In the United States, markets returned to a degree of normality last week following a brief period of volatility in recent weeks. The sell-off in technology and software stocks slowed considerably, although companies such as Microsoft and Amazon continued to face downward pressure. Semiconductor stocks also gained early in the week amid optimism surrounding advances in AI models, including Anthropic’s Claude. Markets reacted primarily to US economic data releases, with retail sales coming in weaker than expected. However, stronger-than-anticipated jobs data on Wednesday helped to lift multiple sectors, though another sell off on Thursday pulled markets back once again. For the week, the S&P 500 and the NASDAQ closed -1.51% and -1.58% higher, respectively.
In earnings news, although the majority of the fourth-quarter reporting season had concluded, several notable companies still reported results. Coca-Cola released earnings last Tuesday, with results falling short of expectations for the first time in five years. Quarterly revenues totalled $11.82bn, below estimates of $12.03bn. Globally, the earnings miss mirrors that of its rival Pepsi, as demand for certain soft drinks has softened amid more price-conscious consumer behaviour and rising demand for healthier alternatives. Despite this, the company reported a 1% increase in unit case volume — its primary benchmark for sales growth. Volumes rose in key markets, increasing by 1% in North America and 2% in Latin America. McDonald’s reported positive fourth-quarter earnings, exceeding estimates as revenues increased by 10% year-on-year.
In corporate developments, the proposed acquisition involving Warner Bros. Discovery progressed last week, with Paramount once again enhancing its offer to acquire the studio in a transaction valued at $108bn. The revised terms include a so-called “ticking fee”, designed to compensate investors should US regulators delay completion of the deal. Under the arrangement, an additional $650mn would be paid in quarterly instalments if the transaction does not close by the end of 2026. Alphabet has reportedly engaged banks regarding a potential issuance of a 100-year “century bond”, denominated in sterling. While not unprecedented, sterling-denominated century bonds remain rare, with only three issuers having accessed this market — including the University of Oxford. Within the technology sector, bond maturities typically extend to 40 years, with with IBM being one of the few precedents with the issue of a century bond in 1996. Although such an instrument may not appeal to all investors, it would likely attract life assurance companies and pension funds, which typically seek long-duration assets. Alphabet also issued $20bn of US dollar-denominated bonds last Monday, with the longest tranche — a 40-year maturity — expected to yield nearly one percentage point above US Treasuries.
In Europe, markets were mixed last week, supported by strong corporate earnings but impacted by weaker performances among large-cap software and banking stocks. With limited economic data to digest, corporate results largely dictated market direction. On the upside, robust earnings from companies such as Ferrari, Hermès, Siemens and Legrand pushed both the Euro Stoxx 50 and the STOXX 600 to record highs on Thursday. However, for the week, the Euro Stoxx 50 and the STOXX 600 closed -0.71% and -0.07% higher, respectively.
In corporate developments, Novo Nordisk — whose share price has recently declined significantly following weaker-than-expected fourth-quarter earnings — launched legal proceedings against Hims & Hers over the company’s so-called “copycat” weight-loss drugs. Hims had planned to market the treatment at a steep discount to Novo’s existing product, Wegovy. The Hims & Hers offering was priced at $49 per month, compared with $149 for Novo’s treatment. The lawsuit comes amid intensifying competition in the weight-loss drug market, with smaller companies taking advantage of a 2022 FDA decision permitting compounded versions of certain obesity and diabetes treatments to be produced due to supply shortages from Novo Nordisk and Eli Lilly. Compounding involves replicating the active ingredients of patented medicines using non-patented components.
In the United Kingdom, the FTSE 100 reached new record highs last week, supported by corporate earnings and elevated metal and oil prices, which continued to drive the index higher. Shell rose by more than 5% over the week, while shares in Antofagasta gained over 6% as copper prices traded at record levels. The index closed 0.39% higher for the week.
In corporate developments, one of London’s oldest independent asset managers was acquired last week, as Schroders agreed to a £9.9bn takeover by US asset manager Nuveen. Nuveen is part of Teachers Insurance and Annuity Association (TIAA), and completion of the transaction will create an asset manager overseeing approximately $2.5tn in assets. For Schroders, the deal marks the end of more than two centuries of family ownership, which began in 1804.
