Market remain anxious over Powell`s Fed tenure

General market commentary

U.S. equity markets ended higher on Wednesday, with the Nasdaq posting a fresh record close for the fifth time in six sessions. Despite intraday volatility caused by rumours that President Trump was set to fire Federal Reserve Chair Jerome Powell, the markets recovered after Trump denied any such plans. The initial market reaction saw equities and bonds move sharply, but sentiment improved as clarity returned. Investor optimism was supported by softer-than-expected inflation data, with producer prices remaining flat in June, reinforcing expectations of potential interest rate cuts later this year. The health care sector led gains, particularly Johnson & Johnson, whose shares surged over 6% after the firm cut its tariff-related cost outlook and raised its full-year sales and profit forecast.

Earnings continued to underpin market strength, with strong results from major banks, although this did not translate into share price gains for all. While Goldman Sachs reported its best-ever quarter for equity trading, and Morgan Stanley also saw a boost from market volatility, both Bank of America and Morgan Stanley shares declined despite better-than-expected profits. Johnson & Johnson stood out as one of the S&P 500's top performers. Broader corporate earnings have so far exceeded expectations, suggesting a resilient economy and steady consumer spending. Meanwhile, the White House announced a new trade agreement with Indonesia, and President Trump hinted at further tariffs targeting pharmaceuticals and semiconductors. In Europe, the EU Commission approved Germany’s fiscal plan allowing significant new borrowing through 2029.

Latest market and economic update

Asian markets traded mostly flat to lower on Thursday amid ongoing U.S. tariff and interest rate uncertainty, with chip shares under pressure ahead of TSMC earnings. South Korea’s KOSPI and Japan’s Nikkei declined, while Australia’s ASX 200 outperformed, nearing record highs on soft labour data boosting rate cut hopes. Chinese and Singaporean indices saw modest gains.

US equity futures dipped slightly overnight amid lingering uncertainty over Federal Reserve policy and cautious business sentiment highlighted in the Fed’s Beige Book. Investor focus shifted to upcoming earnings from chipmaker TSMC and Netflix. Despite some positive bank results, inflation concerns, and tariff impacts kept sentiment cautious ahead of key data releases.

European equities fell for a third session, with the STOXX 50 down 0.8% and STOXX 600 down 0.5%, weighed by tariff concerns. ASML dropped 11.4% despite beating Q2 estimates, while Renault plunged 18.5% after cutting margin guidance. Auto shares also fell sharply amid ongoing US trade tensions and potential new tariffs on pharmaceuticals and semiconductors.

The US dollar index rose to 98.4 after a volatile session, while EUR/USD steadied at 1.1616. Dollar gains were limited by soft U.S. producer prices, reinforcing rate cut expectations. Markets now await retail sales data, with sentiment also shaped by ongoing trade tensions and concerns over Federal Reserve independence.

Oil prices rose in Asian trade, breaking a three-day decline after U.S. crude inventories fell more than expected, signalling tighter supply. Brent rose to $68.94, WTI to $66.92. Despite strong refinery activity, rising tariffs announced by President Trump on over 150 countries, including threats to the EU, kept investor caution high.

President Trump plans to send a single letter to over 150 smaller trading nations, confirming a uniform tariff rate, currently at 10% and possibly rising to 15 to 20%. Major economies like the EU, Japan, and South Korea have already received specific notices. Countries with large trade deficits, including India and Taiwan, await clarity amid ongoing or stalled negotiations.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

A landmark Nvidia deal to supply AI chips to the UAE faces internal U.S. resistance over national security concerns, particularly regarding Abu Dhabi-based G42. While Trump supports the deal, officials fear potential Chinese access. Delays persist despite optimism from both sides, amid fears rivals like Huawei could benefit if the agreement stalls or is altered.

Goldman Sachs reported a stronger-than-expected Q2 profit of $3.7 billion, driven by record equities revenue and a 26% rise in investment banking fees amid market volatility. Despite trade uncertainties, dealmaking surged, with Goldman leading global M&A advisory. Asset management revenue dipped slightly, while the bank plans cautious acquisitions and has reduced headcount.

Bank of America beat Q2 profit estimates, boosted by a 15% rise in sales and trading revenue to $5.4 billion, driven by market volatility and geopolitical uncertainty. Net interest income hit a record $14.7 billion. However, investment banking fees fell 9%, lagging peers, while loan growth and expenses remained stable amid cautious optimism.

Johnson & Johnson beat Q2 expectations, reporting adjusted earnings of $2.77 per share and sales of $23.74 billion, driven by strong demand for its cancer drug Darzalex and medical devices. The company raised its full-year sales forecast to $93.2-$93.6 billion and increased EPS guidance, while reducing tariff cost estimates due to the US-China tariff pause.

ASML warned that revenue growth in 2026 is uncertain due to tariff-related delays in US chipmaker investments. Despite net bookings beating expectations by 25%, shares fell over 11%. A potential 30% US tariff could raise equipment costs, increasing geopolitical risks. Strong demand from TSMC supports results, but issues at Intel and Samsung pose challenges.

Tesla plans to launch a new six-seater Model Y L in China later this year, according to regulatory filings showing a 3,040 mm wheelbase. Tesla confirmed the launch via Weibo account, posting images matching the filing and announcing the Model Y L will arrive this fall. The model is designed specifically for the Chinese market.

MP Materials announced a $500 million common share sale following a rare earths supply deal with Apple. Shares fell 4.7% despite a 275% rise this year. The company, also linked to a US Department of Defence agreement, aims to fund growth amid ongoing trade tensions with China. J.P. Morgan and Goldman Sachs lead the sale.

Mizuho upgraded Palantir to Neutral from Underperform, raising its price target to $135 due to strong momentum in commercial and government segments and rising demand for AI platforms. However, the equity’s very high valuation, trading at 77x–97x estimated 2025–26 revenue, remains a significant risk compared to software peers.

Citi analysts added Carnival to their Focus List, raising price targets across the cruise sector due to strong demand and limited supply growth. Carnival’s target rose to $37 from $30. Citi highlighted constrained industry capacity and improving trends, noting Carnival’s shares remain 40% below 2019 levels, signalling recovery potential.

Upcoming data and events

Market attention will today focus on key economic data including retail sales, initial jobless claims, and the Philadelphia Fed Manufacturing Index, all crucial for monetary policy outlooks. Earnings season continues with major reports expected from Netflix, TSMC, GE Aerospace, US Bancorp, and sales figures from Vinci, potentially shaping investor sentiment and market direction.

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