United States
Sharp cross-currents buffeted US stocks on Thursday, as last year’s technology winners sold off while investors piled into small caps, energy producers, and defence names.
The S&P 500 finished little changed while the Nasdaq 100 slid 0.6 per cent, ending a three-day advance. The Dow Jones Industrial Average rose 0.6 per cent. Tech behemoths Nvidia and Apple both fell, with memory storage companies Seagate Technology and Western Digital tumbling more than 7 per cent each.
It’s amounting to one of the more extreme rotations of its kind. The Russell 2000 has beaten the Nasdaq 100 by around 4 percentage points in the first five sessions of 2026, the second-best outperformance to start a year on record. The small-cap gauge surged 1.1 per cent to a fresh record.
Defence stocks jumped after President Trump signalled plans to raise military spending to US$1.5 trillion in 2027. Lockheed Martin and Kratos Defense led the sector higher. Evercore ISI called it an aspirational target to shape future legislative debates.
In a notable shift in the megacap landscape, Alphabet overtook Apple in market capitalisation, moving into second place behind Nvidia at US$3.92 trillion. Apple has now lost more than 5 per cent to start the year, with its market cap falling to US$3.8 trillion.
Treasury yields rose, with the 10-year climbing four basis points to 4.18 per cent after announced layoffs at US companies dropped to a 17-month low in December. Weekly jobless claims rose less than expected.
All eyes now turn to tonight’s December nonfarm payrolls report. Citi expects a 75,000 increase in payrolls but wouldn’t be surprised by stronger growth. Money markets are pricing in at least two quarter-point rate cuts this year.
Europe
European stocks fell for a second day as investors weighed weak US economic signals and locked in profits from the AI trade.
The Stoxx 600 slipped 0.2 per cent, with tech stocks and data centre-linked names following US peers lower. ASML fell 3.7 per cent, ASM International tumbled 6.9 per cent, and Infineon dropped 3.7 per cent.
Energy stocks were weak after Shell warned its oil trading performance significantly worsened in the fourth quarter as crude prices slumped. Shell fell 3.5 per cent, while Siemens Energy dropped 4.6 per cent.
Mining stocks also retreated amid a broad-based decline in metal prices. Glencore fell 2.3 per cent and Rio Tinto lost 1 per cent ahead of the merger talks confirmation.
Defence stocks bucked the trend after Trump’s military spending announcement. BAE Systems jumped 5 per cent, while Rolls-Royce gained 1.1 per cent to a record close.
UK supermarket Tesco slid 6.7 per cent after softer-than-expected like-for-like growth over Christmas triggered profit-taking. Marks & Spencer, however, gained 5 per cent after reiterated guidance reassured investors. Primark-owner Associated British Foods plunged 14 per cent on a profit warning.
Banks outperformed, with BNP Paribas gaining 3.5 per cent following an upgrade from UBS, while UK lenders rose after Bank of America lifted price targets on Lloyds, NatWest, and Barclays.
Australia
The local market is set for a positive start, with ASX 200 futures pointing to gains of around 0.3 per cent at the open.
The major story is Rio Tinto’s confirmation that it is in preliminary discussions with Glencore about a potential all-share merger. Under UK Takeover Code rules, Rio Tinto has until 5pm London time on February 5 to announce a firm intention to make an offer. Any successful transaction is expected to be implemented via the acquisition of Glencore by Rio Tinto through a court-sanctioned scheme of arrangement.
The talks come amid a surge in copper prices past US$13,000 a tonne this week. S&P Global warns the race for artificial intelligence and surging defence spending are set to intensify a projected shortage of copper, with demand forecast to rise 50 per cent to 42 million tonnes by 2040 while production peaks at about 33 million tonnes in 2030.
RBA Deputy Governor Andrew Hauser signalled a patient approach to high inflation, suggesting the central bank is in no rush to cut rates despite sticky price pressures.
In BlueScope news, Jarden analyst Charles Strong put a $36 per share sum-of-the-parts valuation on the steelmaker, well above the rejected $30 per share SGH/Steel Dynamics offer. Australia’s top pension fund has boosted its stake in the takeover target.
ASX Limited was upgraded to neutral at Goldman Sachs with a price target of $57, while Eagers Automotive was raised to buy at Jefferies.
Commodities and currencies
Oil rebounded strongly overnight as traders digested measures from the US to exert control over Venezuelan supply. Brent crude jumped 4.3 per cent to US$62.55 a barrel, while West Texas Intermediate rose 4.6 per cent to US$58.57.
Goldman Sachs released a survey showing institutional investors are close to their most bearish view on oil in a decade. More than 59 per cent of over 1,100 Goldman clients are bearish or slightly bearish on crude, placing sentiment just off record lows in data dating back to 2016. A record number of institutional investors said oil was their favourite short.
Precious metals found some stability after recent volatility. Gold edged up 0.5 per cent to US$4,478.50 an ounce after dipping below US$4,450. Silver pared earlier losses but remained under pressure as investors positioned for annual commodity index rebalancing that will see futures contracts worth billions of dollars sold in coming days.
Iron ore eased 0.7 per cent to US$108.25 a tonne.
The Australian dollar fell 0.4 per cent to US66.95 cents, its lowest level in several sessions. Bitcoin slipped 0.2 per cent to around US$90,800.
Economic Calendar
US:
- Change in Nonfarm Payrolls Dec 00:30
- Unemployment Rate Dec 00:30
- Housing Starts Oct 00:30
- Uni. Of Michigan Sentiment 02:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
