Key Points

• U.S. Markets: U.S. equity futures rebounded as investors digested earnings results and signs of stabilisation after a technology-led sell-off, with AI-related capital spending plans helping to support sentiment.
• Corporate Earnings: Alphabet’s results kept investor focus on the sustainability of AI-driven growth, as strong cloud and advertising momentum balanced concerns around rising capital expenditure and valuation.
• Asia Equities: Sony’s stronger-than-expected profit and raised outlook highlighted the benefits of diversification, even as higher memory costs and softer hardware sales weighed on parts of the technology sector.
• Energy Markets: Oil prices eased as upcoming U.S.–Iran talks reduced near-term geopolitical risk, though markets continue to price in potential supply disruptions given persistent regional tensions.

February Economic Calendar

U.S. Futures Rebound as Earnings Refocus Attention on AI Spending

U.S. equity futures advanced as investors digested fresh corporate earnings and signs of stabilisation after a technology-led sell-off earlier in the week. Futures linked to the S&P 500 and Nasdaq 100 rose modestly, while the Dow Jones Industrial Average was little changed, following a session in which weakness in software stocks weighed on headline indexes but strength in cyclicals lifted the Dow and the equal-weighted S&P 500.

Shares of Alphabet edged lower after earnings, though its plan to sharply increase artificial intelligence investment and target up to $185 billion in 2026 capital spending supported sentiment across the AI supply chain, lifting names such as Nvidia and Broadcom. The earnings backdrop was tempered by continued caution around parts of the technology sector, with Qualcomm falling sharply on a weaker outlook tied to memory shortages, while comments from Federal Reserve Governor Lisa Cook that progress on inflation stalled in 2025 reinforced uncertainty around the policy outlook ahead of key earnings and U.S. jobless claims data.

Alphabet Earnings in Focus as AI Momentum Shapes Outlook

Investors are closely watching upcoming earnings from Alphabet, as the company’s accelerating push into artificial intelligence continues to drive both performance and valuation debate. Alphabet shares are up more than 8% year to date and roughly 64% over the past 12 months, supported by strong growth in Google Cloud, rising adoption of its Gemini AI models, and expanding demand for AI infrastructure.

Analysts expect around 20% earnings growth for the quarter and remain broadly constructive on the outlook, citing improving search monetization, robust cloud backlogs, and optional upside from businesses such as Waymo. While consensus ratings skew bullish, some caution has emerged around valuation, leaving markets focused on management commentary around AI investment, advertising trends, and partnerships—particularly relative to peers such as Meta Platforms and potential collaboration with Apple—as key drivers of near-term sentiment.

Sony Lifts Outlook as Profit Beats Expectations Despite Cost Pressures

Sony Group reported a stronger-than-expected December quarter, with operating profit rising 22% year on year, supported by favorable foreign exchange movements and solid performance in its music and imaging businesses, prompting the company to raise its full-year outlook. Revenue edged higher to ¥3.71 trillion, while operating profit reached ¥515 billion, comfortably above expectations, leading Sony to lift its full-year operating profit forecast to ¥1.54 trillion and raise its revenue projection.

Results from the core gaming division softened as PlayStation hardware sales slowed, highlighting growing margin pressure from rising component costs, particularly DRAM, where prices are surging amid strong demand from artificial intelligence and data centers. However, robust growth in music, driven by live events and streaming, alongside strong momentum in imaging and sensing solutions, helped offset these headwinds and reinforced confidence in Sony’s diversified earnings base.

Oil Prices Ease as U.S.–Iran Talks Temper Near-Term Risk Premium

Oil prices fell in volatile trading as the United States and Iran agreed to hold talks in Oman, easing immediate fears of escalation in the Middle East while underscoring the fragility of the diplomatic backdrop. U.S. crude slipped about 1.4% to around $64 a barrel, while Brent crude declined a similar amount, reversing part of a recent risk-driven rally.

Markets reacted to the prospect of de-escalation even as disagreements persist over the scope of negotiations, with analysts cautioning that sentiment could shift quickly if talks stall or tensions re-emerge. Despite the pullback, underlying risks remain elevated, given the strategic importance of the Strait of Hormuz—through which roughly one-fifth of global oil supply flows—and positioning data suggest investors continue to price in upside risks should geopolitical frictions intensify again.

Conclusion

Market activity reflects a cautious but selective environment as investors balance earnings momentum against macroeconomic and geopolitical uncertainties. In equities, renewed focus on corporate fundamentals and artificial intelligence investment is helping stabilize sentiment following recent technology-led volatility. Strong results from diversified global companies underscore the value of balanced revenue streams amid rising input costs.

At the same time, energy markets remain highly sensitive to geopolitical developments, with oil prices reacting swiftly to shifting expectations around Middle East diplomacy. Overall, the current backdrop favors disciplined positioning, close attention to earnings quality, and diversification across regions and asset classes as markets navigate a phase of elevated volatility and uneven growth signals.

Investment Insights

• Equities: Recent market moves point to a more selective equity environment, where earnings visibility, balance-sheet strength, and exposure to durable AI investment cycles are increasingly differentiating performance.
• Technology & AI: Strong spending commitments from large-cap technology leaders support long-term growth in AI infrastructure, though elevated capital expenditure and valuation levels warrant a disciplined approach.
• Global Diversification: Sony’s results highlight the benefits of diversified revenue streams across regions and business lines, particularly as cost pressures rise in hardware-related segments.
• Energy & Geopolitics: Oil’s sensitivity to U.S.–Iran developments underscores the need to manage energy exposure carefully, as geopolitical risk remains a key driver of near-term price volatility.