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[MARKET ANALYSIS] Equities hit in early trade but making their way off lows

European equities are showing mixed performance but have recovered from earlier lows, with sentiment pressured by falling commodity prices and a tech sell-off, particularly following comments from NVIDIA's CEO that have undermined confidence in AI investments.

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  • European equities are mixed, but are off worst levels seen in the pre-market. Market sentiment has been weighed down by commodity prices, especially in the metal space with weaker prices in gold, silver and copper. Tech sell-off, triggered by comments from NVIDIA’s CEO Huang saying the investment level for Open AI will be nothing like the USD 100bln initially reported, has also weighed. Additionally, the WSJ reported that the plan had stalled after some expressions of doubt about the deal.
  • European sectors are mixed. Leading are Insurance (+1.0%), Optimised Personal Care (+0.9%) and Food Beverage & Tobacco (+0.8%). Newsflow has been light for the former two, but the latter has benefitted from news that the EU industry association noting a final anti-subsidy duty on EU dairy products at lower levels than in provisional duties from China, to go as high as 11.7% vs. a maximum 42.7% in the provisional duties, underpinning gains in key Co.’s like Nestle (+1.2%) and Danone (+2.0%). On the downside, price action has been largely driven by commodity prices. Basic Resources (-1.6%) has been weighed down by metal prices as Gold, Silver and Copper continue to pare YTD gains. Energy is also lower, pinned back by lower crude prices amid risk-off conditions.
  • Movers this morning include downside in Julius Baer (-4.4%) after the Co. reported a 25% decline in profit in its FY25 report. This has subsequently weighed on sentiment in the financial services (-0.5%) sector. To the upside, a broker upgrade for Elisa (+4.7%) has seen the Co. gain in early trade.
  • US equity futures are lower across the board, with downside in ES (-0.6%), NQ (-0.9%), YM (-0.3%) and RTY (-0.9%). Similar to the trend seen in Europe, sentiment has been weighed down by weaker metal prices and focus on the tech sector following comments from NVIDIA’s (-2.0%) CEO Huang. Furthermore, losses in Oracle (-5.0%) have added further pressure in the NQ after the Co. announced plans to raise up to USD 50bln in debt and equity this year. Looking ahead, highlights include US ISM Manufacturing PMI (Jan) and a speech from Fed’s Bostic. Earnings from Palantir and NXP Semiconductor are also due later.
Context

In the US, equity futures are similarly down, with losses in major tech stocks like Oracle and NVIDIA contributing to the bearish outlook. The focus will be on upcoming economic data and earnings reports, which could further influence market direction.

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