The overall S&P 500 index experienced only a modest decline, indicating that many companies within the index performed well despite challenges in the tech sector. As investors navigate these turbulent conditions, there is an increasing sentiment that they may start to favor companies that utilize artificial intelligence over those that enable it. This shift in focus could transform investment strategies and market dynamics.
European Market Trends
European markets saw an uptick as investors concentrated on earnings reports. However, shares of Kering dropped by 6%, reflecting some volatility in the luxury sector. The German government has revised its GDP forecast for 2025 to a mere 0.3% growth, with the Economy and Climate Minister describing the situation as serious.
While some positive trends, such as increased credit demand, were noted, Germany remains in a state of stagnation. This is concerning compared to the stronger performance of other European nations. In the U.K., the British pound fell by 0.2% against the dollar, trading around $1.2414, following a significant speech by the Finance Minister outlining plans to invigorate the sluggish economy.
U.K. Economic Initiatives
The Finance Minister committed to accelerating growth initiatives and supported the expansion of Heathrow Airport, which is seen as essential for boosting investment and creating up to 100,000 jobs. Yields on U.K. government bonds also saw a slight decrease, losing around 4 basis points, indicating a cautious approach from investors.
These measures are part of a broader strategy to stimulate economic activity in the U.K. as the government seeks to address ongoing challenges. The focus on infrastructure and job creation is expected to play a crucial role in revitalizing the economy.
Scandinavian Economic Developments
In Scandinavia, the Swedish Riksbank announced a 25 basis point reduction in interest rates, bringing the policy rate down to 2.25%. This decision aligns with market expectations and reflects the central bank’s view that inflation risks are limited amid weak economic activity.
The Riksbank noted that previous rate cuts have positively impacted household and corporate finances. However, the full effects on interest expenses and overall demand are yet to be seen, and the central bank remains ready to adjust its policy if inflation and economic activity forecasts change.
Corporate Earnings Highlights
Meanwhile, Norway’s sovereign wealth fund reported a remarkable profit of 2.5 trillion kroner for the year, driven by a rally in technology stocks. The Government Pension Global Fund, valued at 19.7 trillion kroner at the end of 2024, achieved a 13% return on investment, slightly below its benchmark index.
This highlights the fund’s significant role in the global investment landscape as tech stocks continue to attract interest. In corporate earnings, Dutch semiconductor equipment manufacturer ASML reported strong fourth-quarter results, exceeding sales and profit estimates.
Sector Performance Insights
ASML’s order backlog of approximately 36 billion euros alleviated investor concerns about potential slowdowns in semiconductor spending. The CEO expressed optimism about the demand for AI chips, suggesting that lower costs could lead to increased applications and higher demand for chips.
Conversely, luxury goods giant LVMH saw its shares drop nearly 5% despite slightly better-than-expected full-year results. The company reported revenues of 84.68 billion euros for 2024, which surpassed analyst forecasts but indicated ongoing challenges in its fashion and leather goods segments.
Spain’s Economic Growth
Spain’s GDP grew by 0.8% in the fourth quarter of 2024, exceeding analysts’ expectations of 0.6% and matching the previous quarter’s growth rate. The country’s statistics office projected a full-year GDP growth of 3.2% for 2024, positioning Spain as an outlier in Europe.
This positive economic performance comes at a crucial time, with several key GDP releases from across Europe anticipated in the coming days. Meanwhile, Volvo Group reported weaker-than-expected fourth-quarter operating profits but noted a significant increase in order intake.
Market Outlook
Volvo’s net orders rose by 24% to 61,200 vehicles, driven primarily by demand for larger fleets in Eastern Europe and vocational trucks in the U.S. Despite disappointing profit figures, Volvo’s shares rose by 3.5%, reaching a new 52-week high, reflecting investor confidence in the company’s long-term prospects.
Market analysts suggest that broad stock market indexes may encounter challenges in 2025 if major technology firms continue to struggle. The S&P 500 Information Technology Index recently experienced a significant decline, primarily affecting companies expected to play pivotal roles in facilitating AI advancements.
📎 Related coverage from: cnbc.com
