Tech Soars as Broader Markets Stagnate

For a long time, financial markets have been fixated on the Federal Reserve's monetary policy trajectory. But investors now appear less preoccupied with central bank manoeuvres, increasingly mesmerised instead by the resilience of the American consumer and the tantalising profit prospects promised by artificial intelligence. Their favoured bet-piling into tech stocks-is paying off handsomely, even if the rest of the equity landscape languishes. This, in broad strokes, sets the scene ahead of a pivotal few sessions, not least Thursday's, which brings the European Central Bank's meeting, a deluge of PMI indicators and a storm of corporate earnings.

The direction of US indices speaks volumes. AI euphoria is steamrolling everything in its path, in a backdrop of broadly encouraging corporate results and inflation fears temporarily fading into the background. This renewed enthusiasm for tech is powering major US indices to fresh records, while European equities are left behind. The Nasdaq 100 has ventured into uncharted territory beyond 23,200 points, and the S&P 500 notched a new high of 6,336. Following last week's surge in semiconductor stocks, the baton has now passed to other tech giants, notably Alphabet, Amazon and Meta. Worth noting, however, is that this buying frenzy is not spreading across all US indices. Despite a notable retreat in US bond yields yesterday, mid-cap stocks remain out of favour. The Russell 2000, for instance, lost ground—another sign of the market's increasing concentration around a handful of tech behemoths.

Wall Street's buoyancy contrasts starkly with the other side of the Atlantic. Most European markets closed lower yesterday or, at best, flat. Paris slipped 0.31%, Frankfurt marked time, and London edged up by 0.23%. The Stoxx Europe 600 ended down a modest 0.1%, rounding off a lacklustre session. The latest headlines have centred on potential retaliatory measures being prepared by Brussels, should trade negotiations with the US fail before the looming 1 August deadline. In this context, investors will need to wait a few more sessions to see whether earnings from Europe's largest listed firms will overshadow diplomatic wrangling and set the market tone. SAP, the continent's largest listed company, is due to report tomorrow evening, followed by LVMH, Roche, Nestlé and TotalEnergies later in the week.

Elsewhere, familiar market dynamics persist:

• The dollar remains under pressure across the board.

• US Treasury yields continue to retreat.

• Precious metals are enjoying strong momentum despite the market's appetite for riskier assets. Gold's stellar performance is closely tied to the previous two trends.

• Cryptocurrencies are rallying, buoyed by supportive moves from US lawmakers.

• Oil is faltering amid perceptions of ample supply.

Turning to today's session, macro data may be thin on the ground, but corporate earnings will be in full swing. In Europe, eyes will be on Italy's Unicredit, Swiss group Givaudan, and Dutch semiconductor equipment firm ASM International. Across the Atlantic, earnings are expected from the likes of The Coca-Cola Company, Philip Morris, RTX Corporation, Texas Instruments and Intuitive Surgical.

Asian markets offered a mixed picture. Shanghai and Hong Kong managed modest gains by session-end, while Sydney and Mumbai hovered around the flatline. Tokyo and Seoul saw sharper declines. European futures are currently pointing to a moderately lower open.

Today's Economic Highlights:

Today: the Richmond Fed manufacturing index will be released in the United States. See the full calendar here.

• GBP / USD: US$1.35
• Gold: US$3,386.5
• Crude Oil (BRENT): US$68.68
• United States 10 years: 4.38%
• BITCOIN: US$117,479

In corporate news:

• AstraZeneca plans to invest $50 billion in drug manufacturing and R&D in the United States by 2030.
• Givaudan reported improved sales and profits in H1, though the strong Swiss franc proved a headwind.
• Eutelsat Communications has entered into an agreement with the UK government for LEO connectivity.
• TotalEnergies has awarded Tenaris a contract for the GranMorgu project in Suriname.
• Sanofi is set to acquire Vicebio, enhancing its respiratory vaccine pipeline.
• Vinci has secured contracts worth €431 million in Australia.
• Safran has completed the acquisition of Collins Aerospace's flight control systems operations.
• Lindt has raised its growth outlook.
• Norsk Hydro outperformed expectations in Q2.
• Julius Bär Gruppe reported a net profit of $370 million in H1.
• EQT has acquired Adevinta's Spanish operations for a valuation of €2 billion.
• Universal Music Group has confidentially filed for an IPO in the United States.
• UniCredit is considering raising its stake in Commerzbank to 28%.
• BBVA is set to begin the acceptance period for its offer on Banco de Sabadell in September.
• Munich Re posted better-than-expected net profit for Q2.
• Ericsson has partnered with Ooredoo Kuwait to modernise its mobile billing system.
• OpenAI, backed by Microsoft and the UK government, has signed a new AI agreement aimed at bolstering security and infrastructure.
• JPMorgan Chase is reportedly considering offering loans backed by clients' cryptocurrency holdings, according to the Financial Times.
• Apple has launched an online store in Saudi Arabia.
• Meta is appealing Italy's VAT payment demands, according to Reuters.
• Costco Wholesale is establishing a global centre of excellence in Hyderabad, India.
• Coinbase Global has launched perpetual futures contracts on its platform.
• Oracle Corporation is in talks for a $100 million cloud deal with Skydance-Paramount, Bloomberg reports.
• SoftBank and OpenAI's Stargate are scaling back AI data centre plans due to internal disagreements, reports the Wall Street Journal.
• Samsung Electronics has hit a pre-order record with its Galaxy Z Fold 7 and Flip 7 models.
• BHP is withdrawing from the nickel project in Tanzania, according to Lifezone.

See more news from UK listed companies here

Analyst Recommendations:

• Compass Group Plc: Goldman Sachs maintains a neutral recommendation with a price target raised from 2390 to GBX 2500.
• Smiths Group Plc: Stifel maintains its buy recommendation and raises the target price from 2450 to GBX 2600.
• London Stock Exchange Group Plc: RBC Capital maintains its outperform rating and reduces the target price from 13400 to GBX 13200.
• Legal & General Plc: RBC Capital downgrades to underperform from sector perform with a target price reduced from GBX 245 to GBX 220.
• Antofagasta Plc: Morgan Stanley maintains its market weight recommendation and raises the target price from 1780 to GBX 1940.
• Burberry Group Plc: HSBC maintains its buy recommendation with a price target raised from 14.50 to GBP 16.
• Diageo Plc: Zacks maintains a neutral recommendation with a price target raised from 108 to USD 109.
• Unicredit S.p.a.: Grupo Santander maintains its outperform recommendation and raises the target price from 48.65 to EUR 72.
• Abb Ltd: Octavian AG maintains its buy recommendation with a price target raised from CHF 56 to CHF 60.50.
• Renk Group Ag: Berenberg maintains its buy recommendation and raises the target price from 72 to EUR 84.
• Eiffage S.a.: Citigroup remains neutral recommendation with a price target raised from 115 to EUR 120.
• Ryanair Holdings Plc: Citigroup remains outperform recommendation with a price target raised from EUR 29 to EUR 29.20.
• Swatch Group: Grupo Santander upgrades to outperform from neutral with a target price raised from CHF 158 to CHF 165.
• Stellantis N.v.: Citigroup remains neutral recommendation with a price target reduced from EUR 9 to EUR 8.50.