United States
It was a tale of two sessions on Wall Street, with early optimism giving way to afternoon selling as traders digested December’s inflation data alongside the first major earnings of the season.
The S&P 500 slipped 0.2 per cent to around 6,965, retreating from record highs, while the Dow Jones Industrial Average shed 0.8 per cent to 49,192. The tech-heavy Nasdaq 100 also eased 0.2 per cent.
December’s core consumer price index, which strips out volatile food and energy components, rose just 0.2 per cent month-on-month – a touch softer than economists had anticipated. On an annual basis, core inflation came in at 2.6 per cent, matching a four-year low.
The initial reaction was encouraging, with equities and bonds rallying on hopes the Federal Reserve might bring forward its next rate cut. But those gains proved fleeting as traders concluded the data wasn’t compelling enough to shift the central bank’s trajectory.
Money markets continue to price the next rate reduction for mid-2026, following three cuts since September. With unemployment low, growth running above trend, and inflation still above the Fed’s target, policymakers appear comfortable keeping rates on hold for the foreseeable future.
JPMorgan Chase weighed heavily on sentiment, tumbling 4.2 per cent after its quarterly results disappointed. Investment banking fees missed guidance, with revenue from both underwriting and merger advisory work falling short. The KBW Bank Index dropped 1.3 per cent in sympathy.
Political noise also unsettled markets, with President Donald Trump labelling Fed Chair Jerome Powell either “incompetent” or “crooked” following a Justice Department probe into the central bank’s headquarters renovation. Trump also described the North American trade pact between the US, Canada and Mexico as “irrelevant”, adding to uncertainty around trade policy.
On the corporate front, Meta Platforms announced plans to cut more than 1,000 jobs from its Reality Labs division as the company pivots resources from virtual reality towards artificial intelligence wearables. Intel and Advanced Micro Devices both rallied after KeyBanc upgraded the chipmakers, noting strong demand for server processors in 2026.
Europe
European equities finished little changed, with the Stoxx 600 edging down 0.08 per cent as sector performance diverged sharply.
Construction stocks endured their worst session in five months, with the sector tumbling 2.6 per cent. Swiss building materials group Sika slumped 9.5 per cent after a weaker-than-expected update weighed on peers, while French infrastructure giant Vinci dropped 4.5 per cent following a downgrade. Adding to the sector’s woes, President Vladimir Putin’s order to seize Danish insulation maker Rockwool’s Russian assets injected further uncertainty.
Energy was the standout performer, surging 1.9 per cent to its highest level since 2008 as oil prices climbed on heightened geopolitical tensions. Shell, TotalEnergies and BP all advanced more than 2 per cent.
European industrials also impressed, closing at a fresh record with gains of 0.2 per cent. Defence names remained in focus despite Deutsche Bank warning the sector is approaching peak valuations. Siemens, Safran and Airbus all touched record closing levels.
The technology sector reached heights not seen since November 2000, adding 0.5 per cent as ASML hit a record close. Banks also shone, climbing 0.6 per cent to their best level since 2008 as JPMorgan’s results marked the start of the US earnings season.
Automotive stocks struggled, falling 1.3 per cent after Ferrari and BMW were both downgraded, while telecoms dropped 1.4 per cent.
Australia
Australian shares are set for a subdued start to Wednesday’s session, with S&P/ASX 200 futures flat at 8,783.
Rio Tinto will be in focus after reports emerged the mining giant has tapped Evercore’s Simon Robey and JPMorgan to advise on a potential combination with Glencore. BHP’s American depositary receipts gained 2.3 per cent overnight, while Rio Tinto’s ADRs added 1.1 per cent.
Broker activity was busy, with Citi upgrading both Computershare and Endeavour Group to buy ratings, though Jarden took the opposite view on Endeavour, cutting it to underweight. Macquarie lifted Lottery Corp to outperform, while Goldman Sachs upgraded Macquarie Group to neutral. Rare earths player Lynas and titanium producer IperionX both received fresh outperform ratings from William Blair.
Bond yields ticked marginally higher, with the three-year rising 0.8 basis points to 4.11 per cent and the ten-year adding 0.5 basis points to 4.71 per cent.
Commodities and currencies
Oil prices surged to two-month highs after President Trump ramped up rhetoric against Iran, stoking concerns about potential supply disruptions. Brent crude jumped 2.5 per cent to $US65.45 a barrel, while West Texas Intermediate gained 2.5 per cent to $US61.
Precious metals continued their remarkable run. Gold eased marginally to $US4,587 an ounce after touching fresh records, while silver topped $US89.
The Australian dollar weakened 0.4 per cent to 66.82 US cents as the greenback strengthened broadly. The euro slipped to $US1.1650, while the Japanese yen fell 0.6 per cent to 159.12 per dollar.
Bitcoin rallied 3.8 per cent to $US94,441, with ethereum gaining 3.7 per cent.
Economic Calendar
No Major Economic Announcements
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
