Payrolls data in focus

General market commentary

US financial markets were largely closed on Thursday in observance of a National Day of Mourning for former President Jimmy Carter, with both the New York Stock Exchange and Nasdaq 100 halting equity and options trading. Despite the market closure, economic data continued to flow, with the Philadelphia Federal Reserve's December manufacturing index showing a notable improvement, revised to -10.9 from -16.4. The decrease in job cuts, as reported by Challenger, Gray & Christmas, suggests some resilience in the labour market, though December's planned layoffs remain high compared to the previous year. Meanwhile, the energy sector saw a positive uptick, with oil prices rising on the back of tighter supply and falling US inventories, with West Texas Intermediate crude reaching $74.19 per barrel.

On the corporate front, the Dutch government's discussions with tech giants Nvidia and AMD about establishing an AI facility in the Netherlands highlights the growing importance of artificial intelligence on a global scale. At the same time, Super Micro Computer's launch of high-performance servers powered by Intel’s new Xeon 6900 processors signals continued innovation in the tech space. However, the Biden administration’s potential new restrictions on AI chip exports adds a layer of uncertainty to the tech sector, as companies like Nvidia and AMD could face further regulatory hurdles. These developments underscore both the opportunities and challenges within the current economic and geopolitical landscape.

Latest market and economic update

Most Asian equities ended the week lower, pressured by concerns over slower US interest rate cuts, potential Bank of Japan rate hikes, and weak Chinese inflation data. Regional markets also faced uncertainty ahead of US nonfarm payrolls data, with Chinese and Japanese shares particularly impacted by tariff fears and hawkish central bank expectations.

U.S. equity futures fell on Friday as investors awaited the release of the December nonfarm payrolls report, which could influence expectations for Federal Reserve rate cuts. Earnings reports from companies like Constellation Brands, Delta Air Lines, and Walgreens Boots Alliance are also due today.

European equity markets closed mixed on Thursday, with the DAX down 0.1%, the CAC 40 up 0.5%, and the FTSE 100 rising 0.8%. German industrial production beat expectations, but eurozone retail sales growth disappointed, while UK retailers Tesco and Marks & Spencer posted solid results despite economic headwinds.

The dollar index held steady above 109 on Friday as markets awaited the December nonfarm payrolls report, reinforcing expectations of fewer Federal Reserve rate cuts amid inflation concerns. The euro traded at $1.0294 against the dollar, reflecting the greenback’s resilience in light of strong US services activity and cautious Fed commentary.

Oil prices rose in Asian trade on Friday, supported by cold weather in the US and Europe, which boosted demand for heating fuels, and speculation of Chinese stimulus measures. However, a strong dollar limited price gains, with the outlook remaining cautious ahead of US nonfarm payrolls data and concerns over longer-term inflation under President-elect Trump.

Equities on the move

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

Tesla launched a revamped Model Y in China with updated features and increased range, starting at 263,500 yuan, as it faces competition from domestic brands like BYD and Xiaomi. CEO Elon Musk also revealed plans to produce several thousand Optimus humanoid robots in 2025, with plans to significantly ramp up production in the following years.

Airbus delivered 766 jets in 2024, maintaining its lead over Boeing despite facing slower industrial recovery and supply chain pressures, while forecasting strong demand for its A220, A350 freighter, and A321XLR models. The company aims to achieve a production rate of 75 A320 family units per month by 2027 and prepare for potential trade disputes, with plans to enter the US freight market by 2025, despite engine supply issues with Pratt & Whitney.

Tesco reported strong Q3 and Christmas trading results, with UK like-for-like sales up 3.8% and Christmas sales rising 4.1%, but maintained its full-year EBIT guidance at £2.9 billion. Despite solid performance across key markets, including Ireland and Central Europe, the company remains cautious, with analysts viewing any short-term pullback as a potential buying opportunity.

Sunac China shares plummeted nearly 30% after a liquidation petition was filed by China Cinda Asset Management, highlighting ongoing debt troubles in China’s property sector. Despite completing a $9 billion offshore debt restructuring in 2023, Sunac faces a liquidity crisis, with Beijing’s efforts to revive the sector struggling to restore homebuyer confidence.

Country Garden has proposed an $11.6 billion debt reduction plan to its offshore creditors, aiming to restructure its debt and seek more time from the Hong Kong High Court. The developer, once China’s largest, defaulted on $11 billion in offshore bonds in late 2023 and is working on options for creditors, including debt conversion or maturity extensions.

Barclays raised its price target for Ulta Beauty to $445 from $410 following stronger-than-expected preliminary Q4 results and the appointment of Kecia Steelman as CEO. The company also increased its guidance, expecting modest comp sales growth, and Barclays revised its earnings estimates upward for fiscal years 2024-2026.

Upcoming data and events

Today's economic data in Europe includes the HCOB Services PMI Final, which is expected to show a slight contraction at 49.5, and the unemployment rate is anticipated to remain stable at 6.3%. In the US, key reports include Non-Farm Payrolls expected at 227K and an unemployment rate forecasted to hold steady at 4.2%.

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