Danske’s research team notes that global stocks ended the session slightly lower due to a decline in energy and materials prices, but sectoral dispersion remained wide. Lower oil prices are seen as a relief for consumers, while Micron’s mighty performance has boosted confidence in technology profits. They argue that the key to future stronger equity performance will be positioning for oil relief and stable technology earnings.
Oil relief and technological resistance dominate
“Shares ended slightly lower yesterday, led by energy and materials, but the headline move again hid the very large dispersion across sectors and regions. This is not pure risk in or out of the market. This is a market dominated by two forces: the earnings prospects for technology and the impact of sharp moves in the oil market.”
“Despite the modest decline in the index, five sectors closed in positive territory and it is worth noting that both consumer discretionary and consumer staples have improved as the implicit consumption tax on oil has fallen sharply and Brent has now returned to pre-conflict levels.”
“At the same time, the technology earnings narrative was strongly confirmed by Micron, with results and guidance already exceeding elevated expectations and driving marked improvement in AI and memory exposures.”
“In our view, getting on the right side of these two factors, oil emissions reduction and resilience to technology gains, is the key to outperformance in the period ahead.”
“The Micron aid rally continues across Asia this morning, with Japan and South Korea leading gains, while U.S. and European futures are mostly higher, driven by U.S. technology.”
(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)
