Yesterday, the European stock market provided an excellent glimpse of the internal conflict that has been plaguing it for months. Should we abandon the most prolific investments of 2025 to embrace those that have been left behind but are believed to have strong potential?

More specifically, is it time to abandon defense and finance stocks and throw ourselves headlong into cyclical stocks? It was LVMH and ASML that forced investors to ask themselves this question for the umpteenth time this year.

The two companies have (relatively) similar stock market histories. They experienced breathtaking growth between 2016 and 2021. Then came two years of negative stock market performance in 2022 and 2024 for LVMH and ASML. The French company because weak Chinese consumer spending broke the momentum of the entire luxury sector. The Dutch company because of fears of a downturn in the semiconductor investment cycle and a shift toward companies that are more responsive to the AI boom. In 2025, ASML has already resumed its upward trajectory. LVMH has not yet done so.

But yesterday, both companies published promising quarterly figures. There was little concern about ASML, because global demand for semiconductors will inevitably trickle down to chip manufacturing equipment makers. Management confirmed its buoyant outlook. For LVMH, the picture was slightly less clear. But the market has begun to learn to be satisfied with less from companies in the sector. A slight uptick in sales was enough to send the stock soaring 12% at yesterday's close. And when LVMH gains 12%, the CAC 40 finds it easier to post the best performance of all Western stock markets: +2% yesterday, in a mood lightened by the prospect of a political compromise in France (Prime Minister Lecornu is putting his head on the line this morning in Parliament, but with more ammunition than last week).

As suggested above, the LVMH/ASML duo drove European cyclical and technology stocks yesterday. Investors bought heavily in these sectors and sold heavily in defense and finance. Before yesterday's session, and to give you some precise (but rounded) figures, finance was up 35% in 2025 and defense was up 40%. Cyclical stocks were down 5% and technology stocks, excluding ASML, were up only 5%.

In the United States, the indices started by jumping, then plunging, then rebounding. The S&P 500 ended with a gain of 0.4%. This volatility is almost entirely fueled by the emotional roller coaster surrounding the Sino-American trade negotiations. In fact, the question of the Fed cutting interest rates is more or less settled in the short term. And I am tempted to say that the question of corporate earnings is also settled in advance. The first quarterly results are good, but in any case, the market had decided that they would be, as it always does.

So what remains is the trade drama.

Donald Trump and his Treasury Secretary Scott Bessent have resumed their game of good cop, bad cop. The US President added fuel to the fire by talking about the return of the trade war with China. Bessent, for his part, raised the possibility of a further 90-day extension of talks between the two countries, suggesting that this would be decided in South Korea at the end of the month, during the scheduled meeting between Trump and Xi.

Meanwhile, the US President has stated that Indian Prime Minister Narendra Modi has committed to stopping oil purchases from Russia. This is a way of dividing and conquering, while paving the way for a trade agreement with India.

The day will be punctuated by a new series of corporate results, notably from Nestlé, EssilorLuxottica, Pernod Ricard, and ABB in Europe, followed by a number of financial results on Wall Street, including Charles Schwab and Bank of New York Mellon. Not to mention the chip giant TSMC in Asia. In the United States, several statistics should have been published but will not be due to the government shutdown caused by the budget impasse. Producer prices and weekly jobless claims will therefore be scrapped. However, the NAHB housing market index and several public statements by central bankers are still scheduled.

In Asia-Pacific, Tokyo continues its rebound with a 1.2% gain. Mainland China is down 0.2%, and Hong Kong is down 0.8%. Other markets are bullish, notably South Korea (+2.1%) and Australia (+0.9%). Europe, on the other hand, is expected to open slightly lower.

Today's economic highlights:

On the agenda today: the EC Balance comm CVS; in the United Kingdom, the monthly GDP; in the United States, the new unemployment claims, the Philadelphia Fed business outlook, the final demand PPI GM, the retail sales advances GM, the business inventories, the NAHB housing market index, and the DOE crude oil inventories. See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,207.64
  • Crude Oil (BRENT): US$62.32
  • United States 10 years: 4.03%
  • BITCOIN: US$110,819.48

In corporate news:

  • GetBusy PLC integrated SmartVault with the Intuit platform to enhance digital accounting practices.
  • Arm Holdings PLC entered a multi-year strategic partnership with Meta Platforms Inc. to enhance AI efficiency.
  • Jet2.com secured a new agreement with Delta Air Lines Inc. to expand European operations.
  • Constellation Software completed the acquisition of Tecvia Holding, a UK-based Microsoft Solutions partner.
  • Nestle plans to cut 16,000 jobs under new CEO Philipp Navratil, while reporting strong sales growth.
  • ABB reported a 12% increase in Q3 profits and announced a new CFO appointment.
  • Nordea Bank exceeded Q3 earnings expectations and received ECB approval for a EUR 250 million share repurchase.
  • Novartis' drug Fabhalta met the primary endpoint in a Phase III trial for IgA nephropathy.
  • Merck KGaA adjusted its mid-term guidance for its healthcare unit and expressed interest in M&A with life science companies.
  • Raiffeisen Bank International AG appointed Kamila Makhmudova as its new CFO.
  • EQT reported increased funds under management and successful capital raising for its BPEA IX fund.
  • Anglo American proposed concessions to EU regulators regarding the nickel deal investigation.
  • Meta Platforms is investing $1.5 billion in a new Texas data center to support AI advancements.
  • Microsoft plans to manufacture most new products outside China by 2026.
  • Apple faces significant shifts with an executive leaving for Meta and launching new AI-enhanced products.
  • Hewlett Packard Enterprise forecasts fiscal 2026 results below estimates and expands its repurchase capacity by $3 billion.
  • SL Green Realty Corp. reported strong Q3 earnings and acquired Park Avenue Tower for $730 million.
  • Navigator Global Investments Ltd announced a 3% rise in assets under management, reaching $87 billion.
  • Activision Blizzard employees established a union.
  • OpenAI enhances video generation in its Sora app.

See more news from UK listed companies here

Analyst Recommendations:

  • Wizz Air Holdings Plc: Wood & Company Financial Services maintains its buy recommendation and reduces the target price from GBP 15 to GBP 14.
  • Astrazeneca Plc: Baptista Research downgrades to hold from outperform and raises the target price from USD 92.40 to USD 93.70.
  • Rathbones Group Plc: Barclays maintains its equalweight recommendation and reduces the target price from GBP 18.30 to GBP 18.20.
  • Jupiter Fund Management Plc: Barclays maintains its underweight recommendation and raises the target price from GBP 1.15 to GBP 1.25.
  • Hays Plc: Barclays maintains its overweight recommendation and reduces the target price from GBP 1.03 to GBP 0.87.
  • Aston Martin Lagonda Global Holdings Plc: HSBC maintains its hold recommendation and reduces the target price from GBP 0.66 to GBP 0.56.
  • Morgan Advanced Materials Plc: Deutsche Bank maintains its hold recommendation and reduces the target price from GBX 235 to GBX 205.
  • Shell Plc: Gerdes Energy Research LLC maintains its buy recommendation and raises the target price from USD 92 to USD 94.
  • Centrica Plc: Barclays upgrades to overweight from equalweight with a price target raised from GBP 1.80 to GBP 2.10.
  • Hays Plc: Morgan Stanley maintains its underweight recommendation and raises the target price from GBX 52 to GBX 55.
  • Relx Plc: Rothschild & Co Redburn maintains its buy recommendation and raises the target price from GBX 4600 to GBX 4750.
  • Lassila & Tikanoja Oyj: SEB Bank maintains its buy recommendation and raises the target price from EUR 11.20 to EUR 11.50.
  • Argenx Se: Rothschild & Co Redburn maintains its buy recommendation and raises the target price from EUR 795 to EUR 815.
  • Asml Holding N.v.: DZ Bank AG Research maintains its hold recommendation and raises the target price from EUR 810 to EUR 875.