Before the bell: New Rate Cut

The ECB has lowered interest rates again by 25 basis points, while in the U.S., Wall Street continues its decline.

For the fifth consecutive time, the ECB cut interest rates on Thursday. The 25-basis-point reduction was expected, but the end of rate cuts is not yet in sight. According to ECB President Christine Lagarde, a rate pause is now necessary, as the policy rate has dropped to 2.5%. Meanwhile, long-term interest rates continued to rise on Thursday, as Europe takes on new debt to invest in its own defense. The Euro Stoxx 50 gained 0.6%. The picture was quite different in the U.S., where the Nasdaq fell sharply by another 2.8% as trade war tensions continued. Netflix (-8.5%), Broadcom (-6.3%), and Nvidia (-5.8%) were among the biggest losers, along with Tesla (-5.6%). In Asia, Chinese tech companies appear to be immune to the sell-off. The Hang Seng Index lost just 0.6% this morning, a fraction compared to the Nasdaq’s decline.

On the last trading day of the week, investors will be able to react to the earnings report of industrial laundry equipment manufacturer Jensen-Group. The company announced a record order book of over 500 million euro and reported a sharp rise in profits. In the U.S., we expect a negative opening for the supermarket chain Costco. A surprise this morning comes from carpet manufacturer Belysse, which, for the first time in a long while, managed to post a net profit thanks to a recovery in European consumer demand. Meanwhile, Elia has raised 850 million euro from investors through a capital increase. The American consumer is struggling, as reflected in Costco’s lower-than-expected revenue. Tonight, all eyes will be on a speech by Fed Chair Jerome Powell.

People Will Always Need Clean Clothes

One area where we can agree with Marc Coucke? Many of his investments focus on leisure and entertainment. No matter how the world changes, people will still need entertainment 20 years from now. That’s why Coucke invests in companies like Compagnie des Alpes (ski resorts and amusement parks) and the Pairi Daiza zoo. But what else will people always need? Clean clothes. On the Brussels stock exchange, Jensen-Group is a strong player in this sector, providing industrial laundry systems for hotels and cruise ships. The once-overlooked stock has been setting record after record. For the first time, the company’s order book has surpassed 500 million euro, a 42% increase. That bodes well for profitability, with earnings per share rising 27% to 4.3 euro in 2024. After Coucke’s acquisition of Smartphoto, could this be another potential takeover? After all, people need both entertainment and clean clothes.

How Is Joe Sixpack Doing?

Want to gauge the financial health of the average citizen? In Belgium, politicians often consult “Deborah from the checkout counter,” while in the U.S., they talk about “Joe Sixpack.” Figuratively, of course, as both Deborah and Joe Sixpack exist only in the minds of politicians and journalists. Market analysts, on the other hand, look at earnings reports from major supermarket chains like Walmart and Costco to assess the state of the American economy. And what do we see? Joe Sixpack appears to be struggling. Costco reported both revenue and earnings below expectations. Revenue fell short by 600 million dollar, coming in below the 63.1 billion dollar analysts had forecast for the fourth quarter. Earnings per share were also lower at 4.02 dollar, missing expectations by 9 cents. The American consumer seems to be spending less, and this is even before the impact of new trade tariffs. We are slowly becoming more cautious about the U.S. economy after yet another disappointing report.

Did You Know…

The yield on 10-year German government bonds made its biggest jump this week since March 1990? The last time German government bond yields rose so sharply, Germany was on the verge of reunification following the fall of the Berlin Wall.

This article was translated from Dutch and was originally published on Spaarvarkens.be.