Stock Markets in a Coffee Break from Europe

Yesterday, the ECB's decision to cut rates by -25bp, bringing them to 2.75/2.90%, was largely uneventful. It met expectations and reiterated the message that future adjustments will hinge on incoming data—definitely not exciting! In the U.S., the 4Q GDP reported a growth of +2.3%, which, although considered weak by its standards, was somewhat favorable for Wall St. Meanwhile, the Eurozone's GDP growth remained unchanged at +0.9%, falling short of the +1% forecast. Notably, Germany reported a decline of -0.2%, while France (+0.7%) and Italy (+0.5%) also underperformed. In contrast, Portugal (+2.7%) and Spain (+3.5%) excelled, reinforcing the belief that "SPA, PT, and IRL are the new GER." Corporate results were generally positive, aside from UPS, which saw a -14% drop following disappointing guidance and a significant decline in business with Amazon. The 4Q EPS for the S&P500 is currently at +10%, exceeding the expected +7.5%. After the New York market closed, Visa...

Market Overview: The recent hours have seen a somewhat lackluster performance in the markets, though semiconductors have shown resilience (SOX +0.2%). Bond yields have remained relatively stable at manageable levels (Bund 2.58%; T-Note 4.52%), which is crucial. Federal Reserve Update: Last night, the Federal Reserve maintained interest rates at 4.25/4.50%, as anticipated, following a series of reductions since September '24. The Fed adopted a more hawkish stance, indicating a reluctance to further lower rates in the near term. They removed the mention of inflation "progressing" towards the 2% target and emphasized that price increases remain "somewhat elevated." This aligns with our expectations, and we do not foresee additional rate cuts until possibly September '25. This stance will likely lead to a stronger USD and a weaker euro as the market absorbs this outlook. Today's Key Events: Today, we await GDP releases for the EMU and the US. More importantl...

Financial markets are beginning to stabilize after the initial turmoil caused by DeepSeek’s emergence. U.S. technology stocks rebounded yesterday, following Monday’s steep losses, as investors adjusted to the reality of China’s new AI contender. Described as faster, more efficient, and cheaper—at least on paper—DeepSeek has sparked both intrigue and controversy. Microsoft and OpenAI have raised concerns, suspecting that DeepSeek may have trained on OpenAI’s data, an allegation they find deeply troubling. The irony is hard to miss: the same companies that have been mining global data for their own AI models are now protesting. Amid this ethical tangle, one overlooked group remains caught in the crossfire—content creators, whose work continues to fuel the AI arms race. Despite Monday’s 3% drop fueled by fears over AI investments, the Nasdaq has already reversed course, regaining half its losses. Nvidia, a bellwether for the AI sector, saw its stock plummet 17% before rebounding 9% yester...

The sudden rise of DeepSeek in the AI landscape has sent ripples through the market, affecting a wide range of companies. Key examples include: - Hardware Suppliers: Nvidia and Broadcom dropped 17%, Dell Technologies fell 8.4%, and ASML decreased by 7%. - Data Center Equipment: Vertiv plunged 30%, and Schneider Electric dipped 10%. - Energy Production Equipment: GE Vernova fell 21%, Siemens Energy 20%, and Prysmian 9%. - Energy Providers: Vistra dropped 28%, and Constellation Energy 21%. Notably, Nvidia's market cap shrank by $589 billion in a single day, surpassing its previous record drop. Investors, anticipating a correction, saw a shift from AI euphoria to caution. DeepSeek's achievements with fewer resources suggest reduced investment in AI-related sectors. Despite dramatic downturns, the impact was mainly on overvalued companies like Vistra and Vertiv. This wasn't a market-wide meltdown but a targeted correction. Analysts debate whether this is a "DeepSeek evolut...

DeepSeek is currently experiencing several challenges, including technical issues that have rendered its online model unresponsive today. Users have reported that the HTTP Request node, previously connected to DeepSeek R1, is hanging and taking around 10 minutes to send requests. These technical difficulties align with significant market reactions to DeepSeek's recent AI developments, leading to a substantial selloff in shares of major tech companies. Notably, Nvidia saw a decline of nearly 12%, as investors expressed concerns about the sustainability of U.S. dominance in the AI sector. Other affected companies include Microsoft, Meta, and Tesla. Additionally, DeepSeek has faced criticism for its selective handling of sensitive topics. While the AI chatbot engages in political discussions about various countries, it avoids addressing sensitive issues related to China, such as the Tiananmen Square incident and topics concerning Xi Jinping. This has raised concerns about bias and cen...

This week is filled with significant events, including: - Corporate Earnings: Reports from Meta, Microsoft, ASML, and others are expected. - Federal Reserve Meeting: Rates are projected to remain unchanged at 4.25%/4.50%. - ECB Rate Decision: A 25 basis points cut is anticipated, lowering rates to 2.75%/2.90%. - Other Central Banks: Sweden and Canada are also expected to announce rate cuts. - U.S. PCE Deflator: Due on Friday, with an expected increase to +2.6% from +2.4%. Market Overview Last Monday, we observed that the improved market sentiment from the previous week was likely to solidify, which has indeed occurred. This week may follow a similar path, although the beginning of Monday could be affected by some "technological noise" due to the emergence of DeepSeek, a Chinese AI development alternative. DeepSeek utilizes simpler chips and may present a short-term challenge to dominant AI models from companies like Nvidia and ChatGPT. Currently, Nasdaq-100 futures are down a...

Week This week witnessed Donald Trump's inauguration and his initial proclamations, generating significant excitement in the markets. The S&P 500 celebrated by reaching a new all-time high on Thursday. Meanwhile, across the Atlantic, Europe showcased a remarkable rebound, driven by the banking sector, luxury goods, and the positive outlook of a lessened trade conflict with the United States. Quarterly earnings reports have continued to enhance the stock market's momentum, presenting a generally optimistic scenario. However, with important central bank decisions approaching and impending earnings releases from major U.S. tech companies, investors should prepare for ongoing volatility. Looking ahead, the last week of January is set to be eventful: Central Banks in Focus Monetary policy decisions are anticipated in Canada, the United States, Europe, and Brazil. Macroeconomic Indicators Investors will closely examine the first estimate of U.S. GDP for Q1 and the Dec...

The market is currently performing exceptionally well. Trump's focus on immigration, the most populist aspect of his policy, is the least practical and has minimal immediate impact on the market. This allows the market to absorb his policies without much disruption. Supported by gradually improving corporate results for Q4 2024, the market is rebounding with a hint of complacency. Current Market Performance As of 2025: ES-50: +6.3% S&P 500: +3.5% Nq-100: +4% This increase may come off as somewhat complacent and risky. However, the positive corporate results and Trump's moderate approach to key short-term market issues (like tariffs, taxes, and deregulation) have boosted investor confidence. The decrease in perceived risk has also stabilized bond yields at acceptable levels: Bund: 2.50% T-Note: 4.60% This stabilization is critical for allowing high liquidity to flow positively into the market, fostering a buying sentiment. TODAY'S MARKET OUTLOOK The market is...

The positive market tone observed last week is expected to strengthen, driven by the easing of US Core Inflation (+3.2% vs +3.3%) and solid results from American banks. TODAY'S MARKET STATUS New York is closed today due to a holiday, coinciding with Trump’s inauguration. The market outlook remains undefined, with no immediate need to reduce positions as previously considered on Friday. If Trump unexpectedly implements any known policies (tariffs, immigration, taxes, deregulation) with his usual dramatic flair, the market might view this favorably for the US GDP, especially if it includes tax cuts. This could positively influence Wall Street. However, it is likely that he will focus on his more populist and less feasible measure: immigration, which will serve as political leverage without impacting the market significantly. CORPORATE RESULTS AND INFLATION: The earnings reports from American companies are becoming increasingly significant. Their ability to exceed expectations will li...

Countdown to Trump's Inauguration: Stock Market Update The stock market began the week poorly, but a  positive surprise  regarding  US   inflation , alongside robust results from Wall Street banks, shifted the momentum as investors geared up for  Donald Trump 's inauguration . Next week will see a slight increase in quarterly earnings releases, featuring  Netflix ,  Johnson & Johnson ,  GE Aerospace ,  Procter & Gamble , and  Abbott  in the US. In  Europe ,  Investor AB ,  Givaudan , and  Ericsson  are expected to report. Additionally, the week will be highlighted by significant events such as the  Davos Forum  and the  Bank of Japan 's  rate decision on Friday. Of course, we can't overlook the inauguration of the new US President on Monday, which may bring some  dramatic announcements  early in his term. Weekend Wishes As we approach a week filled with signi...

Yesterday was a fantastic day for rebounds (NY up +2%) as US core inflation came in lower than anticipated (+3.2% vs +3.3% expected and previous). The overall inflation rate rose by the estimated 2 tenths, reaching +2.9%, and US banks exceeded expectations (JPMorgan EPS $4.81 vs $4.12; Wells Fargo $1.43 vs $1.33; Goldman $11.95 vs $8.26). This allowed for a small reduction in bond yields for the first time in a while, creating space for stocks to rebound with considerable enthusiasm. TODAY We have a bullish outlook for TODAY, starting with 3 positive news items: TSMC reported results that beat expectations and provided positive guidance for 1Q 2025 this morning. Richemont's quarterly sales were unexpectedly strong (+10% vs +0.9% expected). Although it’s early to draw conclusions about US 4Q 2024 results, with 28 companies reporting, the average EPS is already surpassing expectations (+7.8% vs +7.5% expected). TODAY, we have 2 key indicators to watch: US Retail Sales at 2:30 PM: +0....

Today's Significance: Today marks a crucial day of the week as American inflation figures are released, alongside earnings reports from major American banks. Market Recap from Yesterday: Stock Market Performance: New York: +0.1% Europe: +0.5% Bond Yields: Bund at 2.65% (+3bp) T-Note stable at 4.79% The slight rise in the markets was primarily driven by American Industrial Prices for December, which increased less than expected (+3.3% year-over-year vs. +3.5% estimated and +3.0% previous). This sets an optimistic tone for today's American CPI data. European Economic Highlights: Noteworthy interventions from ECB officials Lane and Rehn, who maintained a dovish stance, advocating for further rate cuts and emphasizing their intention to act independently from the Fed. Current EUR/USD exchange rate stands at 1.029. UK Inflation Data: This morning, the UK reported a good inflation reading of +2.5%, slightly below the expected +2.6%. The core inflation rate also declined t...

Market Overview Stocks and bonds are currently processing the robust employment data from the US released last Friday. The anticipation for Fed rate cuts is diminishing, with predictions now at -27 bp, down from -43 bp before the employment report. Economic Expectations The market is likely shifting to a "risk-off" stance ahead of the US CPI data scheduled for Wednesday, which is projected to increase from +2.7% to +2.9% for December. Additionally, Trump's inauguration on Monday will reveal the extent of his proposed measures and threats. Impact on Yields and Stocks In this environment, it seems challenging for bond yields to decrease while stocks make gains without hesitation. Notably, Wall Street saw a rebound yesterday, although the technology sector lagged. ECB Insights Lane, the chief economist of the ECB, highlighted the risk of inflation dropping below the 2% target if European interest rates remain excessively high. Rehn from Finland, speaking from Asia, emphasize...

Wall Street experienced a correction on Friday with noticeable vigor (S&P500 -1.5%, NDX -1.6%). Employment statistics confirmed the robustness of the American job market, which heightened concerns about a more aggressive Federal Reserve and led to an increase in bond yields (T-Note at 4.76%). The rise in oil prices, following a new set of US sanctions on Russia, did not provide any support. This upward trend is continuing today (WTI up by 2.1% to $78.2 and Brent up by 1.9% to $81.3), contributing to fears of ongoing inflation. This week is particularly significant as the US Consumer Price Index (CPI) will be released next Wednesday. There’s an anticipated increase in the overall rate to +2.9% from +2.7%, while the core rate is expected to hover around +3.3%. The effects of these figures will be binary: a worse-than-expected result could pressure bond yields and stifle stock market growth, while a better result could provide some relief. This week can be seen as split into two segme...

The bond sell-off seems to be moderating slightly (Bund 2.52% T-Note 4.66%), but yields are still too high for stocks to advance. Yesterday, they just flattened, distracted and worried about US employment data to be released tomorrow, which is likely to be stronger than desired, which would push the Fed away from cutting rates... which would favor bond yields not giving in. That is the main obstacle. However, surprisingly, the ADP Private Employment Survey came out somewhat weak yesterday (122k vs 140k expected vs 146k previous). But tomorrow's employment figures (2:30 PM) are the decisive ones, by official figures. Payrolls or Non-Farm Payroll Creation of only 160k vs 227k previous, Private Employment 135k vs 194k, Unemployment Rate repeating at 4.2% and Wages also repeating at +4.0% are expected. These figures, rather weak, would be good for stocks to stabilize and try to rebound a bit because yields would relax somewhat. But it is advisable not to trust because it would be stran...

The stock market's lackluster beginning to 2025 isn't surprising, as we anticipated a more cautious approach. Citadel, a major hedge fund, is advising its investors to take profit.  While 2024 saw impressive gains, we expect 2025 to be more challenging, with potentially slower growth and less predictable market movements. This initial sluggishness suggests our cautious outlook might be on the right track. However, we'll need to wait until next week to get a clearer picture of the market's direction. Key indicators to watch include European inflation (projected to rebound to 2.4%), US employment figures, and trading volume. The US dollar has already strengthened against the Euro, reaching 1.027/€, and could potentially reach parity by the end of the year. Beyond next week's European inflation report, we'll be closely watching US inflation data on the 15th, Trump's inauguration on the 20th, and the Fed and ECB meetings on the 29th and 30th. January is likely t...

The stock market is starting 2025 with a mixed bag: Wall Street is up while China is down. This is a natural reaction after Wall Street retreated in the last few days of 2024. We expect a confusing start to 2025, with the rest of the year likely being more difficult than 2024. China's decline is driven by concerns about its reliance on monetary stimulus, which we believe is insufficient to boost the economy without structural reforms and fiscal support. The incoming American administration's trade restrictions on January 20th will also negatively impact China's export sector. Additionally, China's centralized economy struggles to shift its focus to private consumption due to limitations on resource allocation and price setting. The recent poor Manufacturing PMI (Caixin) reading (50.5 vs 51.5 previous vs 51.7 expected) further reinforces these concerns. Meanwhile, the US market is likely to remain positive, despite an ISIS attack and a Tesla Cybertruck explosion in Las V...