Before the bell: Black Friday on the markets?

What offers the best opportunities for investors: the strong U.S. economy or the weak European one? Celebration at the largest supermarket, sorrow at the number two.

Nearly four weeks after Donald Trump’s election, the dominant market theme remains the strength of the U.S. economy versus the weakness of Europe. While there are nuances to consider, investors—and thus stock markets—are clearly reflecting this narrative in prices. On Friday, U.S. PMI figures from corporate purchasing managers showed sentiment at its highest level in 31 months, while similar surveys suggested that the European economy might be slipping into contraction. Wall Street gained 1.7% last week, while European indices barely moved. The Bel20, however, stood out with a weekly gain, largely thanks to biotech/pharma companies UCB and Argenx, which each gained over 7%. Since the start of the year, the Bel20 has delivered a return of 14%, excluding dividends, compared to a modest 5.9% for the Euro Stoxx 50. This highlights how markets can swing dramatically in either direction. It will still be over a month before we see the first policy actions from Trump, at which point it will become clear whether all the positive (and negative) expectations were justified. Meanwhile, the euro has dropped to its lowest level against the dollar in two years, and European bond yields are falling while U.S. yields climb.

This morning, UniCredit reported strong results and launched a takeover bid for Banco BPM. In Asia, the Japanese stock market is climbing, while Hong Kong remains stable. Baidu (+2%) and Alibaba (+1.8%) reacted positively to Chinese measures aimed at restricting personalized content on social media, while Tencent fell 1.2%.

Stocks to Own When Interest Rates Fall

Long-term interest rates in Europe fell sharply on Friday after data suggested the European economy may have contracted in November. But every downside has its upside, as a famous Dutch footballer once said. Economists and investors are now hoping the ECB will accelerate rate cuts. German 10-year bond yields fell to 2.25%. This was evident on Friday: interest-sensitive stocks rallied. In the Bel20, Elia rose 3.4%, while real estate investment trusts like WDP (+3%), Cofinimmo (+2.5%), and Aedifica (+2.3%) led the pack. Should we also include Ageas and Ackermans here? Ageas, with its generous dividend, and Ackermans, through its asset management banks, both benefit from lower interest rates, which push investors toward yield-seeking strategies. Ackermans also includes CFE, which reported decent results on Friday and gained 4.3%. Could the construction sector have bottomed out now that rates are falling again?

Walmart on Target

Friday is Black Friday in the United States, but few will be surprised by this anymore, as significant discounts on this day have also become commonplace in Europe. One day? It has now stretched to weeks, as retailers start sales earlier and extend them longer to attract more customers. Recent results from the largest U.S. retailers show a growing divergence in performance. Target, the second-largest retailer in the U.S., issued a warning about weak sales last week, resulting in an 18.3% drop in its stock price. In contrast, Walmart (+6.6%) posted better-than-expected results. Revenue rose 5.6%, and earnings per share surged by 13.7%. Walmart is gaining market share among higher-income consumers—the very demographic Target has traditionally targeted.

Did You Know…

Ahold Delhaize surprised positively with its results last week, but its U.S. figures were less impressive? While sales stagnated in the U.S., European revenue grew by 2.6%, with profitability also improving significantly.

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