US markets close in on all-time highs

General market commentary

U.S. equity markets advanced on Thursday, with the S&P 500 and Nasdaq Composite both finishing just shy of their all-time highs, buoyed by gains in growth-oriented and cyclical sectors such as communication services, energy, and industrials. The tech-heavy Nasdaq rose 1% to 20,167.9, while the S&P 500 climbed 0.8% to 6,141, reflecting broad-based strength across most sectors. Only real estate and consumer staples posted declines. European and Asian markets were more mixed, weighed down in part by weaker-than-expected German consumer confidence. Investor sentiment in the U.S. was supported by easing trade tensions, particularly as the White House hinted at the possibility of extending the suspension of tariffs due to expire in early July. Meanwhile, speculation around a potential early announcement of Federal Reserve Chair Jerome Powell’s replacement added a political dimension to market chatter.

On the economic front, the picture was less clear. First quarter U.S. real GDP growth was revised lower to a 0.5% annualised contraction, reflecting softer consumer spending and export activity. However, jobless claims fell more than expected, with initial claims dropping to 236,000, the lowest in six weeks. That said, continuing claims reached their highest level since November 2021, raising concerns about the underlying health of the labour market. Durable goods orders beat forecasts, helped by strong demand for commercial aircraft, and pending home sales rose across all regions. Treasury yields declined, with the 10-year falling to 4.25% and the 2-year to 3.73%, suggesting investor confidence in a near term pause in Fed rate hikes. Markets now look to upcoming inflation data, particularly the Fed’s preferred PCE measure, for further guidance on the economic outlook.

Latest market and economic update

Asian shares rose on Friday with Japan’s Nikkei hitting a five-month high, boosted by gains in Tokyo Electron, Sony and SoftBank. Softer inflation data raised doubts about further Bank of Japan rate hikes. Markets remained cautious ahead of the July 9 US tariff deadline amid ongoing trade tensions. China’s indices were flat while South Korea’s KOSPI fell.

US equity futures were steady on Thursday evening as investors awaited key inflation data. Tech and bank shares lifted the S&P 500 and Nasdaq near record highs, supported by a stable Israel-Iran ceasefire and expectations of Fed rate cuts amid soft economic growth. Futures for the S&P 500, Nasdaq 100, and Dow Jones showed little change ahead of Friday’s inflation report.

European markets were mixed on Thursday, with the STOXX 50 down 0.2% and the STOXX 600 up 0.1%. Defence shares rallied following NATO’s spending pledge, led by BAE Systems, Rheinmetall, and Airbus. Miners advanced on stronger metals prices, while tech lagged as ASML fell 2.5% after a downgrade. German consumer confidence dipped slightly.

The US dollar index slid toward 97, its lowest since February 2022, as markets priced in potential Fed rate cuts and reacted to dovish comments from Jerome Powell. Easing trade tensions also dampened dollar demand. The euro gained ground, with EUR/USD rising to 1.1705, highlighting improved sentiment toward the euro relative to the weakening dollar.

Oil prices rose slightly in Asian trade, supported by a US crude stock drawdown and optimism over China stimulus. Brent and WTI futures are down over 12% this week amid easing Middle East supply concerns following a US-brokered Israel-Iran ceasefire. The Trump administration has no immediate plans to refill the strategic petroleum reserve, which remains at historic lows.

China’s industrial profits fell 9.1% in May year-on-year, ending a two-month growth streak amid slowing factory activity and economic pressures. Deflation and a property crisis weigh on demand. State-owned firms saw a 7.4% profit drop, while private and foreign firms recorded modest gains. Tariffs and price wars strain industries like autos, prompting calls for supply adjustment.

The European Union is considering reducing tariffs on U.S. imports to reach a trade deal with President Trump, ahead of talks in Brussels. Alongside tariff cuts, the EU may lower non-tariff barriers and boost U.S. purchases. With Trump pausing 50% tariffs, EU officials now aim to secure exemptions from the existing 10% tariffs.

Equities on the move

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

SoftBank CEO Masayoshi Son aims for the group to become the leading platform provider for “artificial super intelligence” within 10 years, comparing it to Microsoft and Google. SoftBank has invested $32 billion in OpenAI since 2024 and acquired semiconductor firm Ampere for $6.5 billion. Recent successes like Arm’s listing have boosted its capacity for new AI investments.

Revolut will acquire Argentine lender Cetelem from BNP Paribas, expanding its presence in Latin America. The deal, pending regulatory approval, aims to offer tailored products like multi-currency accounts and no-fee transfers. Revolut will compete with Mercado Pago, Uala, and traditional banks in a market where many use the US dollar as a safe haven.

Pony AI shares jumped 15% after reports that Uber is in talks with former CEO Travis Kalanick to back his acquisition of Pony AI’s US arm. Kalanick would lead Pony AI while staying CEO of CloudKitchens. The move reflects Uber’s response to growing competition from autonomous taxi services like Waymo and Tesla’s robotaxis.

Novo Nordisk will partner with WeightWatchers from July 1 to sell its weight-loss drug Wegovy for $299 per month, aiming to capture patients using compounded versions. This follows the end of Novo’s deal with Hims over sales of copies. WeightWatchers, emerging from bankruptcy, seeks to reboot its weight-loss drug strategy through the collaboration.

Meta Platforms is in advanced talks to acquire PlayAI, a Palo Alto startup specialising in AI voice replication technology, Bloomberg reported. The move aims to strengthen Meta’s AI capabilities by securing both the technology and key staff. The deal is not yet finalised, and financial terms remain undisclosed.

Siemens Energy plans to start producing large industrial power transformers in the US by 2027, expanding its Charlotte factory if demand and tariffs remain high. With over 80% of US transformers currently imported, the company anticipates a long-term boom driven by AI data centre growth and a $2 trillion investment in the US power grid by 2050.

Tesla executive Omead Afshar, a close confidant of Elon Musk, has left the company amid slowing demand in Europe and North America. Afshar oversaw sales and manufacturing in key markets since 2024 and played a central role in major projects like the Texas Gigafactory. His departure follows a series of senior exits during Tesla’s restructuring and shift towards AI and robotics.

UBS raised its price target on Meta Platforms to $812, citing confidence in new AI-driven revenue from business messaging and the Meta AI assistant. The valuation now assumes a 28-times multiple on 2027 earnings, reflecting Meta’s strong advertising growth potential. AI-related revenues are not yet factored into current models, while AI costs are included.

Benchmark raised Tesla’s price target to $475, citing the successful Austin robotaxi launch and supportive new Texas autonomous vehicle regulations. Despite a 33% drop from its December peak, Tesla remains a top pick for 2025. Analyst Mickey Legg highlights Tesla’s scalable, cost-effective camera-based approach and sees growth from robotaxi expansion and product refreshes.

Jefferies downgraded ASML and ASM International from Buy to Hold, citing weakening semiconductor equipment demand in 2026. They forecast a 1% decline in wafer fab equipment spending, driven by a 16% drop in DRAM and reduced China sales. Despite price target hikes, revenue and EPS estimates remain below consensus amid market softness and geopolitical risks.

JP Morgan initiated coverage of Centrus Energy with a Neutral rating and $148 target, noting shares doubled amid US efforts to boost domestic nuclear fuel supply. While Centrus is well-positioned with unique enrichment capabilities, significant multi-billion-dollar investments and clearer government funding are needed. JPMorgan advises waiting for de-risking and financing clarity.

Wells Fargo downgraded The Trade Desk to Equal Weight with a $68 price target, citing rising competition from Amazon’s DSP, boosted by partnerships with Roku and Disney. These deals are shifting connected TV budgets away from The Trade Desk, though the analyst still expects the company to meet 2025 consensus estimates despite lowered revenue forecasts for 2026 and 2027.

Upcoming data and events

Key market events today include the release of the U.S. Core PCE Price Index, a crucial inflation measure watched by the Federal Reserve, and the University of Michigan’s consumer sentiment data. Oracle is among the notable companies reporting earnings, which may impact market sentiment and trading activity.

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