United States
US stocks closed at new records on Tuesday, driven by relentless optimism around artificial intelligence and expectations of continued Federal Reserve rate cuts.
The S&P 500 finished up 0.6 per cent at 6,944.74, surpassing its late December closing high. The Dow Jones Industrial Average jumped 1 per cent to close above 49,000 for the first time at 49,461. The tech-heavy Nasdaq gained 0.6 per cent, while small caps outperformed with the Russell 2000 adding 1.4 per cent.
The session’s standout performers were computer memory and storage companies. SanDisk soared as much as 25 per cent to a record in its best intraday performance since February, after Nvidia chief Jensen Huang highlighted the critical need for memory and storage at the CES tech conference. Western Digital and Seagate Technology also posted double-digit percentage gains.
Nvidia itself, however, struggled to meet the market’s lofty expectations, fluctuating between positive and negative territory despite the company’s CFO Colette Kress saying a bullish October revenue forecast has only gotten brighter due to strong demand. AMD faced similar challenges, falling 3 per cent even after boss Lisa Su said AI demand is soaring.
Goldman Sachs expects another year of solid gains, forecasting an S&P 500 total return of 12 per cent to a year-end level of 7,600. Citadel Securities’ Scott Rubner pointed to record money-market balances of US$7.6 trillion as a potential source of buying power, supporting the case for a strong January effect.
A weaker than expected US services PMI reading bolstered rate cut hopes, with business activity and jobs market data due later this week.
Europe
European stocks climbed to a fresh record on Tuesday, led by healthcare and mining shares.
The Stoxx 600 gained 0.6 per cent, with the healthcare sector hitting a 10-month high. Novo Nordisk rallied 5 per cent on continued optimism around the US launch of its Wegovy obesity pill, while AstraZeneca surged 4.9 per cent. Life science stocks received a boost after a US federal appeals court rejected the Trump administration’s attempt to slash billions in NIH research overhead costs.
EssilorLuxottica climbed 5.2 per cent after partner Meta flagged high demand for smart glasses, while UK retailer Next soared 5 per cent on strong Christmas sales and another lift to profit guidance. Tesco gained 2.8 per cent after data showed it captured its greatest slice of shoppers’ spend in more than a decade over the Christmas period.
Mining stocks benefited from copper’s continued surge to fresh records, with Rio Tinto gaining 3.3 per cent and Anglo American adding 3.7 per cent. The basic resources sector closed at its highest level since June 2022.
Polish parcel locker company InPost was the standout performer, soaring 28 per cent after receiving a takeover proposal. On the downside, Adidas and JD Sports fell sharply after Bank of America downgraded both stocks, predicting a material slowdown in growth.
Australia
The local market is set for a solid start, with ASX 200 futures pointing to gains of around 51 points, or 0.6 per cent, at the open to 8,709.
All eyes today will be on the November monthly consumer price index data at 11.30am AEDT. TD Securities expects headline inflation to remain elevated at 3.8 per cent year-over-year, reflecting higher recreational prices, rents, and electricity costs. Services inflation will be closely watched for signs of stickiness.
The stakes are high. Markets are pricing roughly a one-in-three chance of a rate hike at next month’s RBA meeting, and a hot inflation print could tip the scales further towards tightening. TD Securities said it expects the RBA to remain on hold through 2026, but cautioned the risk leans towards a hike as soon as February if CPI exceeds forecasts.
Investment bankers are expecting a buoyant year for mergers and acquisitions, with the BlueScope takeover approach setting an early tone. The $13.2 billion bid from SGH and Steel Dynamics is being evaluated by BlueScope’s board, subject to conditions including due diligence and debt funding.
Among broker moves, Santos was upgraded to outperform at Bernstein with a price target of $7.30, while Harvey Norman was cut to hold at Jefferies and Bapcor was downgraded to sector perform at RBC.
Commodities and currencies
Base metals are stealing the spotlight. Copper extended its powerful rally to a fresh record of US$13,387.50 a tonne on the London Metal Exchange, as expectations of US tariffs on refined metal draw inventory into America, potentially leaving the rest of the world short.
Nickel spiked more than 9 per cent in London, its biggest gain in over three years, as surging investor interest in China helps turbocharge a broad rally across metals markets. The battery metal has lifted more than 20 per cent over the past two weeks despite an oversupplied market.
Gold climbed 0.7 per cent to US$4,481.38 an ounce as the precious metals rally extended, while silver surged 6 per cent.
Oil pulled back sharply, with Brent crude falling 1.9 per cent to US$60.61 a barrel amid a rethink on how the toppling of Nicolas Maduro will impact Venezuelan oil flows. Some observers are cautioning against rushing to invest in the country, with one prominent Venezuelan-born fund manager calling the sudden interest “nuts”.
Iron ore edged up 0.7 per cent to US$106.55 a tonne.
The Australian dollar firmed 0.3 per cent to US67.34 cents. Bitcoin retreated 2 per cent to around US$92,500, giving back some of last session’s gains.
Economic Calendar
AU:
- Building Approvals MoM 11:30
- CPI 11:30
EU:
- CPI 21:00
US:
- MBA Mortgage Applications 23:00
- ADP Employment Change 00:15
- ISM Services Index 02:00
- Factory Orders 02:00
- Durable Goods Orders 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.
