Trump`s tariffs erase election gains

General market commentary

U.S. equity markets faced a sharp downturn on Thursday, with growth-oriented sectors bearing the brunt of the sell-off. The Nasdaq Composite tumbled by over 2.5%, driven lower by disappointing forward guidance from semiconductor firm Marvell, which overshadowed its strong earnings report. This reaction underscores the high expectations placed on AI-exposed companies and the broader technology sector. Market sentiment was further pressured by concerns that valuations in growth equities remain stretched, particularly in the face of uncertain earnings trajectories. Additionally, U.S. shares have given up all the gains seen since President Donald Trump won the election in November 2024, due largely to uncertainties created by his tariff melee. Meanwhile, European markets traded slightly higher following the European Central Bank’s decision to cut interest rates, while Asian markets found support from optimism surrounding Alibaba’s latest AI advancements.

Looking ahead, market leadership continues to broaden, reinforcing the case for diversification amid ongoing volatility. While U.S. equities have had a choppy start to the year, international developed markets have significantly outperformed, and defensive sectors such as healthcare and consumer staples have shown resilience. The underperformance of technology and consumer discretionary shares year-to-date signals a shift in investor preferences, as cyclical and value-oriented segments gain traction. Despite near-term headwinds, the broader bull market remains intact, though investors should brace for persistent volatility and a more measured pace of gains.

Latest market and economic update

Asian equities fell on Friday, mirroring Wall Street’s losses, as investor uncertainty grew following President Trump’s abrupt decision to delay 25% tariffs on most Mexican and Canadian goods after initially imposing them. Japan’s Nikkei 225 plunged 2.1%, Australia’s ASX 200 dropped 1.6%, and South Korea’s KOSPI traded 0.4% lower, while Chinese and Hong Kong markets saw more modest declines.

US equity futures edged higher overnight as investors awaited the key monthly jobs report for insights into economic strength, following sharp declines in major indices the previous day. Tech stocks remain in focus after Marvell’s weak AI-driven forecast weighed on the sector, though Broadcom shares surged over 12% in after-hours trading after delivering strong earnings and upbeat guidance.

European equities closed slightly higher on Thursday, with the STOXX 50 up 0.5%, supported by tariff relief hopes and potential exemptions for agricultural goods. Air France-KLM (+14%), Lufthansa (+7%), and Deutsche Post (+12%) rallied on strong earnings and cost-cutting plans, while broader sentiment remained cautious after the ECB's rate cut and inflation forecast revision.

The dollar index stabilised above 104 on Friday, supported by President Trump’s temporary exemptions on Canadian and Mexican goods, although it remained on track to lose more than 3% for the week due to escalating trade tensions. The dollar depreciated sharply against the euro, with EUR/USD rising to 1.0807 as investors anticipated significant public spending increases across Germany and other European nations to boost defence.

Bitcoin dropped nearly 4% following the announcement of U.S. President Donald Trump’s executive order to create a strategic Bitcoin reserve, which will be funded by Bitcoin seized through criminal or civil asset forfeitures, with no new government purchases. The cryptocurrency is currently valued around $86,721, as the reserve is intended to serve as a store of value similar to gold, rather than having any major impact on crypto markets.

Oil prices remained steady in Asian trade this morning, near their weakest levels of the year, as fears of increased U.S. trade tariffs and concerns over rising supply weighed on the market. Brent and WTI futures were on track for their worst weekly loss since October, with the OPEC+ production hike and ongoing geopolitical uncertainty, particularly around Russia and Ukraine, adding further pressure.

China's exports grew by just 2.3% year-on-year in the January-February period, while imports unexpectedly fell by 8.4%, missing economists' expectations. The weak trade data raises concerns over China's economic recovery, just days after the government set a growth target of around 5% for 2025.

The European Central Bank has lowered its growth forecast for the eurozone, now expecting GDP to grow by 0.9% this year, down from the previous 1.1%. However, inflation is projected to rise to 2.3% in 2025, before falling back to 1.9% by 2026, with the ECB continuing to ease interest rates.

Equities on the move

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

Broadcom announced a strong second-quarter forecast, projecting revenue of $14.90 billion, which exceeded market expectations of $14.76 billion. Shares surged 13% in after-hours trading, driven by a 77% increase in AI revenue to $4.1 billion, as cloud computing companies increasingly adopt Broadcom’s custom AI chips, with four new hyperscale customers now engaging with the company for tailored solutions.

Costco reported a 9% increase in quarterly revenue to $63.72 billion, surpassing analysts’ expectations of $63.13 billion, but missed profit estimates, with earning $4.02 per share, compared to the expected $4.11. The company faced rising costs, particularly from higher egg prices, which impacted its margins, while merchandise costs grew by 9%, up from 5% last year.

SpaceX's Starship spacecraft exploded minutes after launch on Thursday, marking the second consecutive failure for the Mars program this year, as the rocket broke apart in space shortly after losing engine power. The incident, which prompted the FAA to halt air traffic in parts of Florida, will be investigated, and SpaceX must address the cause before it can attempt another launch.

CMA CGM, the world’s third-largest container shipping line, announced a $20 billion investment in the U.S. over the next four years, which will create 10,000 jobs and expand shipping logistics and terminals. This move aligns with the Trump administration's efforts to boost domestic shipbuilding and reduce reliance on China, with CMA CGM also planning to increase its U.S.-flagged vessels from 10 to 30 and develop a new air cargo hub in Chicago.

Germany's DHL plans to cut 8,000 jobs in its home market this year, the largest reduction in two decades, due to declining letter volumes and strict regulations, aiming for savings of over 1 billion euros by 2027. Despite a 7% drop in 2024 earnings, DHL exceeded expectations and forecasts a 2025 operating profit of over 6 billion euros, though it is still below analysts’ projections.

Air France-KLM reported stronger-than-expected annual results, with a fourth-quarter operating profit nearly double analysts' forecasts, driven by cost control and stronger pricing. However, its Dutch unit KLM faced rising costs and lower margins, leading to a €234 million decline in operating results, prompting 250 job cuts in non-operational roles.

Lufthansa's shares rose after the airline posted a slight beat in operating profit for 2024, aided by strong demand and lower fuel costs in the second half of the year, following a challenging period of strikes and delays. The airline anticipates "significantly higher" operating profit in 2025, with cost-saving measures at its core brand expected to contribute a gross profit of €2.5 billion by 2028.

TD Cowen upgraded Tesla to "Buy" from "Hold" and raised its price target to $388, citing strong prospects in electric vehicles, autonomous driving, and robotics, despite challenges in the near term. While acknowledging risks such as tariffs and potential regulatory changes, TD expects Tesla to see mid-teens delivery growth in 2025 and 2026, with improved margins and upside potential from its autonomous and robotics ventures.

Cantor has initiated coverage on Robinhood Markets with an Overweight rating and a $69 price target, highlighting the company's growth potential, particularly in equities and crypto. Analysts are optimistic about Robinhood's expansion in crypto and believe it will drive market share gains, asset growth, and profitability in the medium term.

Seaport Research has upgraded several homebuilding shares, including D.R. Horton, Lennar, and KB Home, citing a potential 27% upside despite challenges like increased supply and margin pressure. Analyst Ken Zener believes the sector's recent 34% decline offers significant upside potential as the market shifts, with later cycle sectors lacking similar opportunities.

Bank of America maintains its Buy rating on ASML and a €859 price target, confident that the company's 2025 revenue guidance is achievable, based on its backlog and booking requirements. Despite potential headwinds, including tariffs affecting demand, BofA highlights strong EUV demand and good visibility for ASML’s 2026 forecasts.

BofA Securities has upgraded E.ON to a "buy" rating, citing Germany's fiscal policy shift and a €500 billion infrastructure spending plan as key growth drivers for the company. Analysts expect the policy change to benefit E.ON through expanded energy networks, increased demand, and improved regulation, raising their price target to €15.50, with significant potential upside.

Morgan Stanley downgraded Ryanair to "equal-weight" from "overweight," citing concerns over valuation after a 50% rally in its shares, with rising operational costs and slowing seat growth limiting further upside. The brokerage now prefers Jet2, which it views as undervalued, while acknowledging Ryanair's strong financial position and market presence but projecting slower earnings growth.

Upcoming data and events

Key events today include the U.S. jobs report, with economists forecasting an increase of 159k. It’s a quiet day in terms of reporting as we approach the end of the Q4 2024 earnings season, but the economic updates will still play a crucial role in shaping market sentiment.

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