Rio Tinto and Glencore reignite potential merger discussi

General market commentary

US equity markets ended Thursday modestly higher overall, despite mixed performance across major indices. The Nasdaq Composite slipped as technology shares came under pressure, while gains in more cyclical and defensive areas supported the broader market. The Dow Jones Industrial Average rose solidly and the S&P 500 finished little changed. Energy, consumer staples, consumer discretionary and materials were the strongest performing sectors, helped by a sharp rebound in oil prices. In contrast, large semiconductor names such as Micron Technology, Applied Materials and Intel weighed on technology equities. Defence related equities outperformed after comments from President Donald Trump pointing to a substantial increase in US military spending.

Investor sentiment remained cautious ahead of the closely watched US employment report, contributing to restrained market moves. Rising Treasury yields also influenced positioning, with the 10 year yield climbing above 4.1 percent. In company news, Costco Wholesale stood out after reporting strong December sales, lifting its share price and providing support to consumer related equities. Overall, markets reflected a rotation away from high growth technology names towards traditional sectors, as investors balanced improving economic signals against uncertainty around interest rates and the labour market.

Latest market and economic update

Asian equity markets were subdued on Friday as investors remained cautious ahead of key US jobs data. Japan outperformed, supported by a weaker yen, while Australia edged higher. South Korea and Hong Kong were flat. Chinese equities rose modestly after inflation data signalled easing deflation pressures.

US equity index futures were largely unchanged overnight, with S&P 500 futures edging 0.1% higher, Dow futures up 0.1%, and Nasdaq 100 futures flat. The muted after-hours moves reflected investor caution ahead of Friday’s US nonfarm payrolls report and ongoing uncertainty around the Federal Reserve’s interest rate outlook.

European equities slipped as the STOXX 600 fell 0.2%, dragged down by a 2.2% decline in technology shares and a 1.6% fall in miners amid weaker gold and copper prices. Aerospace and defence equities reached record highs, while Puma surged 8.5% on takeover reports, highlighting cautious investor sentiment ahead of the 2026 earnings season.

The US dollar strengthened on Friday, nearing a one-month high against major currencies, including the euro, as investors awaited the US jobs report and a potential Supreme Court ruling on Trump’s global tariffs. The euro remained under pressure, trading around $1.1655, reflecting caution amid geopolitical tensions and uncertainty over US policy developments.

Oil prices rose for a second day, heading for a third weekly gain, as concerns grew over supply disruptions from Venezuela and unrest in Iran. Brent and WTI extended strong gains from Thursday, supported by geopolitical tensions, although rising global inventories and oversupply risks may limit further upside.

President Trump said he has decided on his next Federal Reserve chair but has not announced the nominee. He praised adviser Kevin Hassett without confirming him. Other contenders include Kevin Warsh and Christopher Waller. The choice could signal a shift in monetary policy and intensify debate over the Fed’s independence.

Equities on the move

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

Rio Tinto shares dropped sharply in Australian trade, falling over 6%, after confirming renewed merger talks with Glencore. The potential all-share combination could create one of the world’s largest mining companies, surpassing BHP in valuation. Some profit-taking also contributed after Rio’s recent record highs.

Johnson and Johnson agreed with the Trump administration to cut US drug prices in return for tariff exemptions. The company will join federal pricing programmes and expand US manufacturing, investing 55 billion dollars in new facilities. The deal follows similar agreements with other pharmaceutical firms amid pressure to lower medicine costs.

CrowdStrike will acquire identity security start-up SGNL for $740m to strengthen protection against AI-driven cyber threats. The deal adds real-time identity technology to its Falcon platform, targeting misuse of human, machine and AI identities. SGNL’s team will join CrowdStrike, with integration expected after the deal closes in early fiscal 2027.

China’s Anta Sports has offered to buy 29% of Puma from France’s Pinault family, potentially supporting the sportswear brand’s turnaround under CEO Arthur Hoeld. Puma shares jumped to their highest since May 2025. Artemis views the stake as non-strategic, while Anta aims to leverage its experience revamping Western sports and lifestyle brands.

Dassault Aviation raised its 2025 net sales guidance above €7 billion after delivering 26 Rafale fighter jets and 37 Falcon business jets. Rafale deliveries included 15 exports, while Falcon deliveries fell short of guidance. Orders for Rafale exports declined, Falcon orders rose, with backlogs at 220 Rafale and 73 Falcon aircraft at year-end.

UBS upgraded BNP Paribas to “buy” from “neutral,” raising its 12-month price target to €103, citing undervaluation versus European peers and strong EPS growth potential. Forecasts include a 50% EPS increase by FY28, rising CET1 ratio to 15.3%, and a 13% return on tangible equity, supported by restructuring, acquisitions, and capital generation.

Morgan Stanley cut Alibaba’s price target to $180, citing weakening core e-commerce amid soft consumption and intense competition, though cloud momentum remains strong. Cloud revenue is expected to grow over 35% YoY, while overall profitability may fall, with adjusted EBITA projected to drop 45% to Rmb30bn, reflecting higher AI costs and slowing retail growth.

Upcoming data and events

Friday's main economic releases include US December jobs data, nonfarm payrolls, unemployment rate and wages, US housing starts and building permits, Germany’s November trade balance, Canada’s December unemployment, US Michigan consumer sentiment and inflation expectations, Baker Hughes rig counts, and Fed speeches by Kashkari and Barkin.

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