Trump delays imposing reciprocal tariffs

General market commentary

Equity markets saw broad-based gains on Thursday, with major indices all closing higher despite a surprise uptick in wholesale inflation. The Producer Price Index for January came in above expectations, driven by a rise in energy prices, which kept inflationary pressures elevated. However, the positive momentum in equities was driven by strong corporate earnings and investor confidence in resilient business performance. Notably, several sectors, including materials and consumer discretionary, led the charge. President Trump’s comments on potential reciprocal tariffs also stirred some market movement, though the effect was relatively muted compared to previous trade-related announcements. With inflation concerns lingering, investors remained focused on the stability and growth potential of large-cap companies.

European markets also performed well, with the STOXX Europe 600 index reaching a new all-time high, buoyed by growing optimism around potential peace talks in Ukraine. Meanwhile, the U.S. dollar weakened against major currencies, supporting foreign demand for U.S. equities. In the bond market, the 10-year Treasury yield dropped to 4.53%, reflecting cautious sentiment. On the economic front, jobless claims data showed a healthy labour market, further bolstering the outlook for consumer spending and wage growth. While inflationary pressures remain, particularly with the higher-than-expected PPI, the combination of solid earnings and a relatively stable economic backdrop has helped maintain a positive sentiment in equity markets.

Latest market and economic update

Asian markets traded in a flat-to-low range on Friday, with concerns over rising U.S. trade tariffs and persistent inflation weighing on sentiment. However, Chinese equities, particularly in Hong Kong, saw strong gains driven by the ongoing AI rally, while Australian shares hit record highs on expectations of an interest rate cut by the Reserve Bank of Australia.

US equity futures remained steady on Friday as investors digested President Trump’s memorandum to review reciprocal tariffs and awaited upcoming retail sales data. With strong corporate earnings from companies like Airbnb, Roku, and Coinbase, market sentiment remains positive, though concerns over inflation persist ahead of the personal consumption expenditures price index release.

European equities closed sharply higher on Thursday, driven by strong earnings reports and optimism surrounding potential progress in the Ukraine conflict. The Eurozone’s STOXX 50 hit a 25-year high, with autos like Mercedes Benz and Volkswagen leading the gains, while Siemens, Adyen, and EssilorLuxottica also saw significant rises, though Unilever saw a decline following a pessimistic outlook.

The US dollar held steady around 107 on Friday, on track to decline by about 1% for the week, pressured by easing trade concerns and expectations for a softer personal consumption expenditures price index. The euro, trading at 1.0459, benefitted from the dollar's weakness amid uncertainty over the impact of proposed reciprocal tariffs and the Federal Reserve’s inflation outlook.

Oil prices rose in early trade on Friday, with Brent futures climbing to $75.25 a barrel and WTI crude at $71.41, supported by rising fuel demand and a delay in the implementation of President Trump's reciprocal tariffs until April. Global oil demand has surged, while concerns over a potential peace deal in Ukraine and the impact on Russian oil exports added uncertainty to the market's outlook.

Equities on the move

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

Sony's shares rose 9% in Tokyo on Friday after the company reported strong results in its gaming and music divisions, with PlayStation 5 sales reaching 9.4 million units over the holiday season. The firm also announced a share buyback plan of up to 30 million shares for around 50 billion yen, as its gaming profits surged and its music business posted robust growth, offsetting weaknesses in its pictures division.

Palo Alto Networks raised its full-year revenue forecast, expecting increased demand for its AI-powered cybersecurity solutions as businesses face growing online threats. The company reported a 14% rise in second-quarter revenue, slightly surpassing estimates, and raised its fiscal year 2025 revenue forecast to between $9.14 billion and $9.19 billion.

Applied Materials forecast second-quarter revenue below market expectations, citing the impact of escalating geopolitical tensions and tighter U.S. export restrictions on chipmaking technology to China. The company also warned that these restrictions would reduce its 2025 revenue by approximately $400 million, with a significant portion of the impact seen in its services segment.

Coinbase exceeded fourth-quarter profit estimates, reporting a significant rise in trading volumes driven by increased interest in bitcoin and other digital tokens following the U.S. election. The company's profit surged to $4.68 per share, boosted by strong transaction revenue and gains from its crypto asset investments, while competition with platforms like Robinhood continues to intensify.

Roku's shares surged 14% in extended trading after the company forecast annual revenue above Wall Street expectations and exceeded fourth-quarter revenue estimates, driven by strong advertising sales. The growth was boosted by increased political ad spending, expanded advertising offerings, and a larger subscriber base as more customers switched to streaming platforms.

Adyen's shares surged over 14% after reporting strong Q4 results, with net revenue and EBITDA margins exceeding expectations, despite some pressure on Total Payment Volume (TPV). Analysts from Barclays and Morgan Stanley highlighted the company's solid growth outlook for 2025, noting its consistent performance and positive share momentum.

Siemens posted better-than-expected results, with a 3% increase in revenue and industrial profit of €2.52 billion, despite challenges in factory automation and the ongoing economic uncertainties. CEO Roland Busch stated that Siemens can manage potential tariffs and macroeconomic risks, benefiting from local production facilities and new business opportunities in the US.

Barclays reported a 25% increase in profit before tax to £3.58 billion for 2024, driven by higher net interest income and a one-time gain from the acquisition of Tesco Bank. Despite solid growth in retail banking and mortgages, the bank faces challenges such as pressure on mortgage margins and changing consumer spending patterns amid high interest rates.

Commerzbank reported a 6.2% rise in revenues to €11.1 billion in 2024, driven by a 7.4% increase in net commission income and solid loan and deposit growth, especially in corporate sectors. The bank's profitability surged, with a 20.3% rise in net profit to €2.7 billion, and it anticipates further growth in commission income in 2025, despite potential challenges in net interest income.

Unilever's 2024 results slightly exceeded expectations, with sales of €60.8 billion and organic growth of 4.2%, though its outlook for 2025 remains cautious, expecting slower momentum in early quarters. Despite stable profitability and a share buyback plan, investor sentiment has been negative due to concerns over the lack of growth catalysts and the impact of restructuring efforts, causing shares to drop over 5%

Nestlé reported a 2.2% organic growth in 2024, down from 7.2% in 2023, with profitability mixed due to weaker pricing adjustments and a slight decline in net profit to CHF 10.9 billion. Despite challenges, the company saw improved cash flow, proposed a dividend increase, and plans to focus on innovation and marketing for better growth in 2025, although it expects some margin pressure.

SharkNinja reported stronger-than-expected fourth-quarter results, with EPS of $1.40 and revenue of $1.79 billion, driven by a 29.7% increase in net sales. The company also showed impressive annual growth, with a 30% rise in net sales, and provided an optimistic forecast for 2025, expecting continued growth in EPS and net sales.

Moncler reported fourth-quarter revenue of €1.24 billion, surpassing analyst expectations, and a full-year revenue of €3.11 billion, beating forecasts. The company also announced a higher-than-expected dividend and strong performance from its Moncler brand, driven by growth in Asia and direct-to-consumer sales, while Stone Island slightly exceeded revenue estimates but missed DTC growth projections.

Apple plans to launch its artificial intelligence features, called Apple Intelligence, on Chinese devices by mid-2025, collaborating with local firms like Alibaba and Baidu to meet regulatory requirements. The move comes as Apple faces declining smartphone sales in China and competition from local players, while also seeking to catch up with rivals in AI integration.

Mizuho analyst Vijay Rakesh expects modest growth for NVIDIA in the April quarter due to power and cooling challenges but anticipates stronger growth in the second half of 2025. The firm projects NVIDIA will capture 74% of the $350 billion AI accelerator market by 2027, driven by major customers like Microsoft, Amazon, and Google.

Elon Musk’s consortium will withdraw its $97.4 billion bid for OpenAI’s non-profit arm if the company abandons its plans to become a for-profit entity, according to a court filing. Musk argues the move is essential to preserving the charity’s mission, while OpenAI’s board is set to reject the bid, insisting the non-profit is not for sale.

Baird initiated coverage of GE Vernova with an "Outperform" rating and a $448 price target, citing the company's leadership in power generation and its strong position to benefit from rising global electricity demand. The firm highlighted GE Vernova's strong technology portfolio, pricing power, and potential for margin expansion, along with upside from emerging technologies like small modular reactors and carbon capture.

Rosenblatt Securities upgraded Cisco Systems to "Buy" and raised its price target to $80, citing strong subscription growth, AI-driven orders, and robust recurring revenues. The firm highlighted Cisco's impressive Q2 results, with a 9% revenue increase and strong growth in AI infrastructure and web-scale orders, while acknowledging potential risks such as tougher year-over-year comparisons and US public sector spending.

Morgan Stanley upgraded STMicroelectronics to Equal Weight, anticipating a potential recovery in fiscal year 2026 despite ongoing margin challenges and uncertain demand, particularly in the automotive sector. The firm has revised its sales, margins, and EPS estimates for FY25 and FY26, setting a fair value of €22 per share based on a 14x multiple.

Kraft Heinz was downgraded by both Bank of America and Citi due to a disappointing FY25 sales and earnings outlook, with analysts citing ongoing revenue challenges and limited investment in growth. Both firms lowered their price targets and earnings estimates, highlighting concerns over weak sales in key product categories, execution issues with the Accelerate platform, and reduced marketing and promotional spend.

Berenberg maintained its Buy rating on Vinci and a €130 price target, praising the company’s resilient growth and strong margin management in FY24, with a 4% revenue increase to €71.6 billion. Despite political headwinds and new taxes, Berenberg expects Vinci to achieve steady EBIT growth of 5% annually over the next three years, and views its valuation as attractive with a 4.5% dividend yield.

UBS analysts upgraded their outlook for European shares, citing the potential for peace in Ukraine to drive opportunities in reconstruction and lower energy costs. They recommended buying shares in companies that could benefit from a ceasefire, including Ryanair, EasyJet, Wizz Air, Erste Group, UPM-Kymmene, Stora Enso, Coca Cola HBC, and LPP.

Upcoming data and events

Today’s key U.S. economic data includes January’s Retail Sales, along with Capacity Utilization and Industrial Production for the same month. Notable companies reporting include Hermès International, Charles Schwab, Safran, and Enbridge Inc.

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