Trump and Putin agree to start Ukraine peace talks

General market commentary

Equity markets experienced a downturn on Wednesday following the release of the latest Consumer Price Index figures, which indicated a higher-than-anticipated level of inflation. Energy and real estate shares were particularly affected, while smaller and mid-sized companies underperformed due to their sensitivity to rising bond yields. The prospect of delayed interest rate cuts by the Federal Reserve, prompted by the sticky inflation data, further dampened investor sentiment. Despite this, comments from House Speaker Mike Johnson regarding tariff exemptions offered some support. In the meantime, European indices mostly edged higher, as investors considered the potential implications of increased U.S. tariffs. The dollar remained relatively stable, while West Texas Intermediate crude oil prices declined following a reported rise in U.S. crude inventories.

Looking ahead, market participants are keenly awaiting the release of the Producer Price Index and jobless claims data, which will provide further insight into the state of the economy and inform expectations for future monetary policy. While the Fed appears poised to maintain its current course, average hourly earnings outpacing inflation could support consumer spending. Corporate news saw CVS Health shares surge on strong earnings, contrasting with declines for Biogen which guided lower. After-hours trading saw contrasting movements, with Reddit experiencing a decline, while Cisco soared on raised annual forecasts. These company-specific events, coupled with macroeconomic indicators, continue to shape the overall market landscape.

Latest market and economic update

Asian equities rose on Thursday, driven by a rally in Chinese technology shares fueled by AI optimism and strong dealmaking activity in Japan's tech sector, despite concerns over U.S. inflation data. Markets across the region showed resilience, with Japan's Nikkei 225 and Hong Kong's Hang Seng hitting new highs, although sentiment remained cautious due to rising trade tensions and expectations of higher U.S. interest rates.

U.S. equity futures rose overnight, as investors anticipated further earnings reports and the latest producer inflation data. Despite mixed performances in after-hours trading, with Reddit falling sharply and Applovin, Cisco, Dutch Bros, and Robinhood all soaring, market sentiment was supported by positive comments on tariff exemptions, though traders remained cautious ahead of key economic data.

European equities saw modest gains on Wednesday, with Germany’s DAX rising 0.5% and France’s CAC 40 gaining 0.2%. Key movers included Heineken, whose shares soared 14% following strong profit growth, while Randstad’s equities dropped 6% due to weak performance, and Ahold Delhaize saw a 5% decline amid concerns over market volatility.

The dollar index continued its recent decline this morning, staying below 108 despite a hotter-than-expected US CPI report, which showed inflation surpassing forecasts. Against the euro, the dollar remained under pressure, with the EUR/USD trading at 1.0434, as markets adjusted their expectations for only a single rate cut by the Federal Reserve this year.

Oil prices dropped in Asian trade on Thursday, pressured by the possibility of a peace treaty between Russia and Ukraine, which could lead to the lifting of U.S. sanctions on Russian oil. Brent crude futures fell 0.9% to $74.51 a barrel, with additional downward pressure from weaker U.S. inventory data and the ongoing concerns over higher U.S. interest rates.

China has proposed hosting a summit between Russian President Putin and U.S. President Trump to help facilitate peace talks and end the Ukraine war, according to reports. The proposal follows Trump's recent discussions with both Putin and Ukraine's Zelenskiy, with Trump ordering U.S. officials to begin talks on resolving the conflict, while Beijing continues to advocate for peace efforts on its own terms.

U.S. consumer prices rose by 3.0% in January, slightly above expectations, signalling persistent inflationary pressures that could impact the Federal Reserve's approach to interest rate cuts. The core inflation measure, excluding food and fuel, also edged up to 3.3%, suggesting inflation remains above the Fed's 2% target, potentially delaying rate reductions further.

Equities on the move

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

Cisco Systems raised its annual revenue forecast, citing increased demand for its cloud networking products driven by the AI boom, and its shares rose 6.6% in after-hours trading. The company also announced a $15 billion increase in its share buyback programme and expects fiscal 2025 revenue to reach between $56 billion and $56.5 billion, supported by strong demand from corporate customers upgrading their networks for AI initiatives.

Robinhood exceeded fourth-quarter profit expectations, driven by a 236% increase in transaction-based revenue, particularly a 700% surge in crypto trading amid optimism over Donald Trump's return to the White House. The company posted an adjusted profit of $1.01 per share and reported a record-breaking $1 billion in revenue for the quarter, capping a strong year with over $3 billion in total revenue.

Reddit Inc reported better-than-expected fourth-quarter earnings, with a 39% year-on-year increase in daily active users and revenue rising to $427.7 million, surpassing analysts' expectations. However, despite strong results, Reddit's shares fell 13.2% in after-hours trading, and the company projected first-quarter 2025 revenue between $360 million and $370 million, slightly above consensus estimates.

Applovin Corp shares surged by 29% after reporting fourth-quarter earnings of $1.73 per share, exceeding analysts' expectations of $1.25, with revenue reaching $1.37 billion. The company also forecasted first-quarter 2025 revenue between $1.355 billion and $1.385 billion, above the consensus estimate of $1.321 billion.

CVS Health surpassed Wall Street’s fourth-quarter profit expectations, with shares rising more than 15% after the company issued a forecast in line with analysts’ estimates, signalling progress under new CEO David Joyner. Despite challenges in its healthcare benefits unit, the company saw a 7.5% revenue increase in its pharmacy and wellness segment, and provided an annual profit outlook of $5.75 to $6.00 per share.

Lyft Inc. shares dropped nearly 10% after the company reported Q4 earnings that missed expectations and issued a lower-than-expected Q1 bookings forecast, with revenue slightly surpassing estimates. Analysts from RBC Capital Markets and BMO Capital Markets downgraded their price targets, citing aggressive pricing from rival Uber and a weaker outlook, although they noted positive signs in rides growth and the impact of autonomous vehicles.

Kraft Heinz forecasted lower-than-expected annual profit and missed quarterly sales estimates, with sluggish demand for products like Lunchables and packaged meat following price hikes, causing its shares to drop 5%. The company is facing challenges from reduced spending by middle-to-lower-income groups, higher input costs, and lower volumes, while it continues to invest in marketing and technology to compete with cheaper private-label alternatives.

Heineken's shares surged 12% after the Dutch brewer reported better-than-expected profits for 2024, with an 8.3% growth in organic operating profit, and announced a €1.5 billion share buyback. The company also forecasted further growth of 4% to 8% in operating profit for 2025, driven by continued investments in growth, while managing risks related to geopolitical tensions and cost inflation.

CME Group reported a higher fourth-quarter profit, driven by increased hedging activity amidst geopolitical and economic uncertainty, with trading volumes rising across all asset classes. The exchange operator saw its total revenue climb 6% to $1.53 billion, with a net profit of $863.7 million, or $2.40 per share, in the quarter ending December 31.

Chevron plans to lay off 15% to 20% of its global workforce by 2026 as part of efforts to reduce costs, streamline operations, and finalise its $53 billion acquisition of Hess, despite facing production challenges. The company aims to cut up to $3 billion in costs through technology, asset sales, and restructuring, with the layoffs potentially affecting around 8,000 employees.

BASF SE is exploring a potential listing of its agricultural chemicals division, possibly in the U.S. or Germany, as part of a broader restructuring effort to cut costs by over 2 billion euros. The division, which reported sales of approximately 10 billion euros in 2023, competes with major players like Bayer, Corteva, and Syngenta, and the company is also considering strategic options for its coatings business.

eToro, the Israel-based online trading platform, has confidentially filed for an initial public offering with the U.S. SEC, aiming for a valuation over $5 billion, with the listing potentially taking place in Q2 2025. Despite a previous failed SPAC merger and regulatory challenges, eToro has demonstrated resilience, expanding its global presence and securing significant funding, while continuing to focus on the cryptocurrency market.

Benchmark analysts initiated coverage of Tesla with a Buy rating and a $475 price target, highlighting growth potential in autonomous vehicles, robotics, and energy solutions, including the Robotaxi service and Optimus humanoid robot. Despite regulatory challenges and a recent stock decline, Wedbush maintains a bullish outlook, citing CEO Elon Musk's influence and the company’s innovations as key drivers for long-term growth.

Lynx Equity Strategy analysts noted that Super Micro Computer Inc. has made strong progress, particularly with its successful capital raise from private sources, which they believe will restore confidence in the equity. The analysts raised their price target to $60, citing improved company performance metrics, expanded manufacturing capacity, and renewed access to capital markets, with confidence in steady revenue growth even if Nvidia’s Blackwell chips are delayed.

Bernstein analysts have resumed coverage of Vinci with an "outperform" rating and a price target of €141.1 per share, citing confidence in the company's strong prospects driven by its diversified business model and stable cash flows from its concessions. Despite uncertainties, Bernstein believes Vinci's undervalued toll roads and contracting units, along with its solid financials and management, offer significant upside potential.

Morgan Stanley downgraded L'Oreal's shares to Equal Weight and lowered its price target to €379, citing projected organic sales growth in line with the broader staples sector and a premium valuation despite near-term weakness. The firm adjusted its earnings forecasts for 2025 and 2026, reflecting the impact of L'Oreal's sale of its stake in Sanofi, while maintaining an 11% upside from the current price.

UBS analysts have maintained a Neutral rating on Nike, citing ongoing challenges in China, where they expect slow growth and low EBIT margins in the near term. They identified key obstacles to recovery, including the need for more product innovation, inventory reduction, and tailored marketing strategies to meet the evolving Chinese market.

Upstart Holdings Inc. received upgrades from JPMorgan and B. Riley following stronger-than-expected Q4 results and an optimistic 2025 outlook, with both firms raising their price targets significantly. Analysts cited a rebound in origination volume, improved conversion rates, and a better macro environment as key factors driving growth, with B. Riley expecting revenue to accelerate by 57% in 2025.

Upcoming data and events

Thursday will see the release of the Producer Price Index and Initial Jobless Claims, which could provide important insights into inflation and the labour market. Earnings reports from companies like Motorola, DexCom, and Airbnb will also be closely watched by investors.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.