What is the 2025 outlook for the beauty industry?

Investing.com -- Global AI stocks have bounced back from their January lows, as markets reassess the impact of low-cost models like DeepSeek.

According to UBS, the potential disruption appears manageable, with the bank maintaining a mid-teen upside forecast for global AI stocks in 2025. In contrast, Chinese AI stocks have surged recently, but UBS expects more moderate gains ahead.

The global AI rally has been driven largely by the "ChatGPT moment" in late 2022, adding about $13.5 trillion to Nasdaq's market cap, with UBS attributing roughly $9 trillion of that to AI.

Meanwhile, Chinese tech stocks had been lagging until the recent success of DeepSeek, which triggered a $350 billion market cap increase since late January.

UBS analysts see further potential for both markets but caution that the returns might differ.

“We continue to see mid-teen upside for global AI stocks in 2025,” UBS strategists led by Sundeep Gantori said in a note. “For China AI, we see low-teen average returns p.a. over the next three years, as significant upside potential has already been priced in over the past 20 days.

In their AI portfolio, UBS continues to favor semiconductor and cloud platform companies, such as Nvidia (NASDAQ:NVDA), Google owner Alphabet (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT), with each accounting for 12-14% of the portfolio. For investors seeking exposure to Chinese AI, the bank mentions Tencent Holdings Ltd (HK:0700) and Alibaba (NYSE:BABA) as potential candidates.

UBS's analysis projects global AI spending to reach $500 billion by 2026, with total AI-related revenue hitting a similar figure.

The bank estimates the total end-demand opportunity for global AI at around $1 trillion that year, supported by strong margins—35% on average, with semiconductor margins near 50%.

In comparison, UBS expects AI spending in China to reach $30 billion by 2028, approximately 6% of global AI spending.

Revenue forecasts for China AI stand at $50 billion, giving an end-demand estimate of $80 billion. With an expected 20% operating margin, operating profit could reach $16 billion, significantly lower than the projected $350 billion for global AI.

UBS assigns a 30x multiple to next year's operating profits to calculate potential market caps. By the end of year 3, the bank sees global AI hitting $10.5 trillion, compared to $480 billion for Chinese AI. From current levels, this suggests mid-teen returns for global AI stocks in 2025 and low-teen annualized returns for Chinese AI stocks over the next three years.

“The upside risk is that the recent share price momentum continues in China AI and the remaining 37% upside may be discounted very soon,” strategists noted.

In sum, UBS’s team continues to see an appealing risk-reward profile of mid-teen returns for global AI stocks, bolstering their positive view on the structural AI trend.

Investing.com -- Following the recent release of the Federal Open Market Committee (FOMC) January meeting minutes, Deutsche Bank (ETR:DBKGn)'s U.S. head of rates research, Matthew Raskin, anticipates a pause in Quantitative Tightening (QT) in March. QT is a method utilized by central banks to slow down the economy by reducing the amount of money in circulation.

Raskin stated, "In light of discussion in its January minutes (released yesterday), we now expect the FOMC to announce a pause to QT at its March meeting, to be implemented in April." This pause is expected to continue until the Federal Reserve's liabilities have normalized after resolving the debt limit. The bank anticipates a resumption of QT in October, with the current caps remaining at $25 billion on U.S. Treasuries (USTs) and $35 billion on Mortgage-Backed Securities (MBS).

Furthermore, Deutsche Bank has revised its assumption of the level of ample reserves from $3 trillion to $2.75 trillion. This change, along with the assumption that the FOMC will stop QT with reserves "somewhat above ample," leads Deutsche Bank to expect the end of QT altogether in the first quarter of 2026.

After the end of QT, Deutsche Bank anticipates that MBS prepayments will be invested into USTs to further reduce the share of MBS in the System Open Market Account (SOMA) portfolio. Raskin added, "And, in early 2027, balance sheet growth will restart to accommodate growth in non-reserve liabilities that would otherwise lead reserves to decline."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Britain's Competition and Markets Authority (CMA) imposed a total fine of 104.5 million pounds ($132.4 million) on Citi, HSBC, Morgan Stanley (NYSE:MS), and the Royal Bank of Canada for the illicit exchange of sensitive information regarding UK government bonds, known as gilts.

The CMA concluded that the traders from these banks shared competitively sensitive information in Bloomberg chatrooms between 2009 and 2013, following the global financial crisis.

The CMA's investigation, which began in 2018, initially found the four banks and Deutsche Bank (ETR:DBKGn) in breach of competition rules in May 2023. Deutsche Bank, having admitted to anti-competitive activity alongside Citi, was granted immunity from the fines after it alerted the CMA to the misconduct.

The traders involved in the exchange of information discussed UK Debt Management Office auctions, subsequent gilt transactions, and Bank of England auctions, which were crucial to the UK economy's recovery post-crisis.

Citi, in a statement, expressed contentment with the resolution of the matter, highlighting full cooperation with the CMA and a commitment to regulatory compliance. Morgan Stanley attributed the issue to the actions of a former employee and noted significant industry changes, including better supervision and compliance controls since then.

HSBC pointed out that the CMA's probe was related to a limited number of communications with Deutsche Bank from 2009-2010 and emphasized its transformed controls and robust compliance program.

Deutsche Bank acknowledged its proactive reporting of the issue and full cooperation with the investigation. RBC also stated that it had significantly improved its compliance systems and that the two employees involved were no longer with the bank.

Juliette Enser, CMA's executive director of competition enforcement, emphasized the fines' role in addressing breaches of competition law and deterring anti-competitive behavior. She noted that the penalties would have been higher if the banks had not taken extensive measures to prevent future violations.

Of the total fines, RBC received the largest at 34.2 million pounds, followed by Morgan Stanley with 29.7 million pounds and HSBC with 23.4 million pounds. These banks received a 10% discount for settling post-CMA's Statement of Objections.

Citi's fine amounted to 17.16 million pounds, reflecting a 35% leniency discount and a 20% reduction for settling early. The exchange rate at the time of the fines was $1 equal to 0.7891 pounds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investors demonstrated a clear preference for German midcap shares as they bet on the country's economic recovery, Reuters reported.

This shift in focus from blue-chip stocks to midcap companies is driven by expectations of a post-election fiscal stimulus and the potential resolution of the conflict in Ukraine.

The MDAX index, which includes companies like Thyssenkrupp (ETR:TKAG) and Hellofresh, is now seen as a more accurate gauge for Germany's economic rebound than the internationally-focused DAX index.

The MDAX, with a higher revenue exposure to Germany compared to the DAX, could significantly outperform the benchmark if the German economy, which has contracted for two consecutive years, shows signs of recovery. Deutsche Bank (ETR:DBKGn) has identified fiscal stimulus and industry-friendly policies as potential catalysts for this outperformance.

Investors like Lemanik portfolio manager Andrea Scauri have increased their exposure to the MDAX, anticipating a surge if the election leads to a government that supports a larger deficit.

Despite the optimistic outlook for midcap stocks, there are risks involved. The market may have preemptively priced in expectations for a more lenient fiscal policy post-election.

Additionally, the aftermath of the election and the situation in Ukraine remain unpredictable, with the potential to dampen investor enthusiasm if outcomes are less favorable than expected.

Goldman Sachs has noted the existing bullish option positioning, which might cap the upside potential if the election results or progress in Ukraine do not meet market expectations. However, the bank still finds certain cyclical European stock indices, like the MDAX, attractive for hedging upside risks.

The MDAX's valuation relative to the DAX is currently at a 2.4% discount, historically unusual given that midcaps typically trade at a premium.

This suggests that there might be room for growth, especially in sectors like industrials and chemicals, which are poised to benefit from an economic upturn and decreasing energy prices.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.