Strong jobs data curbs rate cut bets

General market commentary

US equity markets traded mixed on Wednesday as investors digested a stronger than expected January jobs report that pushed government bond yields higher. The Nasdaq Composite slipped 0.2 per cent to 23,066.47 and the Dow Jones Industrial Average edged 0.1 per cent lower to 50,121.40, while the S&P 500 finished little changed at 6,941.47. Communication services, financials and consumer discretionary were among the weaker areas, whereas energy, consumer staples and materials led the gains. The robust payrolls data reinforced expectations of economic resilience but also reduced the likelihood of near term Federal Reserve rate cuts, with markets now assigning a high probability to rates remaining unchanged in March.

Treasury yields moved higher in response, with the two year rising to 3.52 per cent and the ten year climbing to 4.18 per cent, reflecting a more patient policy outlook. In commodities, West Texas Intermediate crude advanced 1.6 per cent, while gold and silver posted solid gains. At the company level, Generac shares surged nearly 18 per cent after issuing upbeat sales guidance, marking one of the strongest performances in the S&P 500. In contrast, Robinhood Markets shares fell almost 9 per cent after reporting weaker than expected quarterly results. Overall, the session highlighted a rotation within equities as investors balanced firm economic data against higher bond yields.

Latest market and economic update

Most Asian markets advanced on Thursday, led by South Korea’s KOSPI, which surged to a record high as Samsung and SK Hynix rallied on strong demand for AI related memory chips. Japan’s Nikkei briefly topped 58,000 before trading flat. Australia and Singapore gained, China was subdued, while Hong Kong’s Hang Seng declined.

US equity futures traded modestly higher overnight, with the S&P 500 and Dow Jones both up 0.4 per cent and the Nasdaq 100 rising 0.2 per cent. In after hours trading, Cisco shares slumped around 7 per cent after disappointing earnings and guidance, while McDonald’s shares were little changed despite reporting better than expected results.

European stocks closed mixed, with the Stoxx 600 up 0.1%, the FTSE 100 gaining 1.1%, while Germany’s DAX and France’s CAC 40 fell. Ahold Delhaize and Siemens Energy surged on strong results, TotalEnergies rose despite cutting buybacks, and Heineken edged higher after announcing job cuts and weaker profit guidance.

The US dollar took only limited support from stronger than expected payrolls data, with its overnight gains stalling in Asian trade. The dollar index remained subdued and is down around 0.8 per cent this week, as investors await US inflation data. Against the euro, the greenback stayed broadly softer amid lingering policy uncertainty.

Oil prices edged higher this morning, supported by concerns over escalating tensions between the United States and Iran that could disrupt supply. Brent rose to $69.67 and WTI to $64.92, extending Wednesday’s gains. However, a sharp rise in US crude inventories limited advances, while resilient US economic data underpinned demand expectations.

In the US, jobs grew by 130,000 in January, comfortably beating expectations and marking the strongest growth since December 2024, while the unemployment rate edged down to 4.3%. Average hourly earnings showed no significant acceleration, suggesting limited wage pressure. However, sharp downward revisions to 2025 payrolls highlight ongoing fragility in the labour market.

The US House of Representatives voted 219 to 211 to end President Trump’s national emergency used to impose tariffs on Canada, with six Republicans backing the Democratic measure. The resolution now moves to the Senate but is unlikely to overcome a presidential veto. The vote signals growing congressional opposition to tariffs criticised as costly to households.

Equities on the move

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

Cisco shares fell 7 per cent in extended trading after quarterly adjusted gross margin of 67.5 per cent missed expectations, hurt by higher global memory prices. Although revenue of $15.35 billion beat forecasts and full year guidance was raised, margin pressure overshadowed strong AI driven demand for its data centre networking products.

Grab forecast fiscal 2026 revenue below expectations, sending shares about 4 per cent lower in extended trading, as ride hailing and delivery demand slows amid economic uncertainty. The firm guided revenue of $4.04 billion to $4.10 billion and announced a $500 million buyback. It also agreed to acquire Stash Financial in a $425 million deal.

Siemens Energy said first-quarter net profit almost tripled, supported by robust demand for its gas turbines and grid technology equipment, alongside a reduced loss at its wind division. Chief executive Christian Bruch highlighted continued strength in core energy infrastructure businesses and noted early indications of gradual improvement within the company’s wind operations.

McDonald’s beat fourth quarter sales and profit estimates, with global comparable sales rising 5.7 per cent, driven by strong value promotions and marketing. US same store sales jumped 6.8 per cent, while international demand remained firm. Adjusted earnings topped forecasts, though shares were marginally lower after hours amid ongoing cost inflation pressures.

Bill Ackman’s Pershing Square disclosed a roughly $2 billion stake in Meta Platforms, about 10 per cent of its capital, citing undervalued long term potential from artificial intelligence. The hedge fund believes AI will enhance advertising and engagement. Meta shares have risen since November, despite broader investor concerns over heavy AI spending.

Micron shares rose after its CFO reassured investors over its HBM4 memory product, confirming high-volume production and earlier-than-expected customer shipments. The company said performance exceeds 11 gigabits per second and demand remains strong, driven by AI applications. Executives dismissed recent concerns, highlighting tight supply and robust business momentum.

BMW is recalling around 575,000 vehicles worldwide over a potential fire risk linked to a defective starter motor. The issue, identified through inspections and customer complaints, may cause increased wear in the magnetic switch after frequent use, making cars difficult or impossible to start and, in rare cases, posing a fire hazard.

Kraft Heinz has paused plans to split the company, citing worsening industry conditions under new CEO Steve Cahillane. Instead, it will invest $600 million in marketing and innovation to revive growth after weak results and lost market share. The group forecast lower 2026 earnings and sales, signalling a challenging consumer environment.

Heineken plans to cut up to 6,000 jobs, nearly 7% of its workforce, as part of a productivity drive to boost efficiency and fund growth. The brewer forecast slower 2026 profit growth of 2%–6% amid weak demand, despite reporting slightly better-than-expected 2025 operating profit and continuing its search for a new CEO.

Amazon is expanding its same-day prescription delivery to nearly 4,500 US locations by 2026, leveraging its logistics network to address pharmacy closures and staffing shortages. The move, alongside new AI-driven health tools via One Medical, has unsettled telehealth firms, raising concerns about competition and the long-term viability of standalone digital health platforms.

T-Mobile added 962,000 postpaid phone customers in the fourth quarter, missing expectations amid fierce promotional competition, while churn edged up to 1.02%. Revenue beat forecasts, though cash flow guidance disappointed due to integration costs. Separately, it launched real-time AI call translation across 50 languages, expanding its network-based service offering.

Carvana shares fell 7% on Wednesday as investors grew nervous ahead of next week’s earnings and ongoing legal and short-seller scrutiny. Gotham City Research alleged accounting irregularities and undisclosed related-party dealings with DriveTime. A judge has also ordered previously withheld DriveTime documents to be produced, further denting market confidence.

CME Group is developing the world’s first rare earth futures contract, focused on neodymium and praseodymium, to help firms hedge price volatility in a market dominated by China. The move could support Western financing and supply diversification. Rival ICE is also exploring plans, though CME is further advanced.

Barclays warns insurance stocks face further declines as investors reassess AI’s disruptive impact, particularly in motor and personal lines. The bank sees valuations potentially falling 5–25% amid weaker earnings momentum and cyclical pricing pressures. While near-term forecasts may hold, insurers are increasingly viewed as vulnerable in an AI-driven market rotation.

Barclays downgraded Norwegian Cruise Line to Equal Weight, citing its recent share price surge and weaker pricing trends. The bank warned of soft first-quarter yields, continued fare discounting and tougher competition. It also flagged distribution disadvantages and said 2026 guidance may be challenging, with performance weighted to the second half.

Jefferies upgraded ArcelorMittal to Buy, citing expected EU trade protections that could curb imports, lift steel prices and boost production. It forecasts stronger earnings, with EBITDA reaching $11.7 billion by 2027, above consensus. Higher prices and volumes, alongside restarted capacity, are seen driving improved European profitability despite rising carbon costs.

TD Cowen downgraded NuScale Power to Hold, citing risks linked to a Romanian shareholder vote on the Doicesti SMR project. While approval is expected, revised terms increase NuScale’s performance exposure and delay operations to 2033–34. The project is key to its commercial prospects, with limited near-term financial impact but added longer-term risk.

Upcoming data and events

Today’s market focus is on UK GDP data for December and Q4, alongside US jobless claims, existing home sales, natural gas stocks and key Treasury bill and bond auctions. Major corporate earnings scheduled include Hermès, Applied Materials, Siemens, L’Oréal, SoftBank, Arista Networks, Unilever, Anheuser-Busch InBev, British American Tobacco and Vertex Pharmaceuticals.

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