Shares steady amid soft jobs and services data

General market commentary

US equity markets ended little changed on Wednesday as investors digested weaker-than-expected economic data and remained focused on ongoing trade tensions. The ADP employment report showed private payrolls grew by just 37,000 in May, well below expectations, while the ISM services PMI dipped to 49.9, indicating a contraction in the sector for the first time in nearly a year. In response, bond yields fell, with the 10-year Treasury yield settling near 4.36%. Equities were broadly flat: the S&P 500 closed near the flatline, the Nasdaq rose modestly, and the Dow slipped around 0.2%.

Investors also kept a close eye on trade developments, with President Trump’s deadline for tariff negotiations falling on Wednesday and expectations of talks with Chinese leader Xi Jinping later in the week. While near-term uncertainty weighed on sentiment, analysts suggest a longer timeline may be needed for meaningful resolution, especially as the US pursues industrial onshoring. In corporate news, Tesla shares declined 3.5% amid a sales slump in Europe, whereas Meta Platforms rallied over 3% after JPMorgan raised its price target. Hewlett Packard Enterprise shares also rose, supported by strong results driven by AI server and hybrid cloud demand.

Latest market and economic update

Most Asian equities fell amid uncertainty over US trade policy and weak economic data, while Hong Kong and South Korea outperformed on technology gains and optimism after South Korea’s presidential election. Investors remain cautious ahead of a planned call between US President Trump and Chinese President Xi, with markets reacting to mixed economic signals and hopes for renewed trade talks.

US equity futures were flat overnight as investors remained cautious amid weak private-sector hiring data. In after-hours trading, shares of Five Below and MongoDB surged 4.6% and 14.6% respectively, following better-than-expected earnings and revenue results.

European shares climbed yesterday, lifted by Germany’s approval of a €46 billion tax relief package aimed at boosting economic growth. Progress in EU-US trade talks also supported sentiment, while Airbus shares jumped over 4% on reports of a potential large aircraft order from Chinese airlines.

The US dollar index remained under pressure below 99 as investors reacted to disappointing economic data, raising doubts about the US economy and the Federal Reserve’s near-term policy outlook. This weakness helped push EUR/USD to trade around 1.1415, near a six-week high, supported by steady euro demand ahead of the European Central Bank’s rate decision.

Oil prices slipped this morning after a larger-than-expected build in US gasoline and diesel inventories and Saudi Arabia’s cut to July prices for Asian crude buyers near four-year lows. This follows OPEC+ agreeing to increase output by 411,000 barrels per day in July, part of Saudi Arabia and Russia’s strategy to regain market share.

China’s services sector expanded more than expected in May, with the Caixin services PMI rising to 51.1, supported by strong domestic demand despite the impact of US trade tariffs on export orders. However, weakness in manufacturing dragged the overall Caixin composite PMI down to 49.6, indicating a contraction in Chinese business activity for the month.

Equities on the move

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

A US auto suppliers’ group has called for urgent action to address China’s rare earth export restrictions, warning supply shortages could disrupt production of critical automotive components. The restrictions have caused shutdowns at European auto parts plants and prompted manufacturers like Mercedes-Benz and BMW to take precautions, while spurring EU efforts to diversify mineral sources amid concerns of further outages.

Raytheon has secured a $1.1 billion contract from the U.S. Navy to boost production of its AIM-9X Block II missiles to 2,500 units per year. The deal comes amid sustained global demand for military equipment and follows President Trump’s $892.6 billion defence budget request for 2026, aimed at strengthening national security.

Uber launched senior accounts and Simple mode, designed to make the app more accessible for older adults by simplifying the interface and improving usability. Developed with input from ageing advocates, the new features support independence and mobility for seniors, with options for family assistance and independent ride booking now available across the U.S. and select global markets.

Meta Platforms is engaging with major Hollywood studios like Disney and A24 to secure exclusive immersive content for its upcoming premium VR headset, "Loma," due next year. The device will feature a sleek, eyeglass-like design with higher-fidelity video and be priced under $1,000, positioning it below Apple’s Vision Pro and aiming to strengthen Meta’s foothold in the high-end virtual reality market.

Reddit sued AI startup Anthropic in San Francisco court, accusing it of using Reddit data to train its Claude chatbot without permission and refusing a licensing agreement. Reddit claims this breach enriched Anthropic by billions and seeks damages plus an injunction to stop further commercial use of its content.

Bank of America analysts have identified Robinhood as a prime candidate for inclusion in the S&P 500 index during the upcoming rebalancing, expected to be announced on Friday. This potential addition could increase demand for Robinhood shares from index funds, boost the company’s market profile, and provide a more stable shareholder base.

Thyssenkrupp plans to spin off 49% of its defence division, TKMS, to shareholders later this year, retaining majority control of the unit with a record €18 billion order book. This move supports the conglomerate’s strategy to divest stakes in core businesses and become a holding company after recent steel and hydrogen division sales.

Bernstein analysts believe Microsoft’s AI margins are likely to improve over time, easing investor concerns about high development costs and potential pressure on overall profitability. Strong growth in Azure’s AI-driven revenue and commercial bookings led them to reaffirm an "outperform" rating and name Microsoft a top investment pick.

Needham downgraded Apple shares to Hold from Buy, citing mounting earnings risks, intensifying competition, and an expensive valuation with limited near-term catalysts. The analysts highlighted slowing smartphone demand, geopolitical pressures in China, and growing AI-related threats, suggesting a more attractive entry point between $170 and $180 per share.

Bank of America downgraded CrowdStrike to Neutral from Buy, citing limited upside due to its high valuation and concerns over slowing future revenue growth. While acknowledging strong current performance and promising initiatives like Falcon Flex, BofA warned that decelerating growth and a lofty 73x implied P/E ratio could weigh on the equity in the near term.

UBS upgraded Snowflake to Buy, citing strong growth prospects from rising enterprise investment in AI-driven data infrastructure. Analysts noted improving customer sentiment, product expansion, manageable competition with Databricks, and raised the price target to $265, expecting nearly 30% growth by late 2025.

Citi downgraded Constellation Energy to Neutral from Buy, citing limited near-term upside despite the recent 20-year power purchase agreement with Meta for the Clinton nuclear plant. While the deal adds value and supports the plant’s long-term operation, Citi believes much of the benefit is already priced in, with a balanced risk outlook due to market volatility and execution challenges.

Bernstein started coverage of the U.S. entertainment sector with Outperform ratings on five companies, including Spotify and TKO Group, citing superfans and demand for premium experiences as key growth drivers. The analysts expect slower user growth but rising profitability for firms that monetise superfans, with a 24% upside target for Spotify at $825.

Citi Research has upgraded DHL Group to Buy from Neutral, raising the target price to €48, citing underutilisation of its Express network and expected margin expansion as volumes recover. The brokerage forecasts the Express division’s EBIT margin to rise to 13.4% in 2026 and 13.7% in 2027, supported by early signs of volume recovery linked to improving Eurozone economic indicators.

Upcoming data and events

Financial markets face a busy day with key economic data from the US and Europe, including factory orders, producer prices, job cuts, and European Central Bank interest rates. Meanwhile, major companies like DocuSign, Broadcom, and Lululemon Athletica are set to report earnings, providing valuable insights across various sectors.

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