General market commentary

Equity markets ended mixed on Tuesday as investors assessed the latest inflation data and braced for quarterly earnings reports to justify high share valuations. The Dow rose by 0.5%, the S&P 500 edged slightly higher, while the Nasdaq dipped nearly 0.25%. A report from the U.S. Labor Department revealed that the producer price index rose less than expected in December, briefly lifting investor sentiment. However, optimism waned amid disappointing news from Eli Lilly, whose shares plunged over 6.5% after forecasting lower-than-expected fourth-quarter sales of its weight-loss drug Zepbound. Concerns about tariffs and interest rates, as well as Boeing’s 2% decline following its lowest annual deliveries since the pandemic, further weighed on the markets.

The 10-year Treasury yield, holding above 4.7%, remained near a 14-month high, despite bond yields edging lower after the inflation data. Financial shares gained ground, with Goldman Sachs rising 1.5% ahead of its earnings report later today, while utilities also outperformed. Mid- and small-cap equities led the day’s gains, and the U.S. dollar weakened against major currencies. In commodities, WTI oil fell following forecasts projecting steady demand alongside rising U.S. output over the next two years. Global markets were more subdued, with European equities declining, driven lower by energy shares. Investors now await today’s consumer price index data, which will shape expectations for the Federal Reserve’s next policy decisions.

Latest market and economic update

Most Asian equities edged higher on Wednesday, tracking Wall Street's gains, but caution prevailed ahead of key U.S. inflation data and the Federal Reserve’s hawkish outlook for 2025. Japan's Nikkei 225 rose 0.3%, while China's CSI 300 slipped 0.2%, and markets across the region remained subdued amid concerns over limited Fed rate cuts and mixed economic indicators.

U.S. equities futures edged higher this morning as investors awaited the December consumer inflation report, which could influence Federal Reserve policy. Major financial institutions, including BlackRock and JPMorgan Chase, are set to report their fourth-quarter results, while market focus remains on potential shifts in interest rate expectations.

European equities ended higher on Tuesday, breaking a four-session losing streak, with banks and tech shares leading the gains. The Eurozone's STOXX 50 rose 0.5%, while the STOXX 600 struggled due to losses in healthcare and consumer defensive sectors, particularly Sanofi and Novo Nordisk.

The U.S. dollar index held steady near two-year highs at 109.2 on Wednesday, as traders awaited key inflation data that could shape Federal Reserve policy, while weaker-than-expected PPI figures on Tuesday led to a slight pullback. The euro remained soft against the dollar at $1.0303, reflecting ongoing dollar strength amid cautious market sentiment.

Oil prices held steady near a four-month high in Asian trade on Wednesday as traders awaited key U.S. inflation data, with Brent at $79.95 a barrel and WTI at $76.45. A smaller-than-expected decline in U.S. crude inventories and rising gasoline and distillate stockpiles signalled robust supply and tempered demand concerns.

The U.S. producer price index rose 3.3% year-on-year in December, slightly below the 3.4% estimate, driven by base effects from lower readings a year ago. Monthly PPI inflation slowed to 0.2%, consistent with recent trends, while the flat services component could help ease elevated U.S. consumer services inflation.

Equities on the move

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

Pfizer is planning to sell approximately 700 million shares, or a 7.7% stake, in Haleon Plc, aiming to raise around £2.6 billion ($3.1 billion). This move is part of Pfizer's ongoing share divestments in Haleon, and the funds will strengthen Pfizer's financial position, though their specific use remains undisclosed.

The U.S. Securities and Exchange Commission has sued Elon Musk, alleging he violated securities laws by failing to disclose a substantial stake in Twitter in a timely manner, allowing him to save at least $150 million. Musk, who has criticised the SEC as "broken," is also under investigation for potential securities fraud related to his Twitter buyout and Tesla share sales.

Country Garden, once China’s largest property developer, reported a record net loss of 178.4 billion yuan for 2023 and a narrower interim loss of 12.8 billion yuan for the first half of 2024 amid a prolonged property sector crisis. Facing a liquidation petition over a $205 million loan, the developer is pursuing a debt restructuring plan to reduce its $16.4 billion offshore debt by 70%.

Eli Lilly’s shares fell 6.6% on Tuesday after reporting weaker-than-expected fourth-quarter revenue of $13.5 billion, driven by softer sales of its Mounjaro and Zepbound weight-loss drugs. Despite the miss, analysts at BofA maintained a Buy rating, citing strong long-term prospects in the weight-loss drug market and a price target of $997.

Robinhood's shares rose 5.5% yesterday after analysts from Morgan Stanley and Bernstein SocGen gave positive ratings, highlighting its growth potential and regulatory progress. Both firms foresee significant upside, with expectations for increased profitability and expansion in cryptocurrency offerings.

Barclays raised its price target for Netflix to $715 but maintained an Underweight rating, citing challenges in meeting the high expectations reflected in its current valuation. The analysts warned that Netflix's ad-supported tier and growing costs may limit future growth, making it difficult to justify further valuation increases without exceeding the company's guidance.

Goldman Sachs downgraded Mercedes-Benz to "neutral" from "buy," citing concerns over top-end luxury vehicle sales and risks related to electric vehicle growth and market conditions. The firm forecasts a 40% drop in earnings for 2024, with a further decline in 2025, while lowering its price target to €59.

Raymond James downgraded Fortinet to Market Perform from Outperform, citing concerns that the expected "firewall supercycle" in network security may be premature. The firm also raised concerns over Fortinet's SASE market position, the departure of a key executive, and its high valuation relative to historical averages.

Truist Securities initiated "Buy" ratings on Northrop Grumman and Lockheed Martin, citing recent pullbacks as good entry points. The firm highlighted strong growth drivers for both, including Northrop's nuclear programs and Lockheed's missile revenue, with continued U.S. and NATO defense spending supporting long-term prospects.

Upcoming data and events

Today, the U.S. will release its Consumer Price Index data alongside earnings reports from major banks like JPMorgan Chase and Wells Fargo, with expectations of strong performance amid ongoing inflation concerns. In Europe, the Eurozone's Industrial Production figures and the UK's inflation rates will also be announced, providing further insights into economic conditions across the regions.

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