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General market commentary
The market's performance in the first week of President Trump's second term has been largely positive, with the S&P 500 rising 1.7% and reaching an intraday record high. Strong quarterly earnings from companies such as GE Aerospace, Union Pacific, and Netflix have supported investor sentiment, driving the overall optimism. The communication services sector posted the largest gain, up 4%, with Netflix surging 14% following strong earnings and subscriber growth. Similarly, health care and industrials saw notable increases, with Moderna's share price climbing 22% on the back of new government contracts, and GE Aerospace reporting a solid earnings beat. However, the energy sector struggled, declining by 2.9%, partly due to a drop in crude oil futures.
Looking ahead, investors are hopeful that the Trump administration will follow through on its promises to lower taxes and reduce regulations, which could further boost the market. Sentiment is likely to remain driven by expectations of pro-growth policies, particularly as earnings season continues and more companies report results. The possibility of tax cuts, especially for corporations, remains a key theme, with the market positioning itself for potential long-term benefits from reduced financial burdens on businesses. Moreover, the administration’s focus on deregulation, particularly in the financial services sector, could also fuel optimism, albeit the process will require cooperation from Congress and may take time to materialise.
Despite the positive economic outlook, investors should brace for continued volatility as the market adjusts to the potential policy shifts under the new administration. Central bank decisions, particularly regarding interest rates, as well as the upcoming earnings reports from major US tech firms like Apple, Microsoft, and Meta Platforms, could lead to more market fluctuations. Key economic data releases, including the December personal consumption expenditures price index and GDP figures, will also provide further clues about the direction of the economy. As always, investors are advised to maintain a long-term perspective, focusing on the fundamental drivers of growth, including innovation, productivity, and economic stability, while using any market volatility as an opportunity to rebalance and diversify their portfolios.
Latest market and economic update
Most Asian equities fell on Monday, with risk appetite hit by U.S. President Trump's tariffs on Colombia and weak Chinese PMI data highlighting economic struggles. However, Hong Kong's Hang Seng index outperformed, rising 0.6% as major Chinese internet shares gained on optimism around the DeepSeek AI model.
U.S. equity futures dropped sharply this morning, with Nasdaq futures tumbling 1.8% and S&P 500 futures falling 0.9%, as investors reacted to the launch of China’s DeepSeek AI model. The market downturn was compounded by concerns over U.S. trade tensions following President Trump’s imposition of tariffs on Colombia.
European equities closed flat on Friday, following nine consecutive sessions of gains, with the STOXX 50 reaching its highest level since 2000. Luxury shares, led by strong sales at Burberry, outperformed, while auto manufacturers rebounded on softer rhetoric from President Trump on tariffs. Novo Nordisk saw a 7% surge following promising weight-loss drug results, while ASML ended the week with a 2% drop.
The US dollar strengthened this morning as traders assessed the impact of Trump’s tariff plans and the upcoming Federal Reserve meeting, with the euro slipping to 1.0469 ahead of the ECB's policy meeting. Meanwhile, concerns over tariff tensions led the Mexican peso to weaken, and investors closely watched for potential clues on U.S. rate cuts in the coming months.
Oil prices fell sharply on Monday, pressured by U.S. President Trump's repeated calls for OPEC to lower crude prices and his new tariffs on Colombia, heightening trade concerns. Weak Chinese PMI data also weighed on the market, signalling ongoing economic pressure in the world’s largest oil importer.
Chinese manufacturing activity unexpectedly contracted in January, with PMI falling to 49.1, while non-manufacturing growth also slowed sharply to 50.2, reflecting limited impact from recent stimulus measures. The data underscores the need for further government support amid looming U.S. trade tariff threats.
The preliminary US S&P Services PMI for January dropped to 52.8, below expectations, signalling slower economic growth, while the Manufacturing PMI rose to 50.1, returning to expansion after six months. We expect further Fed interest rate cuts and pro-growth policies, like tax cuts and deregulation, to help sustain US economic expansion.
Moody's raised Argentina's long-term foreign currency sovereign credit rating to "Caa3" from "Ca," citing the government's successful policy shift and economic stabilisation. This comes after a record $18.9 billion trade surplus in 2024, reflecting the impact of President Milei's economic reforms. The agency also revised Argentina's outlook to "positive" from "stable," as the government continues to make progress on fiscal adjustment and macroeconomic stability.
Equities on the move
The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:
Nvidia’s shares dropped over 5% in 24 hour-markets amid concerns that China’s DeepSeek R1, a new AI model, could lead to more capital-efficient AI development, reducing demand for expensive AI chips like Nvidia’s H100. While some analysts worry DeepSeek's efficiency could challenge Nvidia’s dominance, others argue the concerns are exaggerated, citing the model’s reliance on older-generation chips and export restrictions.
Novo Nordisk's shares rose after its experimental drug, amycretin, showed promising results, with patients losing up to 22% of their body weight in clinical trials. The company plans to continue developing amycretin for overweight and obese adults, building on the success of its existing weight-loss drugs, Wegovy and Ozempic, as it competes in the growing GLP-1 obesity treatment market.
Burberry reported a smaller-than-expected 4% drop in quarterly sales, driven by a strong holiday season in the US, which contributed to a 9.6% surge in its share price. CEO Joshua Schulman’s strategy of emphasising the brand’s iconic trench coats and scarves, rather than less recognisable designs, helped boost customer growth and increase brand desirability.
American Express exceeded analysts' expectations for Q4, posting adjusted EPS of $3.04, driven by robust card member spending and increased net interest income. For 2025, the company forecasted revenue growth of 8-10% and projected earnings per share between $15.00 and $15.50, while also announcing a 17% increase in its quarterly dividend to $0.82 per share.
Verizon reported stronger-than-expected Q4 results, with earnings per share of $1.10 and revenue of $35.7 billion, driven by robust consumer revenue and higher wireless equipment sales. For the full year 2025, the company forecasts wireless service revenue growth of 2% to 2.8%, along with adjusted EBITDA growth of 2% to 3.5%, while expecting cash flow from operations to reach between $35 billion and $37 billion.
Diageo confirmed it has no intention of selling its Guinness beer brand or its stake in Moet Hennessy, following reports that the company was exploring options for both. Despite Guinness being an outlier in Diageo's primarily spirits-focused portfolio, the brand has seen strong growth, outperforming key liquor labels like Johnnie Walker, with sales rising by double digits each year since 2021.
State-backed Monte dei Paschi di Siena has made a surprise €13.3 billion all-share bid to acquire merchant bank Mediobanca, despite the deal puzzling some analysts. The offer, which aims to strengthen Italy's banking sector, is seen as a challenge due to cultural differences between the two institutions and concerns over its execution.
Shares of British American Tobacco, Altria Group, and Philip Morris International rose after the Trump administration withdrew a proposal to ban menthol cigarettes, a move seen as a relief for the tobacco industry. The decision prevents a significant loss of market share in the US, where menthol cigarettes are popular, and helped boost investor confidence in the sector.
Intuitive Machines' shares rose after the company secured a $2.5 million NASA contract to study lunar logistics and mobility under the Moon to Mars mission. This contract underscores the company's growing role in space exploration, with its focus on advancing lunar payload transport and surface mobility, building on its success with the Nova-C lunar lander.
Chewy’s shift to an in-house advertising platform is expected to boost revenue and reduce costs, with the potential for its ad revenue to grow from 1% to 3% of total sales. Mizuho analysts have set a $42 price target, highlighting the platform’s role in driving future growth through new ad formats and improved vendor offerings.
NextEra Energy is making progress in evaluating the recommissioning of its Duane Arnold nuclear plant in Iowa, with the possibility of restarting operations by 2028. While the company reported lower-than-expected revenue in the fourth quarter, it upheld its earnings forecast for the current year and anticipates consistent growth at an annual rate of 6% to 8% through 2027.
SES SA has taken steps to strengthen its bond position by completing a €625 million buyback, which included purchasing €100 million of its perpetual bonds. This move comes as the company faces increasing competition from Elon Musk’s Starlink. The buyback has resulted in a 4-cent rise on the euro, helping to recover a significant portion of the losses suffered earlier in the month.
Bernstein upgraded Netflix to "Outperform" and raised its price target to $1,200, citing strong subscriber growth and improving margins. The firm forecasts continued double-digit growth, particularly in international markets, and believes Netflix’s content efficiency and ad-supported tier will further boost revenue.
Bank of America expects strong fiscal Q1 2025 results for Apple, driven by high demand for the iPhone 16, but anticipates weaker guidance for the March quarter due to lower iPhone shipments. Despite lowering its iPhone sales forecasts for fiscal 2025 and 2026, the bank remains bullish on Apple, maintaining a Buy rating with a reduced price target of $253.
TD Cowen reiterated its Buy rating on United Airlines and raised its price target to $165 from $142, following strong Q4 earnings and a positive 2025 outlook. The airline is well-positioned to benefit from investments in luxury travel, satellite internet, and advertising, with expectations for further gains in 2026 and 2027.
Wedbush nearly doubled its price target for Oklo Inc to $45, citing the company's potential to meet the growing energy demands of AI datacenters. With backing from OpenAI's Sam Altman, Oklo's advanced nuclear technology and long-term power contracts position it for strong growth, particularly as AI computing power is expected to increase dramatically by 2030
Sherwin-Williams shares rose after Berenberg upgraded the equity to "Buy" and raised its price target to $420, citing strong earnings growth and market share gains. The company is expected to benefit from a more favourable competitive environment and expanding opportunities in high-growth regions like California and Texas.
Stifel raised its price target for EssilorLuxottica, citing strong growth potential from its partnership with Meta, which has led to the successful Ray-Ban Meta smartglasses. While the partnership is expected to significantly contribute to future revenue, Stifel maintains a "Hold" rating due to concerns over market competition and regulatory challenges.
Upcoming data and events
This week, traders will focus on President Trump's policy announcements, key central bank decisions, and earnings from major tech companies. The Fed is expected to keep rates steady, while the ECB and BoC are likely to cut borrowing costs, with significant economic data releases, including GDP growth and inflation figures across various regions.
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