Morning Brew February 25 2025

Good morning,

Nervousness seems to be in charge with Nvidia earnings, key inflation data, Tariff s and geopolitical concerns looming.

Equities continued lower from Friday with a few exceptions, the S&P 500 ended the day down 0.50% and the Nasdaq lost 1.2%, the Dow changed little. . The AI story seems to be questioned a little by reports of Microsoft scrapping a datacenter and worries on low cost  AI, Palantir lost 10%, Tesla 2.25% and Nvidia 2.59%. Alibaba gave up 10%. Rheinmetall gained 6% yesterday on the day, Berkshire Hathaway hit a new record.

Crypto is under pressure for various smaller news, Bitcoin is trading at 91k and Ethereum loses 8%.

US 10-year yields fell to below 4.4% for the first time this year, the USD Index is 106.63. EURUSD receded form yesterdays optimism to 1.0470, GBPUSD 1.2626 and USDJPY 149.60. Gold and Silver are showing some fatigue at 2938 and 32.34.

Jacob wrote a preview for the Nvidia earings

• Nvidia’s earnings will set the tone for AI stocks, with sky-high expectations leaving little room for error.
• Strong AI demand continues, but supply chain constraints and competition could challenge Nvidia’s dominance.
• Market volatility is expected, with options pricing in a 7-8% move—investors should brace for sharp swings. The nominal value is app 280 billion USD

Charu took a look at the US economy

• U.S. growth drivers are weakening: Fiscal spending is tightening, the AI boom faces competition from China, and the Fed is hesitant to cut rates aggressively, all of which could slow U.S. economic momentum.
• U.S. stock valuations look stretched: The S&P 500 trades at a 22x P/E, far higher than Europe (15x) and China (17x), leading investors to rotate into cheaper international markets with growth potential.
• Global markets are gaining appeal: Investors are diversifying away from the U.S. Europe benefits from expected fiscal spending and rate cuts, while China is attracting interest due to AI innovation and government stimulus.
• Other Headlines:
• The US are looking to toughen regulation on chip exports to China and maintain the start of tariffs against Mexicoa and Canada

   

• Apple said on Monday it would spend $500 billion in U.S. investments in the next four years that will include a giant factory in Texas for artificial intelligence servers and add about 20,000 research and development jobs
• Starbucks is cutting 1,100 corporate jobs

   

• Friedrich Merz warned the United States on Monday against turning its back on allies but also urged Europeans to build up their own defense capabilities

   

• Reuters estimates European defense cost to be app €410 Billion annually , that would be quite a boost to GDP especially if the spending were local and not to the US

With the real key data coming only tomorrow and Friday, the biggest event risk is political, any clarification on tariffs, Ukraine or whatever may be next has the potential to move nervous markets.

• Tuesday DE GDP, US Consumer Confidence,
  Earnings:Home Depot, Dr Pepper, Scotiabenk, AMC, Lucid, Workday,
  
  
• Wednesday: AU CPI, Japan Leading Indicator
  Earnings Lowes. ANInbev, Nvidia, Snowflake, Saoesforce,
• Thursday: DE Unemployment, US Durable Goods, GDP,  Initial Jobless Claims,  Consumer Confidence,
  Earnings: Norwegian Cruiselines, TD Bank, Soundhound, Dell,
  
  
• Friday: Japan CPI, UK House prices, CH KOF, US PCE
  Earnings:Frontline,