibaba's extensive user data and AI expertise, aims to enhance personalised services for Chinese consumers, with the companies planning to launch the features in April after receiving regulatory approval.

Super Micro Computer's shares rose over 8% after the company announced it expects to file its delayed annual and quarterly reports by February 25, despite facing subpoenas from the DOJ and SEC over allegations of accounting manipulation. The server maker also lowered its revenue forecast for fiscal 2025 to between $23.5 billion and $25 billion, citing delays in Nvidia's Blackwell processors, and anticipates Q3 sales of $5 billion to $6 billion, below analyst expectations.

S&P Global forecast 2025 adjusted earnings per share above Wall Street expectations, citing increased demand for its data and analytics amid macroeconomic uncertainty, with an anticipated annual profit between $17.00 and $17.25 per share. The company also announced a $650 million share repurchase programme, and reported a 14% rise in quarterly revenue, driven by strong performance in its Ratings and Market Intelligence segments.

Coca-Cola's fourth-quarter income exceeded estimates, driven by a rise in volumes, particularly in North America, where demand for higher-priced beverages was boosted by the introduction of slimmer cans. Despite flat volumes in some regions, the company reported a 2% global volume increase and expects 5% to 6% organic revenue growth for 2025, with earnings per share projected to rise by 2% to 3%.

Shopify's shares reversed course to close 3% higher, despite initially slumping 8% in premarket trading, following their better-than-expected fourth-quarter earnings and revenue results. The company also projected mid-twenties revenue growth for the current quarter and an increase in operating expenses.

UniCredit reported a 2% increase in net profit for FY24, reaching €9.7 billion, with strong performance driven by a 4% rise in net revenue and an 8% increase in net profit excluding deferred tax assets. The bank also raised its dividend by 33%, announced €5.3 billion in share buybacks, and expects FY25 net revenue to exceed €23 billion, while projecting further growth in shareholder returns despite macroeconomic challenges.

Kering's shares rose over 1% after the luxury goods group reported fourth-quarter results that surpassed analysts' expectations, with a 4% organic revenue increase and a strong performance from brands like Bottega Veneta and Saint Laurent, despite Gucci's ongoing challenges. The company also proposed a €6 dividend per share and generated €1.4 billion in free cash flow, with speculation surrounding potential changes at Gucci under new CEO Stefano Cantino contributing to investor optimism.

BP reported a sharp decline in fourth-quarter profit, posting an underlying profit of $1.2 billion, down from $3 billion the previous year, due to weaker refining margins, lower energy prices, and higher costs. Despite the downturn, the company maintained shareholder returns with a dividend and $1.75 billion share buyback plan, while pledging to reset its strategy to drive future growth and improve performance.

Tesla’s shares fell 6.3% on Tuesday, making it the worst-performing equity among the "Magnificent Seven" this year, largely due to a decline in China sales, intensified competition from BYD, and concerns over CEO Elon Musk’s divided focus. The company is also grappling with external pressures, including a price war in the Chinese market and tariffs on key materials like steel and aluminium, which are vital for its production.

Commerzbank is preparing to announce staff cuts of up to 4,000 people and new financial targets in an effort to fend off a potential takeover by Italy's UniCredit, which has already made significant moves to acquire the German bank. Despite a 20% increase in net profit and a successful turnaround, Commerzbank faces significant political and internal opposition to the merger, as German leaders, including Chancellor Olaf Scholz, have strongly resisted UniCredit's advances.

Bank of America projects a record net interest income (NII) growth of 6% to 7% for 2025, with NII expected to reach $15.5 billion to $15.7 billion by Q4, driven by strong consumer spending. Retail banking head Holly O'Neil highlighted solid client liquidity, stable spending patterns, and ongoing investments in technology, marketing, and AI to enhance the client experience and support organic business growth.

Berkshire Hathaway increased its stake in Occidental Petroleum by purchasing an additional 763,017 shares for $35.7 million, bringing its total holdings to 264.9 million shares. This move comes amid a decline in Occidental’s stock price, as the company faces pressure from falling oil prices and concerns over slowing demand due to trade tariffs and a potential economic slowdown.

PhillipCapital downgraded Spotify to "Neutral" from "Accumulate" despite strong Q4 results, citing limited upside following recent share price gains. While the firm raised its price target to $600, it noted Spotify's full valuations, despite its leadership in audio streaming, growing subscriber base, and improved cost efficiency.

Analysts at BMO Capital Markets have raised their price target for DoorDash Inc to $240 from $180, citing better-than-expected user engagement, strong international growth, and an optimistic outlook for 2025. The brokerage highlighted DoorDash's increasing monthly active users, market share expansion, and growth opportunities in grocery delivery and retail media, with raised EBITDA estimates for 2025 and 2026.

Jefferies upgraded EssilorLuxottica to a "buy" rating, citing the company's leadership in the expanding eyewear market and its innovations in smart eyewear, hearing care, and myopia management. The analysts raised the price target to €310 per share, forecasting accelerated earnings growth and highlighting the potential for further upside, particularly with a recovery in the U.S. market and possible tariff impacts.

Upcoming data and events

Today's economic data includes January's CPI figures for both the US and EU, as well as US crude oil inventories, and the Federal Budget Balance. Among the companies reporting today, we have Cisco, CVS Health, CME Group, Robinhood, Vertiv, and Reddit.

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