As a result, the Nasdaq 100, which had been down almost 5% over three sessions, managed to limit its weekly decline to 1.9%. The Dow Jones did even better. The index smashed through the 50,000-point mark for the first time, driven by consumer staples, healthcare, industry and financials. Old economy sectors. But not only those. Semiconductor vendors, in other words hardware players, also provided solid support. Their best salesman, Nvidia's head Jensen Huang, once again came to the rescue of the ecosystem, explaining in an interview with CNBC that everything going on is fantastic, that the massive investments are justified and that there is no reason to be alarmed. It is hard to know whether Jensen Huang is performing some sort of incantation or whether he is completely confident in what he says. One is tempted to argue that he knows his business, and given all the visionary achievements to his name, he is probably worth listening to more than anyone else. Still, the fact that he is at once judge, jury, oracle, financier, salesman and much else besides does raise some doubts about his objectivity.
Be that as it may, his voice carried on Friday and technology stocks rebounded, like other assets subject to intense speculation, including silver and bitcoin. The rebound also extended to the rest of the market, showing that the rally now rests on a much broader base than a few months ago, when the Magnificent Seven and their underlings were doing most of the heavy lifting.
In recent weeks, the narrative of AI-driven trickle-down effects across the economy has only worked in fits and starts. But it remains a pillar of the market advance. In the background, the earnings season remains solid and is facilitating sector rotation. The US small and mid-cap index, the Russell 2000, is up 7.6% since the start of the year, reflecting renewed appetite for less richly valued but well-performing companies. It is ahead of the Dow Jones (+4.3%) and the S&P 500 (+1.3%). The Nasdaq 100 brings up the rear (-0.7%). The Russell 2000 trades on a price/earnings ratio of 19.1 times, compared with 28.6 times for the S&P 500 based on the latest annual results. Friday’s sharp rise (+3.6%) was also driven by mixed US macroeconomic data, which pushed the probability of a June rate cut up to 70%.
On the political front this morning, two major stories stand out.
In Japan, Sanae Takaichi has won her gamble. The snap general election has given her party, the LDP, a solid majority in the lower house. With its allies, Takaichi can even count on a qualified majority. Japanese equities surged in Tokyo, as the political leader has promised a more expansionary spending policy. Bonds fell, as Japan is already heavily indebted. Politically, this landslide victory should give the Prime Minister more time to roll out her reforms.
In the United Kingdom, the situation is far more fraught for Keir Starmer. His chief of staff, Morgan McSweeney, has resigned after acknowledging that he supported the appointment of Peter Mandelson as ambassador to Washington despite his links to Jeffrey Epstein, revealed by newly released documents. The affair has triggered the most serious crisis of Starmer’s term in office, and he could lose his job if his party were to withdraw its support.
Other stories not to miss as the week gets under way:
Oil prices fell after positive comments from US and Iranian officials on the ongoing nuclear negotiations.
Talks on a ceasefire in Ukraine are going well, according to Donald Trump.
On the corporate agenda, the quarterly earnings season remains dense in the United States and is picking up pace in Europe. Companies reporting include Kering, AstraZeneca, BP Plc, EssilorLuxottica, TotalEnergies, Siemens, Hermès International and L'Oréal on one side of the Atlantic, and Coca-Cola, Cisco Systems, T-Mobile US, McDonald's and Applied Materials on the other.
On the macro agenda, attention will focus on Tuesday, with US retail sales and wholesale inventories, and Wednesday, with Chinese inflation and monthly US employment data, and core inflation on Friday.
In Asia-Pacific markets, it is a celebration in Japan (+3.9%) following the local legislative elections, and also in South Korea (+4.1%) in the wake of the strong rebound in the United States. Solid gains are also seen in Hong Kong (+2%), Australia (+1.9%) and Taiwan (+2%). India is slightly behind but still up 0.5%. European markets are expected to open higher. Futures are in positive territory in the United States, although volatility could still cause shifts before the opening bell.
Today's economic highlights:
On today's agenda: consumer confidence in Switzerland; the Bank of Canada's Market Participants Survey; ECB President Lagarde's speech for the Euro Area; in the United States, speeches by Fed's Waller and Bostic. See the full calendar here.
- GBP / USD: US$1.36
- Gold: US$5,028.12
- Crude Oil (BRENT): US$67.27
- United States 10 years: 4.24%
- BITCOIN: US$70,592.5
In corporate news:
- BP plc's Whiting refinery is preparing for a potential strike as the company does not intend to follow the national bargaining agreement signed between Marathon Petroleum and the United Steelworkers union.
- The UK's Financial Conduct Authority plans to publish all trading data for London-listed shares to address under-reporting of market liquidity.
- Natwest is set to acquire Evelyn Partners for more than £2.5 billion, according to Sky News.
- WPP is set to streamline its creative agency structure by bringing its main advertising agencies under one banner called "WPP Creative".
- Ocado Group is considering cutting up to 1,000 jobs, or 5% of its global workforce, to reduce costs.
- Orion Minerals has signed a $250 million prepayment facility with Glencore for the development of the Prieska copper zinc project.
- DGR Global plans to vote in favor of Jiangxi Copper's offer for SolGold.
- NatWest Group is reportedly nearing a £3 billion acquisition of British wealth manager Evelyn Partners, outbidding Barclays.
- Roche's multiple sclerosis drug fenebrutinib achieves its Phase III target.
- WPP is to overhaul the structure of its creative agencies as part of a strategic review, reveals the FT.
- Freya Investissement, Iliad's investment vehicle, is seeking to increase its economic rights in Tele2 to 27% through financial swaps, while maintaining its controlling position with 27% of voting rights (and 19% of capital currently).
- Ryanair restores its 9% growth forecast for Belgium's Charleroi airport after the passenger tax is scrapped.
- Elon Musk announces that the Tesla heavy goods vehicle will go into mass production this year.
- Apple plans to allow external voice-activated AI chatbots in CarPlay, according to Bloomberg.
- Kroger plans to appoint former Walmart executive Greg Foran as CEO, according to the WSJ.
See more news from UK listed companies here
Analyst Recommendations:
- Hiscox Ltd: Peel Hunt maintains its buy recommendation and raises the target price from GBP 15.55 to GBP 17.50.
- Lancashire Holdings Limited: Peel Hunt maintains its hold recommendation and reduces the target price from GBP 6.45 to GBP 6.10.
- Vodafone Group Plc: Landesbank Baden-Wuerttemberg maintains its buy recommendation and raises the target price from GBX 110 to GBX 120.
- Gsk Plc: TD Cowen maintains its hold recommendation and raises the target price from USD 55 to USD 70.
- Ibstock Plc: Jefferies maintains its buy recommendation and reduces the target price from GBX 165 to GBX 145.
- Orsted A/S: Arctic Securities downgrades to hold from buy and raises the target price from DKK 140 to DKK 145.
- Banco De Sabadell, S.a.: Alantra Equities maintains its buy recommendation and reduces the target price from EUR 4 to EUR 3.85.
- Barry Callebaut Ag: Rothschild & Co Redburn maintains its neutral recommendation and raises the target price from CHF 1050 to CHF 1250.
- Heineken N.v.: ING Bank maintains its hold recommendation and raises the target price from EUR 64.62 to EUR 76.13.
- Société Générale: RBC Capital maintains its sector perform recommendation and raises the target price from EUR 67 to EUR 74.
