Markets range-bound as US-China trade talks unfold

Markets opened the week with a cautiously optimistic tone, lifted by the resumption of US-China trade talks and ahead of key inflation data. Equities posted modest gains on Monday as officials from both nations met in London to address tensions around technology and rare earths. The Nasdaq Composite rose 0.3 percent and the S&P 500 edged up 0.1 percent, while the Dow Jones Industrial Average ended flat. Gains were strongest in consumer discretionary and materials, while utilities and financials lagged. In commodity markets, oil prices climbed further, supported by hopes of improved global demand if trade tensions ease. Elsewhere, Asia saw mixed gains despite weaker Chinese export data, while European equities moved broadly lower. The US dollar softened against major currencies.

Investor sentiment remains delicately balanced as attention turns to May’s consumer price data, due Wednesday. Bond yields moved lower, with the 10-year US Treasury yield falling to 4.48 percent, as markets continue to factor in the likelihood of rate cuts later this year. Inflation is expected to pick up slightly, driven by tariff-related price pressures, but long-term expectations remain well anchored. Recent earnings results have also helped support sentiment, with S&P 500 companies showing stronger-than-expected profit growth at 12.7 percent year-on-year. While risks tied to geopolitics and inflation remain, investors are beginning to cautiously re-engage with risk assets, encouraged by signs of economic resilience and a more constructive global dialogue.

Latest market and economic update

Most Asian markets rose this morning, boosted by optimism around ongoing US-China trade talks and reports that President Trump is considering lifting some chip export restrictions against China. Key markets such as South Korea’s KOSPI and Japan’s Nikkei advanced strongly, while Chinese indexes in Shanghai and Hong Kong saw modest gains despite weak domestic economic data.

US equity futures were little changed overnight as investors awaited further developments from US-China trade talks in London and upcoming economic data. In after-hours action, Apple slipped following a muted WWDC showing, while Qualcomm rose sharply after announcing a $2.4 billion deal to acquire Alphawave.

European shares edged lower on Monday as investors remained cautious ahead of ongoing US-China trade talks in London, with the STOXX 600 ending slightly down after a four-day winning streak. The utilities sector declined amid falling Eurozone bond prices, while automakers held steady amid rare earth export concerns.

The US dollar strengthened on Tuesday, with the dollar index rising above 99.2 as optimism around renewed US-China trade negotiations boosted sentiment toward US assets and eased recent market concerns. The euro fell to 1.1395 against the greenback, reflecting broad dollar gains ahead of key US inflation data due later this week, which could influence monetary policy expectations.

Oil prices made modest gains in Asia as investors awaited the outcome of ongoing US-China trade talks in London, with hopes of easing export controls supporting the market. Meanwhile, a lack of progress in US-Iran nuclear negotiations kept sanctions in place, limiting Iranian oil supply and providing additional support to crude prices.

Equities on the move

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

Apple’s WWDC event was largely seen as underwhelming, with the main takeaway being a delay in Siri AI enhancements and no major breakthroughs in AI development. The company unveiled incremental updates, including redesigned operating systems with a new "liquid glass" look and features like Call Screening and live translation, while emphasising user privacy in its AI integrations.

Qualcomm agreed to acquire British semiconductor firm Alphawave for about $2.4 billion, boosting its expansion into the AI data centre market and diversifying beyond smartphone chips. Alphawave shareholders will receive a 96% premium in the cash deal, expected to close early 2026, with the acquisition facing little regulatory risk after Alphawave exited its Chinese joint venture.

Uber Technologies Inc is set to acquire Taiwanese taxi firm Crown Taxi, further expanding its footprint in Asia, although the deal remains subject to regulatory approval. Crown Taxi, one of Taiwan’s largest operators and an Uber partner since 2017, complements Uber’s global strategy of acquiring local taxi services to strengthen its international presence.

London-based activist hedge fund Parvus Asset Managementis is acquiring a stake in Danish pharmaceutical firm Novo Nordisk, aiming to influence the new CEO appointment amid a 50% share price decline. The fall follows disappointing trial results and sales of its obesity drug Ozempic, while current CEO Lars Fruergaard Jørgensen plans to step down once a successor is found.

L’Oréal agreed to acquire a majority stake in British skincare brand Medik8, strengthening its position in the fast-growing dermatological market with a deal valuing Medik8 at around €1 billion. The acquisition boosts L’Oréal’s luxury portfolio, while Inflexion keeps a minority stake and L’Oréal can buy out remaining shareholders.

Jefferies maintained a Buy rating on Oracle, raising its price target to $200, citing strong backlog growth, stable demand, and expectations of easing cloud capacity constraints that should boost IaaS growth in FY25 and FY26. Despite current premium valuation, analysts see potential for further gains as Oracle's backlog converts to revenue and capacity constraints ease with Stargate integration.

Morgan Stanley downgraded Lululemon to Equal-weight and cut its price target to $280, citing concerns over a weak recovery in the U.S. market and a lack of meaningful same-store sales growth. Despite potential earnings beats, the firm sees limited upside until North American sales improve, with tariffs and international expansion costs likely to pressure margins and valuation.

Deutsche Bank downgraded Intuitive Surgical to Sell from Neutral, cutting its price target to $440 from $515 due to rising competition from new robotic systems like Medtronic’s Hugo. While confident in the da Vinci platform’s dominance, the bank warned of challenges ahead despite the equity’s strong performance since its 2000 IPO.

Wall Street analysts are bullish on eToro following its IPO, with four major firms initiating coverage highlighting its strong growth potential and differentiated product suite. Price targets range from $76 to $85, reflecting expected annual account growth of around 10% and improved profitability driven by eToro’s innovative social trading and AI-driven tools.

Mizuho downgraded Chewy to Neutral, citing the recent 55% share rally and improved growth trends are priced in, while warning of risks in upcoming Q1 results, including optimistic guidance and high margin expectations. Chewy must show strong customer gains, better margins, and accelerated Q2 revenue growth to justify further share price rises.

Morgan Stanley raised its price target for AppLovin to $460, viewing the sale of its first-party games segment as a positive move that boosts shareholder value by shifting profits from a low to a higher multiple business. Despite a slight EBITDA downgrade, the valuation multiple was increased to 29x, showing confidence in the ad network’s growth.

Upcoming data and events

Markets will today focus on the EIA Short-Term Energy Outlook, API Weekly Crude Stock report, and the Treasury’s 3-Year Note Auction, all poised to impact market sentiment and activity.

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