Market focused on US inflation and bank earnings

General market commentary

Equity markets recovered from an early dip to close higher on Monday, despite President Trump’s weekend announcement of 30% tariffs on imports from the European Union and Mexico, set to take effect on 1 August. Communication and financial shares led the gains, while energy and materials sectors underperformed. Bond yields edged up, with the 10-year US Treasury yield rising to 4.43%, still below its May peak of 4.60%. Meanwhile, the US dollar advanced against major international currencies. In overseas markets, Asia finished mixed as China's trade surplus unexpectedly expanded to $115 billion in June, despite ongoing tariffs. European equities ended marginally lower, weighed by concerns over the new US tariffs on EU exports.

Investors are now turning their attention to Tuesday’s release of US CPI inflation data for June, with expectations for a rise to 2.6% on an annualised basis, and 3.0% for the core reading. Market participants are also closely watching the start of the second-quarter earnings season, beginning with major US banks. Forecasts have been revised lower in recent months, with S&P 500 earnings growth now estimated at 5.8% year-on-year, down from earlier projections of over 10%. Communications and technology sectors are expected to lead the gains, while energy and consumer discretionary firms may see the sharpest contractions. Despite concerns over tariff-related cost pressures and policy uncertainty, long-term inflation expectations remain anchored, and earnings growth is expected to support equities over the coming year.

Latest market and economic update

Asian equities traded mostly rangebound on Tuesday as markets digested stronger-than-expected Chinese GDP growth and remained cautious over U.S. tariff threats. Hong Kong’s Hang Seng led gains, up 0.8%, boosted by tech shares after Nvidia’s AI chip sales resumed. Chinese markets were mixed, Japan and South Korea dipped, while Australia and Singapore posted modest gains.

US equity futures edged lower overnight as investors grew cautious ahead of key bank earnings and the June inflation report. Markets are watching for signs of tariff-driven price pressures and potential rate impacts. After-hours sentiment followed modest Monday gains, with the Dow up 0.2%, S&P 500 rising 0.14%, and Nasdaq advancing 0.27%.

European shares edged lower on Monday after President Trump’s surprise 30% tariff threat on EU goods rattled markets. Auto shares slumped, with VW, BMW, and Mercedes down up to 2.5%, and Volvo dropping 5% on EV concerns. In contrast, defence equities like Thales gained as Macron unveiled a €6.5 billion military spending plan.

The US dollar held above 98 this morning, near a three-week high, as markets awaited key inflation data. Hawkish signals from Fed Chair Powell and renewed tariff concerns supported the dollar. President Trump’s criticism of Fed policy added to volatility. The euro slipped, with EUR/USD trading at 1.1674 amid ongoing trade uncertainty.

Oil prices edged lower in Asian trade today as markets digested President Trump’s 50-day ultimatum to Russia over the Ukraine war and threats of sanctions on Russian oil buyers. Brent dipped 0.2% to $69.06, while WTI fell 0.3% to $66.79. Traders also weighed strong Chinese GDP and industrial output against weaker retail sales.

China’s economy grew 5.2% year-on-year in Q2 2025, slightly above forecasts but easing from 5.4% in Q1. Growth was supported by strong exports and government stimulus, despite brief U.S. tariff pressures. Industrial production outperformed, but retail sales and fixed asset investment disappointed. Unemployment held steady at 5%, with overall H1 GDP at 5.3%, above target.

Equities on the move

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

Nvidia announced it will soon resume sales of its H20 AI chip in China, following improved U.S.-China trade ties and reassurances from Washington on export licences. Shares rose 3.3% to $169.40 in 24-hour trade. The H20, designed for China, is key for local AI firms. Nvidia had warned prior restrictions could cost $5.5 billion in lost revenue.

McGraw Hill aims for a $4.2 billion IPO valuation, seeking to raise $537 million by selling up to 24.39 million shares priced $19-$22 each. Backed by Platinum Equity since 2021, the publisher reported 7% revenue growth to over $2 billion and plans to list on the NYSE under the symbol “MH” on July 18.

The Trade Desk shares surged 14.7% in extended trading after it was announced the firm will join the S&P 500 on 18 July, replacing ANSYS, which is being acquired by Synopsys. Index inclusion boosts visibility and attracts fund buying. AppLovin and Robinhood shares fell as they missed out on inclusion despite being considered contenders.

Nuclear energy shares rallied Monday after U.S. Energy Secretary Chris Wright expressed strong support for nuclear power, signalling a regulatory shift under Trump. NuScale rose 10%, Oklo 8%, and Nano Nuclear 5%, while uranium firms Energy Fuels and Cameco gained 2%. Investors expect eased regulations and renewed momentum for small modular reactor projects.

Volvo Cars announced an impairment charge of 11.4 billion crowns ($1.2 billion) in Q2 due to tariffs and launch delays affecting its ES90 and EX90 models. The charge reflects lower expected volumes, reduced profitability, and extra development costs, with a 9 billion crown impact on net income. Results are due July 17.

Morgan Stanley downgraded CrowdStrike to Equal-weight from Overweight, citing a full valuation after a 50% rally and high growth expectations. Despite raising its price target to $495, the bank highlighted a significant premium versus peers, elevated investor optimism, and limited near-term catalysts, recommending caution and awaiting better entry points.

Jefferies raised price targets for Home Depot to $460 and Lowe’s to $280, citing a strong recovery in home equity withdrawals boosting repair and remodel spending. Increased HELOC activity and homeowner interest in big projects could add $4.5 billion revenue over three years, driving EPS growth and potential multiple expansions for both stocks.

Morgan Stanley urges buying Taiwan Semiconductor (TSMC) shares ahead of Q2 earnings on July 17, expecting a full-year revenue upgrade due to strong AI demand. With 16% quarterly growth and a $165bn US investment, TSMC is well positioned despite tariffs. The bank set a NT$1,288 price target, citing a 17% upside.

Needham initiated coverage on Shopify with a Buy rating and $135 target, citing long-term growth in international and B2B markets. Despite a premium valuation, improving margins and rising free cash flow justify optimism. The firm highlighted Shopify’s strong platform, large addressable market, and potential 20% margins by 2027, amid near-term US consumer caution.

Citi analyst Jason Gursky raised Rocket Lab’s price target to $50, citing strong 2029 revenue potential of $2.6 billion. He expects growth from 20 annual Neutron launches, increased satellite contracts, and $50 million in yearly revenue from the Geost acquisition. The new target is the highest on Wall Street, reflecting a bullish outlook.

Jefferies downgraded Hermès to “hold” from “buy,” citing lower 2025-26 revenue and EPS forecasts due to FX headwinds and heavy reliance on leather goods. Q2 organic growth missed estimates, with margin pressure expected in 2025. The €2,460 price target implies slight downside, with limited upside without non-leather growth or improved China demand.

Upcoming data and events

Investors are today focused on the U.S. Consumer Price Index (CPI) data for June, with expectations of a 0.3% monthly increase and a 3.1% annual rise, alongside speeches from Federal Reserve officials. Q2 earnings reports from JPMorgan, Wells Fargo, and Citigroup are also due today, drawing significant market attention.

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