The State of Markets: “Sector Rotation: Underway?”
US large cap tech was disrupted at the start of the week by the news of China’s DeepSeek AI App. That news drove significant global rotation into other sectors. In particular both the Philly SOX and the NDX100 sold off sharply (to the bottom of their recent trading ranges), while European markets benefitted from that move. Spanish, German, and Italian equity indices, for example, all made new highs (e.g. see key chart below). That, of course, was a continuation of the theme of the past two months, with Europe outperforming the US (both in local currency terms and in US dollars).
The key question, therefore, is: Will that rotation theme persist in coming weeks (and beyond)? Or will the ‘old’ (tech leadership) theme re-asset itself? We outline our views on those questions in recent research (e.g. see this week’s ‘Daily Risk Appetite’ & ‘Longview on Friday’ publications - available below for subscribers, or click HERE for a trial).
Next week’s macro data will be watched closely and includes US ISM manufacturing on Monday, job openings (Tuesday), ADP employment and ISM Services (both on Wednesday), followed by nonfarm payrolls on Friday. Elsewhere the Bank of England will announce its next policy decision on Thursday; several Fed Presidents are due to give speeches throughout the week; and there are multiple earnings reports (from Alphabet and AMD on Monday, and Amazon on Thursday). Please see below for a full list of upcoming data, events, and earnings.
Key chart: Spanish IBEX 35 candlestick, shown with its 50 day moving average
Upcoming important data/events this week:
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Events: |
Bank of England policy decision (Thurs, 12pm); market holiday in China on account of Chinese New Year (Mon) PLUS multiple Fed Governors speaking during the week (see US section for full list). |
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Monday: |
Chinese Caixin manufacturing sector PMI (Jan, 1:45am); EZ headline & core CPI (January first estimate, 10am); US ISM manufacturing (Jan, 3pm); US Senior Loan Officer Opinions survey (7pm). |
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Tuesday: |
US JOLTS job openings (Dec, 3pm). |
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Wednesday: |
Chinese Caixin services sector PMI (Jan, 1:45am); US ADP employment change (Jan, 1:15pm); US ISM services index (Jan, 3pm). |
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Thursday: |
German factory orders (Dec, 7am); US Challenger job cuts (Jan, 12:30pm). |
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Friday: |
UK Halifax house prices (Jan, 7am); US nonfarm payrolls, hourly earnings & unemployment data (Jan, 1:30pm); US Michigan sentiment (February first estimate, 3pm). |
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Key earnings: |
Palantir Technologies (Mon); Alphabet, Merck&Co, PepsiCo, AMD, Amgen, Pfizer (Tues); Qualcomm, MicroStrategy, Santander (Wed); Amazon.com, Eli Lilly, AstraZeneca (Thurs). |
Key Research
Longview on Friday, 31st January 2025:
European equity markets have been rallying sharply again this week. Indeed, despite the DeepSeek news hitting Nvidia, the NDX100 and other tech stocks hard, various European country equity markets have continued to make new highs. That strength in Europe has been led by Spain +3.65% (to Thursday’s close); & the FTSE 100 (+1.7%), while the German DAX was up +1.5% and Europe as a whole (EuroSTOXX) was 1.3% higher.
As we highlighted last week, this is the continuation of a theme that has been evolving since late November (whether performance is measured in local currency or USD terms). That is, Europe has been outperforming the US since 27th November 2024 (in local currency terms). Reflecting that, month to date the DAX is up 8.7%, the broader European market is +6.1%, while the NDX100 & S&P500 are only 2% – 2.5% higher, and the Philly SOX is down for the year.
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Bostic on the Economic outlook (Mon, 5:30pm), Musalmen at an event at the St. Louis Fed (Mon 11:30pm), Bostic in a moderated conversation on housing (Tues, 4pm), Daly in a moderated panel (Tues, 7pm), Jefferson on the Economic outlook (Wed, 12:30am), Barkin in a fireside chat (Wed, 2pm), Goolsbee at an auto conference (Wed, 6pm), Bowman gives an update on the economy (Wed, 8pm), Jefferson gives lecture at Swarthmore College (Thurs, 12:30am); Waller on future payments (Thurs, 7;30pm), Bowman gives an update on the economy (Fri, 2:25pm) & Kugler in on entrepreneurship and aggregate productivity at the 2025 Miami Economic Forum (Fri, 5pm). |
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Monday: |
Canadian S&P Global manufacturing sector PMI (Jan, 2:30pm); US S&P manufacturing sector PMI (January final estimate, 2:45pm); US ISM manufacturing (Jan, 3pm); US construction spending (3pm); US Senior Loan Officer Opinions survey (7pm). |
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Tuesday: |
US JOLTS job openings (Dec, 3pm); US durable goods orders (December final estimate, 3pm); US factory orders (Dec, 3pm). |
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Wednesday: |
US ADP employment change (Jan, 1:15pm); US trade balance (Dec, 1:30pm); Canada S&P service sector PMI (Jan, 2:30pm); US S&P service sector PMI (January final estimate, 2:45pm); US ISM services index (Jan, 3pm); US total vehicle sales (Jan, 3pm). |
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Thursday: |
US Challenger job cuts (Jan, 12:30pm); US nonfarm productivity & unit labour costs (Q4 first estimate, 1:30pm); US weekly jobless claims (1:30pm). |
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Friday: |
US nonfarm payrolls, hourly earnings & unemployment data (Jan, 1:30pm); Canadian employment data (change in employment, unemployment rate & participation rate) (Jan, 1:30pm); US Michigan sentiment (February first estimate, 3pm); US wholesale sales & inventories (Dec, 3pm); US consumer credit (Dec, 8pm). |
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Key earnings: |
Palantir Technologies, NXP (Mon); Alphabet, Merck&Co, PepsiCo, AMD, Amgen, Pfizer, KKR & co, PayPal, Chipotle Mexican Grill, Mondelez, Transdigm, Regeneron Pharma, Simon Property (Tues); Walt Disney, Qualcomm, Arm, Boston Scientific, Uber Tech, Fiserv, MicroStrategy, McKesson, Illinois Tool Works, O'Reilly Automotive, Emerson, MetLife, Aflac, Allstate (Wed); Amazon.com, Eli Lilly, Linde PLC, Philip Morris, Honeywell, ConocoPhillips, Bristol-Myers Squibb, ICE, Motorola, Fortinet, Becton Dickinson, Hilton Worldwide, Constellation Software (Thurs). |
Fig B: US Michigan sentiment (index)
Key European macro data & events
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Events: |
Speeches by the ECB’s Simkus in Vilnius (Mon, 8am), Villeroy in Paris (Tues, 1:30pm), Lane at Peterson Institute (Wed, 2pm), Nagel in Mexico City, (Thurs, 4:15pm) & Guindos in Madrid (Fri, 8:45am); Riksbank publishes minutes from January meeting (Tues, 8:30am). |
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Monday: |
HCOB manufacturing sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & EZ (9am) - all January final estimates apart from Spain & Italy; Italian ISTAT consumer & manufacturing confidence (Jan, 9am); EZ headline & core CPI (January first estimate, 10am); Italian headline CPI (January first estimate, 10am). |
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Tuesday: |
French industrial & manufacturing production (Dec, 7:45am); Spanish unemployment rate (Jan, 8am). |
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Wednesday: |
HCOB service sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all January final estimates apart from Spain & Italy; Italian retail sales (Dec, 9am); Eurozone PPI (Dec, 10am). |
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Thursday: |
German factory orders (Dec, 7am); Eurozone retail sales (Dec, 10am). |
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Friday: |
German imports/exports, & trade balance (Dec, 7am); German industrial production (Dec, 7am); French private sector payrolls (Q4 first estimate, 7:45am); Spanish industrial production (Dec, 8am). |
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Key earnings: |
BNP Paribas, Intensa Sanpaolo, Ferrari (Tues); Santander, TotalEnergies SE (Wed); L’Oreal, Vinci, ING Groep (Thurs). |
Fig C: German industrial production (Y-o-Y %)
Key UK macro data & events
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Events: |
Bank of England policy decision & minutes (Thurs, 12pm) followed by press conference (12:30pm); speech by the Bank of England’s Pill at the National MPC Agency briefing (Fri, 12:15pm). |
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Monday: |
S&P manufacturing sector PMI (January final estimate, 9:30am). |
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Tuesday: |
N/A |
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Wednesday: |
New car sales (Jan, 9:30am); S&P service sector PMI (January final estimate, 9:30am). |
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Thursday: |
S&P construction sector PMI (Jan, 9:30am). |
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Friday: |
Halifax house prices (Jan, 7am). |
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Key earnings: |
Diageo (Tues); GSK plc (Wed); AstraZeneca (Thurs). |
Fig D: UK Halifax house prices (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
Speech by the BOJ’s Tamura in Nagano (Thurs, 1:30am); market holiday in China on account of Chinese New Year (Mon). |
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Monday: |
Australian headline CPI (Jan, 12am); Japanese Jibun Bank manufacturing sector PMI (January final estimate, 12:30am); Australian ANZ-Indeed job advertisements (Jan, 12:30am); Australian retail sales (Dec, 12:30am); Australian building approvals & private sector houses (Dec, 12:30am); Chinese Caixin manufacturing sector PMI (Jan, 1:45am); Japanese monetary base (Jan, 11:50pm). |
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Tuesday: |
Australian household spending (Dec, 12:30am); Australian S&P services sector PMI (January final estimate, 10pm); Japanese cash earnings (Dec, 11:30pm). |
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Wednesday: |
Japanese Jibun Bank services sector PMI (January final estimate, 12:30am); Chinese Caixin services sector PMI (Jan, 1:45am). |
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Thursday: |
Australian imports/exports, & trade balance (Dec, 12:30am); Japanese household spending (Dec, 11:30pm). |
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Friday: |
Japanese ESRI leading index (December first estimate, 5am). |
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Key earnings: |
Mizuho Financial (Mon); Mitsubishi UFJ Financial group Inc, Nintendo, Mitsui (Tues); KDDI corp (Wed); Tokyo Electron, Itochu Corp, Mitsubishi Corp (Thurs); Nippon Telegraph & Telephone corp (Fri). |
Fig E: Chinese Caixin manufacturing & service sector PMIs (index)
Last week:
Longview on Friday, 31st January 2025:
“Market Correction Risks Rising”
Commodity Fundamentals Report No. 184, 30th January 2025:
"OIL: SELL Signals & Supply Surplus"
Global Macro Report, 27th January 2025:
"UK ‘Debt Death Spiral’: As Bad As Commentators Suggest? A.k.a. What’s The Counter Argument?"
Prior week:
Longview on Friday, 24th January 2025:
“Trump 2.0 vs. 1.0 –> What’s Different? What Matters for Markets? Is Europe Finally Having its Day (in the Sun)? PLUS the View from Sweden”
Longview Letter No. 146, 22nd January 2025:
"The British Economy –> Ways to Fix the Lack of Growth"
The SHORT VIEW (& market positioning), 21st January 2025:
"EUR-USD BUY Signals: Full House"