Update Equities: Trump gets going
The start of the week was comparatively quiet, as the US stock markets were closed on Monday due to Martin Luther King Day. Movement then picked up on Tuesday, after Donald Trump was inaugurated as the new US president the previous day.
The markets were eagerly awaiting his announcements on US tariffs. And even though no final decisions have been made, speculation alone caused market movement, both positive and negative.
However, the announcements regarding the new US government's infrastructure plans under the project name Stargate had the greatest impact. Specifically, the ChatGPT developer OpenAI, in which Microsoft has a stake, and major technology partners such as Oracle and Japan's Softbank, intend to invest USD 500 billion in new data centres for artificial intelligence, of which USD 100 billion will initially be invested in the Stargate joint venture. The announcement led to some significant gains within the technology sector, but also across all sectors for selected industrial, energy and infrastructure stocks.
The European indices were once again robust this week. In addition to the relief that US tariffs are still a long way off, a so-called ‘short squeeze’ also provided support. This occurred because some investors had to buy equities (pushing prices up), after they had previously bet on falling share prices on the futures markets. They were caught on the wrong foot by the good start to the year.
In terms of the earnings season, streaming provider Netflix was particularly impressive with the largest customer growth in the company's history. In total, Netflix was able to gain 19 million net new subscribers in the past three months. This is twice as many as analysts had expected. In addition to raising its forecast, Netflix also announced price increases and a further share buyback programme. The share price rose by double-digits.
In contrast, the shares of the wind power company Orsted declined, due to a negative development that impacted the entire European wind energy sector. The trigger was Orsted's billion euro write-downs on wind power projects in the US. The industry was also aggravated by the new US government's change of course. Trump’s energy stance will make it more difficult to generate and use wind energy in the future.
In the coming week, the reporting season will continue with reports from Microsoft, Apple and Amazon, among others, providing fresh impetus for the markets.
Kevin Scott Mcpherson