Market Daily
Macro Update:
US producer prices rise less than expected
US factory gate prices rose 0.2% in December, below expectations, with annual inflation at 3.3% and core PPI steady at 3.5%. Softer PPI data shifted focus to the upcoming CPI report, key for assessing the Fed's inflation progress and rate policy. Despite this, the 10-year Treasury yield hit 4.8%, reflecting expectations of sustained high rates amid a strong labour market and potential inflationary policies. Markets now foresee just one rate cut later this year. Nevertheless, we still see 2 cuts of 25bps for 2025, which should bring us to a terminal rate of 4.0%.
Main Upcoming Macro Indicators
Equity Market Updates
US EQUITIES
US stocks edged higher on Tuesday in a volatile session as slower producer inflation helped sectors such as materials and utilities, with investors also bracing for the upcoming results season.
EUROPE EQUITIES
Stocks in Europe ended Tuesday’s session almost unchanged as pressure from rising yields continue to weigh on regional equities.
HK EQUITIES
Stocks in Hong Kong sharply rebounded from a four-month low as China regulators pledged to stabilize the market after a wobbly start to the year.
Eli Lilly (LLY US)
Shares of Eli Lilly tumbled on Tuesday after it announced preliminary 4Q24 sales that missed expectations at USD13.5B vs. almost USD14.0B expected, weighed down by slower demand for its popular weight-loss and diabetes drugs. This could provide downward pressure to the company’s share price going forward.
Nevertheless, Eli Lilly said that it anticipates its 2025 revenue to be between USD58B and USD61B, representing a significant increase from the approximately USD45B expected for 2024.
MARKET CONSENSUS: 29 BUYS, 6 HOLDS, 1 SELL, AVERAGE TP USD995.06
Boeing (BA US)
Boeing announced on Tuesday that it delivered 348 airplanes in 2024, the fewest since the pandemic as the planemaker worked to restore confidence in its manufacturing after a turbulent year that included a two-month long strike and production curbs following the January 2024 Alaskan Airlines door plug incident.
This is while its European rival Airbus delivered 766 aircrafts throughout 2024.
How Boeing will be able to restore confidence in its products as well as reaccelerate production capacity will be key to its share price trajectory going forward.
MARKET CONSENSUS: 18 BUYS, 13 HOLDS, 2 SELLS, AVERAGE TP USD186.67
Alphabet (GOOGL US)
The UK’s Competition and Markets Authority (CMA) revealed on Tuesday that it is starting an investigation into Google’s search services and their position on the market, marking the regulator's first strategic market status designation investigation since new rules on digital market competition came into force on 1 January 2025. This could inject some volatility to Alphabet’s share price in the near term.
The CMA specifically pointed out that Google accounts for more than 90% of all general search queries in the UK and stressed the importance of effective competition in the field. The CMA has until October to decide whether it will designate Google under the new rules and impose requirements to lessen the company's dominance.
MARKET CONSENSUS: 60 BUYS, 14 HOLDS, AVERAGE TP USD215.31
Lindt & Spruengli (LISN SW)
Swiss chocolate maker Lindt & Spruengli on Tuesday said its sales grew 7.8% organically last year, coming in a touch below market expectations, hit by record high cocoa prices and weakened consumer sentiment.
The maker of Lindor chocolate balls said its overall sales were CHF5.47B in 2024. That missed analysts' average forecast of CHF5.49B.
For 2025, Lindt forecast organic growth of between 7% and 9% and an improvement in its operating profit margin of 20–40bps.
With cocoa prices having nearly tripled over 2024, analysts are expecting the chocolate market to face an unprecedented cost headwind this year, which could inject volatility to the company’s share price.
MARKET CONSENSUS: 6 BUYS, 8 HOLDS, 4 SELLS, AVERAGE TP CHF101566.66
BP (BP/ LN)
British oil and gas company BP plc revealed on Tuesday that it expects its weaker refining margins to lower its fourth-quarter profit by between USD100-300M.
Realizations in the oil production and operations segment are forecast to have a negative impact in the range of USD200-400M.
BP said, however, that it expects full-year production to be slightly higher than in 2023.
Its fourth quarter and full year results are due to be published on 11 February. How this translates into its top and bottom-line is key for the share price going forward.
MARKET CONSENSUS: 9 BUYS, 13 HOLDS, 3 SELLS, AVERAGE TP GBp471.65
Earnings Announcements
US Market
Blackrock, JPMorgan, Goldman Sachs, Citigroup, Wells Fargo
European Market
-
HK - China Market
-
Global Indices Changes (%)
Fixed Income Market Updates
Due to the sell-off in long-end rates and significant primary supply in January, European bank tier 2 bonds and Japanese insurance hybrids are approaching favourable entry levels, with some offering yields in the high 5% to low 6% range. This presents a decent opportunity to incorporate these defensive names into the bond portfolio.
EUROPEAN BANK COCO (AT1)
The AT1 market opened 5 basis points higher, though the overall tone remained cautious amid rate volatility. Trade activity in AT1s began to pick up, driven by net demand, and the technical outlook for AT1s with longer call date became more supportive, promoting some investors to seek buy-on-dips opportunities. French bank AT1s rose by 12.5 to 50 basis points following headlines regarding a potential agreement to avoid supporting no-confidence motions that could threaten the government’s stability.
ASIA INVESTMENT GRADE (IG)
In the China IG market, two-way flows were observed, with investors seemingly focused on new issuances across the Asia IG landscape. New bonds from the Hong Kong Airport Authority traded 1 to 2 basis points wider amid selling pressure on older tranches. Outside of China, Korean IG activity leaned towards stronger buying in the 5-year curve by offshore investors. Higher-beta corporates like LG Energy Solution and SK Hynix widened by 1 basis point due to a lack of institutional buying..
ASIA HIGH YIELD (HY)
In China HY, the market sentiment remained fragile, particularly following a 2 to 4 point decline in China Vanke’s bonds, reflecting movements in its onshore bonds. Conversely, Vedanta from the Indian HY sector continued to attract strong demand, as investors sought to make room for Vedanta’s new issuance, resulting in some selling pressure within Indian HY bonds.
Forex Market Updates
The US Dollar weakened on Tuesday ahead of more key US inflation readings this week.
USD
The US Dollar retreated against a basket of other major currencies on Tuesday after reports that US President-elect Trump’s economic team was discussing imposing tariffs gradually to the tune of 2-5% per month to avoid a spike in inflation, with Trump’s pick for Treasury Secretary, Scott Bessent, expected to keep a tight leash on US deficits and use tariffs as a negotiating tool. On the data front, US PPI figures came in below expectations but did little to alter the market’s view that a Fed rate cut is unlikely to take place before 2H2025, especially after last week’s strong employment report.
The Dollar Index could see a rebound towards the key 110.00 handle on strong inflation numbers today and tomorrow.
EUR
The Euro rebounded from Monday’s fall to 26-month lows against the USD on positive fiscal developments in France, with new French PM Bayrou proposing a tighter budget and ruling out any adjustments to pension reform. Elsewhere, ECB policymaker Rehn questioned the efficacy of tariffs, saying that firms have found and will continue to find ways to circumvent them. Regarding monetary policy, Rehn stated that the ECB will continue on the path of easing and that he thinks Eurozone rates will “leave restrictive territory in the coming months, at the latest by midsummer”.
Despite yesterday’s recovery, the 1.0350 level is likely to act as a ceiling on near term price action in the common currency.
JPY
The Japanse Yen saw choppy intraday trading due largely to remarks made by BoJ Deputy Governor Himino before eventually ending the day modestly weaker against the USD. Himino said that the BoJ will decide whether to raise rates next week in the face of heightening prospects of sustained wage gains and added that it would “not be normal” for real interest rates to remain negative once Japan had overcome shocks and factors that caused deflation. These comments pushed JGB yields to 14-year highs and were interpreted by some analysts as “laying the groundwork for a January rate hike”.
USDJPY looks poised to remain in consolidation mode above 156.00 heading into the end of the week.
XAU
Gold prices rose for the fifth time in six days after US PPI data, a gauge of inflation, came in slightly weaker than expected, although there was little change to market expectations that the Fed’s first rate cut of this year will only happen in 2H2025. Elsewhere, gold analysts noted that a stronger USD and elevated US yields will likely remain headwinds for the precious metal moving forward, but this should be more than offset by demand for bullion as a portfolio diversifier, especially in light of ongoing geopolitical uncertainties.
The precious metal is likely to be well supported above 2600 in the near term.
