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General market commentary
The past week has been challenging for global equities, as the Nasdaq fell decisively below its 50-day moving average, and Treasury yields surged to their highest levels in over a year. Major indexes like the Dow Jones, S&P 500, and Russell 2000 experienced notable losses, with the latter testing its 200-day moving average. The broad weakness in equities reflects investor concerns over rising yields, as well as repricing of central bank rate-cut expectations. The tech-heavy Nasdaq underperformed, weighed down by valuation-sensitive sectors, while more defensive areas like utilities and healthcare displayed relative strength. Meanwhile, economic data remains robust, with December’s U.S. jobs report exceeding expectations, suggesting sustained momentum in the labour market.
From a technical perspective, the market rally appears fragile, with key resistance levels for the Nasdaq and S&P 500 looming just above. Retaking their 50-day lines would mark an important first step, but downside risks remain significant, as recent lows offer little support in the event of further declines. Additionally, the 10-year Treasury yield, now at 4.77%, underscores tighter financial conditions, which could continue pressuring high-valuation equities and growth-oriented sectors. Crude oil prices surged last week, bolstered by fresh sanctions on Russia’s energy industry, adding a potential inflationary factor to the macroeconomic equation.
Looking ahead, the market faces a delicate balancing act between positive fundamentals and evolving headwinds. On the upside, continued strength in employment, solid earnings growth, and potential for moderate policy easing provide a supportive backdrop. However, uncertainties surrounding global growth, geopolitical developments, and central bank policy remain focal points. Investors should remain cautious, using market volatility to rebalance portfolios towards more quality and enhance exposure to both growth and value opportunities.
Latest market and economic update
Asian equities fell sharply on Monday, with Hong Kong’s Hang Seng, China’s CSI 300, and South Korea’s KOSPI all declining amid dampened hopes for U.S. interest rate cuts following strong payroll data. Australia’s ASX 200 dropped 1.4%, while markets in Japan were closed for a holiday, and India’s Nifty 50 Futures signalled a weak open.
U.S. equity futures remained steady on Monday as investors awaited producer inflation data and remarks from Federal Reserve officials later this week. Focus also centres on corporate earnings, with major banks preparing to release their quarterly results.
European equity markets closed lower on Friday, with the DAX, CAC 40, and FTSE 100 all falling by 0.5% to 0.8%. Notable movers included J Sainsbury, which dropped 4.3% after a weak third-quarter update, while Mercedes-Benz rose 3.7% on stronger-than-expected fourth-quarter sales.
The U.S. dollar began the week strongly, bolstered by robust U.S. jobs data that highlighted the resilience of the American economy. Against the euro, the dollar rose 0.2%, with the euro slipping to $1.0216, near its weakest level since November 2022, as traders pared back expectations of U.S. rate cuts and focused on inflation risks under the incoming Trump administration.
Oil prices surged on Monday, with Brent rising 1.8% to $81.22 a barrel, driven by stringent U.S. sanctions on Russian oil exports, which are expected to disrupt global supply and push prices higher. Additional support came from heightened demand due to a cold snap across the U.S. and Europe, intensifying heating needs and reducing distillate inventories.
China's exports rose 10.7% in December, beating expectations, while imports unexpectedly grew by 1.0%, boosting the trade surplus to $104.8 billion despite mounting trade risks with the incoming U.S. administration. The economy showed signs of stabilisation, supported by stimulus measures, resilient demand for technology and commodities, and government pledges to loosen monetary policy and revitalise growth in 2025.
The US added 256,000 nonfarm payrolls in December, far exceeding expectations, with broad-based job gains and a drop in the unemployment rate to 4.1%. This strong labour market supports economic growth and corporate profits but reduces the urgency for Federal Reserve rate cuts.
Equities on the move
The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:
Delta Air Lines forecast record profits for 2025, surpassing Wall Street expectations, driven by strong demand for premium travel and improved pricing power. The airline also reported higher-than-expected Q4 2024 earnings, with shares reaching a record high amid a favourable industry backdrop.
Constellation Brands lowered its annual sales and profit forecasts after weaker-than-expected consumer spending on its Modelo Oro and Corona Light beers, causing a 14% drop in its shares. The company now expects slower growth in beer sales and a reduction in its adjusted profit per share for fiscal 2025.
TSMC's fourth-quarter revenue for 2024 exceeded expectations, reaching $26.36 billion, driven by strong demand for AI chips. The company saw a 34.4% year-on-year growth, with a significant 57.8% increase in December revenue, and will report full earnings on January 16.
Pfizer's experimental treatment, sasanlimab, combined with the BCG vaccine, showed positive results in preventing cancer recurrence in patients with high-risk non-muscle invasive bladder cancer. The company plans to seek regulatory approval after presenting the data at a medical meeting, with analysts noting the potential to drive momentum in Pfizer’s pipeline.
Mercedes-Benz saw a 3% drop in core car sales in 2024, impacted by weaker demand in China and Europe, and a 23% decline in battery-electric vehicle sales. Despite this, the company’s shares rose after a strong quarterly performance in its high-end segment, although it is cutting profit margin and mid-term targets due to challenging market conditions.
Prada is reportedly considering a bid for Versace, which Capri Holdings may sell as part of strategic options following declining revenues. Analysts remain sceptical of Prada's interest, citing its focus on existing brands and the challenges of turning around Versace's performance.
Constellation Energy has agreed to acquire Calpine Corp for $16.4 billion, creating the largest coast-to-coast power generator in the US with nearly 60 GW of zero- and low-emission capacity. The deal, driven by rising energy demand, boosts Constellation's footprint in key markets like Texas and California and is expected to add $2 billion in annual free cash flow.
Citi raised Stellantis' price target to €13, citing recovery potential after its sharp 38% decline in 2024, supported by strong U.S. market exposure and improved inventory levels. However, margin pressures from high dealer incentives and lower-priced EVs remain challenges, with Citi favouring other automakers like Renault and Volkswagen.
Deutsche Bank raised its Tesla price target to $420, driven by expected growth in robotaxis, robotics, and vehicle deliveries in 2025. The bank forecast a 15% increase in vehicle deliveries but warned of potential margin pressure and risks related to EV demand and regulatory scrutiny.
Bank of America reiterated a Buy rating on Nvidia, highlighting its strong position in AI and the $2 trillion infrastructure opportunity. The analysts remain confident in Nvidia's growth prospects, although cautioning about potential volatility ahead of its Q4 earnings report due to possible China restrictions.
Goldman Sachs downgraded Advanced Micro Devices from Buy to Neutral, citing concerns over increased competition from Arm-based CPUs and challenges in accelerated computing. The firm also reduced its price target for AMD, highlighting slower-than-expected growth in Data Center GPUs and a decline in PC and server demand.
Citi raised Marvell Technology's price target to $136, citing strong AI sales growth and a conservative $43 billion custom ASIC market estimate. With AI revenues projected to reach $8 billion by 2028, Marvell remains well-positioned in AI and cloud markets, earning a reiterated "buy" rating.
UBS upgraded Deutsche Telekom to "buy" and raised its price target to €33, citing an attractive entry point following a price pullback and the company’s strong US exposure. Despite competition in Germany, Deutsche Telekom is well-positioned for growth, with expected 11% annual EPS growth and strong shareholder returns, including share buybacks and a higher dividend.
Barclays raised Airbus's target price to €200, citing better-than-expected 2024 aircraft deliveries and strong growth prospects, with forecasts of 832 deliveries in 2025. The bank is optimistic about long-term growth, expecting a 40% increase in adjusted EBIT from 2025 to 2027, supported by rising production efficiency and strong demand for single-aisle jets.
Needham & Company upgraded Lululemon to a "Buy" rating with a price target of $475, citing strong U.S. sales recovery and positive catalysts ahead. The firm sees potential for share price growth, noting the brand's strong performance during the holiday season and the possibility of further multiple expansion.
RBC Capital Markets maintained a cautious outlook on homebuilders for 2025 due to affordability challenges but highlighted selective opportunities in building products. The firm upgraded KB Home and Lennar Corp to "sector perform" while maintaining "underperform" ratings on several other homebuilders.
Berenberg raised price targets on several luxury shares, including LVMH and Hermes, reflecting positive growth expectations. The adjustments follow strong performance in the sector, with luxury brands continuing to benefit from solid demand.
UBS upgraded Abercrombie & Fitch to "Buy," citing significant growth potential and attractive valuations within the Softlines sector for 2025. The firm highlighted the company's strong FY25 earnings growth prospects, which it believes are undervalued by the market.
Barclays analysts raised their price targets for luxury goods shares, including Hermès, LVMH, and Brunello Cucinelli, citing strong market positioning and brand strength. Despite challenges like weaker Chinese demand and shifting U.S. economic conditions, companies focused on absolute luxury are expected to continue performing well.
Piper Sandler upgraded Nike to Overweight with a price target of $90, citing CEO Elliott Hill's strategic moves to improve the marketplace and drive recovery by FY26. Despite current negative sentiment, analysts are optimistic about Nike’s ability to innovate and increase sales, with a potential price target of $100 in a bullish scenario.
UBS upgraded Amadeus to a "buy" rating, raising its 12-month price target to €80, citing improved growth potential and strong performance in its distribution and IT segments. The company’s ability to adapt to market changes, growth opportunities, and shareholder returns through buybacks were key factors behind the upgrade.
Moffett Nathanson downgraded Roku to "sell," citing concerns over its valuation, competition, and profitability, with a 34% downside potential. The analysts also dismissed acquisition speculation and highlighted risks from rising competition, especially with Walmart's acquisition of Vizio.
Monness Crespi Hardt & Co upgraded Pinterest to a Buy rating, citing strong revenue growth, improved margins, and strategic initiatives, including a $2 billion buyback and enhanced AI capabilities. The firm set a 12-month price target of $40, with expectations for continued growth driven by better ad functionality and expanding partnerships.
Wells Fargo initiated coverage of Instacart with an "equal weight" rating and a $47 price target, citing concerns over slowing advertising growth and increased competition. The bank forecasts EBITDA to fall 2% and 4% below consensus for fiscal 2025 and 2026, with rising customer acquisition costs and maturing ad revenue as key challenges.
Upcoming data and events
This week, U.S. earnings season begins with major banks reporting results, alongside key inflation data, while China releases Q4 GDP and other economic indicators. In the UK, inflation and retail sales data will highlight economic trends, and the Euro Area awaits ECB meeting minutes and final inflation figures.
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