Markets higher despite OECD growth downgrade

General market commentary

Equity markets closed higher on Tuesday, buoyed by strong performances in the technology and energy sectors. Investor sentiment was lifted by optimism surrounding renewed trade negotiations, as President Trump signed an executive order doubling steel and aluminium tariffs, while pushing for accelerated talks ahead of the July 9 deadline. The Dow Jones Industrial Average rose by 0.51%, the S&P 500 gained 0.58%, and the Nasdaq Composite advanced 0.81%, with chipmakers such as Nvidia and Broadcom leading the gains. A rebound in risk assets was further supported by hopes of dialogue between Trump and Chinese President Xi Jinping, as markets look for clarity on future tariff policy. Meanwhile, US Treasury yields moved higher, with the 10-year yield touching 4.45%, and the US dollar strengthened against major currencies.

In economic data, US job openings rose to 7.4 million in April, signalling ongoing strength in the labour market, even as layoffs edged up and quits declined slightly. Manufacturing data was weaker than expected, with factory orders falling 3.7% and inventories slipping after months of pre-tariff stockpiling. Still, the broader manufacturing outlook remains relatively stable. Elsewhere, Asia ended mixed as Chinese manufacturing slumped into contraction, while European equities rose modestly amid a drop in eurozone inflation to 1.9%, potentially paving the way for a European Central Bank rate cut later this week. In commodities, oil prices climbed amid geopolitical tensions involving Ukraine and Iran. Notable corporate movements included gains in Wells Fargo following a regulatory cap removal, and a sharp rise in Dollar General after strong earnings, while Kenvue declined on tariff-related retailer destocking.

Latest market and economic update

Most Asian stocks rose on Wednesday, led by South Korea’s KOSPI, which surged 2.4% after the election of Lee Jae-myung. China’s indexes and Hong Kong’s Hang Seng also gained on hopes of renewed U.S.-China trade talks, while Australia and Japan markets advanced despite softer economic data.

US equity futures were little changed overnight as investors awaited key labour market data later in the week. In after-hours trading, Hewlett Packard jumped nearly 5% on strong quarterly results, while CrowdStrike fell 6.5% following weaker revenue guidance, highlighting mixed sentiment in the technology sector.

European shares closed mostly flat yesterday, recovering from earlier losses after weaker-than-expected Eurozone inflation data reinforced expectations of a 25 basis point ECB rate cut. Sentiment was dampened by the OECD’s downgraded global growth outlook and political instability in the Netherlands, while corporate news included a major healthcare real estate merger and British American Tobacco raising its US sales growth target.

The US dollar index eased to around 99.1 on Wednesday as investors awaited key labour market reports that could influence Fed policy decisions. The dollar weakened broadly, notably against the South Korean won, while EUR/USD traded near 1.1368, reflecting cautious optimism amid mixed economic signals and ongoing trade uncertainties.

Oil prices dipped slightly in Asia this morning after recent gains, supported by geopolitical tensions and stalled U.S.-Iran talks. U.S. inventories fell more than expected, signalling strong demand ahead of summer, while Canadian wildfires threaten supply.

Equities on the move

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

CrowdStrike forecast second-quarter revenue below estimates, signalling weaker government and enterprise cybersecurity spending, causing shares to fall 6.5% after hours. The company faces pressure from higher interest rates, inflation, competition, and expects a $29 million hit to free cash flow due to outage expenses.

Wells Fargo had its $1.95 trillion asset cap lifted by the U.S. Federal Reserve on Tuesday, ending a seven-year restriction imposed after the bank’s scandal and signalling progress under CEO Charlie Scharf. The move allows the bank to pursue growth more freely and boosted investor confidence, with employees receiving $2,000 each to mark the milestone.

Hims & Hers plans to acquire European digital health platform ZAVA, expanding into key markets including Germany, France, Ireland, and the UK. The all-cash deal, expected to close in the second half of 2025, will increase Hims & Hers’ customer base by 50%, adding 1.3 million users, and accelerate its ambition to become a global leader in personalised digital healthcare by combining ZAVA’s clinical infrastructure with its technology and consumer experience.

Meta Platforms signed a 20-year agreement to purchase about 1.1 gigawatts of nuclear power from Constellation Energy’s Clinton Clean Energy Center in Illinois, starting in June 2027. This deal will support the plant’s relicensing and continued operation, increase its output by 30 megawatts, and contribute to Meta’s goal of using 100% clean electricity.

Hewlett Packard Enterprise beat second-quarter revenue and profit estimates, reporting $7.63 billion driven by strong demand for AI-optimised servers and hybrid cloud, with adjusted earnings per share of 38 cents. The company raised its full-year revenue growth forecast to 7–9% and expects third-quarter revenue between $8.2 billion and $8.5 billion.

Dollar General reported first-quarter net sales of $10.44 billion, up 5.3% year-over-year, and earnings per share of $1.78, beating Wall Street estimates, leading the company to raise its full-year guidance with expected net sales growth of 3.7% to 4.7% and diluted EPS between $5.20 and $5.80. However, the retailer warned that tariff-related price increases could create headwinds despite plans to mitigate their impact.

Jefferies reaffirmed its Buy rating on Netflix shares and raised the price target to $1,400, citing strong upcoming content, limited subscriber loss from recent price hikes, and rapidly growing advertising revenue as key drivers. While expecting over 20% annual free cash flow growth, the firm noted risks from tough 2026 comparisons and margin pressures related to live sports investments.

Bernstein named Boeing its top pick in Global Aerospace & Defense, citing strong production momentum, improving fundamentals, and attractive valuation, with plans to ramp 737 MAX production from 38 to 42 units per month by year-end. The firm highlighted stabilising production, defence wins, and improved liquidity, maintaining an Outperform rating and $249 price target while noting free cash flow growth depends on higher production rates.

Barclays downgraded ASML to “equal weight” from “overweight,” citing a weak near-term outlook with 2026 revenue growth of just 1%, due to lower EUV sales and delayed High-NA adoption, plus risks from a weak order book and customer efficiency gains. Despite this, Barclays remains positive on ASML’s long-term prospects, forecasting an 11% annual growth rate from 2026 to 2030, though near-term growth may be volatile.

Evercore ISI upgraded Block shares to Outperform and raised the price target to $75, citing reduced risk in Cash App lending, stable low-end consumer spending, and strong product and sales execution. The firm highlighted improvements in Cash App gross profit and successful new product launches, viewing Block as attractively valued despite shares being down 27% year-to-date.

Jefferies downgraded Rio Tinto to Hold from Buy, citing a more balanced risk/reward profile amid uncertainties including CEO’s planned departure and concerns over lithium investments and iron ore prices. The brokerage highlighted risks from U.S. tariffs on Canadian aluminium and potential political challenges at Oyu Tolgoi, favouring Glencore, Anglo American, and Vale due to better capital allocation and geopolitical positioning.

JP Morgan upgraded Pinterest shares to Overweight and raised the price target to $40, citing improved user engagement, stronger ad revenue, and an attractive valuation. The firm expects 14% revenue growth in 2025 and margin expansion, while noting the shares trade below historical averages with a favourable risk/reward profile.

Upcoming data and events

Today’s key US data include the ADP employment report, service sector activity readings, and crude oil inventory figures, offering important insights into labour market trends, economic health, and energy supply. In Europe, early releases of the HCOB PMIs for France, Germany, and the Eurozone will provide a timely update on business conditions across the region. On the earnings front, Costco reports its quarterly results.

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