Trump announces new tariff rates

General market commentary

Equity markets closed lower on Monday, marking a subdued start to a quiet week for new economic data. The Dow, S&P 500 and Nasdaq each declined by just under 1%, weighed down by investor anxiety over newly announced US tariffs. Utilities and consumer staples sectors posted modest gains, while consumer discretionary and materials shares lagged. Elsewhere markets were mixed, with Asia ending the session unevenly and European equities rising, buoyed by stronger-than-expected Eurozone retail sales. Meanwhile, the US dollar strengthened against major currencies, and WTI crude oil prices climbed as supply remained tight despite OPEC+ boosting output more than anticipated.

President Donald Trump’s announcement of sweeping new tariffs unsettled markets further. The US will impose 25% duties on imports from Japan, South Korea, Malaysia and Kazakhstan starting 1 August, unless trade agreements are reached in July. South Africa will face 30% tariffs, and countries aligning with BRICS policies may see an additional 10% levy. These moves come as the BRICS summit takes place in Brazil and have raised fresh concerns over global inflation and economic growth. US Treasury yields edged up, with the 10-year yield at 4.39%, as expectations for Fed rate cuts this year were pared back. Investors are now anticipating only two cuts, down from three, following strong June job data. Despite recent volatility, analysts believe a healthy but cooling labour market could still prompt a rate cut in the autumn.

Latest market and economic update

Most Asian equities rose on Tuesday, brushing off US tariff threats after President Trump signalled openness to continued trade talks. South Korea’s KOSPI gained 0.7%, while Japan’s Nikkei was flat. Chinese and Hong Kong indices posted modest gains, but Australian and Malaysian shares slipped. Focus remained on the Reserve Bank of Australia’s expected interest rate cut.

US equity futures edged lower on Tuesday as investors reacted to President Trump’s revised tariff measures on 14 nations. The move added to trade uncertainty, weighing on sentiment. Futures pointed to a lower open amid ongoing geopolitical and trade tensions, with markets awaiting further clarity on potential agreements before the extended August 1 deadline.

European shares closed higher on Monday, with the STOXX 50 rising 0.9% as hopes for a US-EU trade deal lifted sentiment. The EU aims to avoid tariff escalation with a preliminary pact, though it is also readying retaliatory measures. Energy shares lagged on OPEC+ output news, while German medical tech firms fell on China’s counter-sanctions.

The US dollar index slipped below 97.5 on Tuesday, retreating from earlier gains after President Trump extended the tariff deadline and warned of further levies on BRICS-aligned nations. Despite Monday's strength following robust US jobs data, easing Fed rate cut expectations, the euro rose, with EUR/USD trading higher at 1.1742 amid renewed dollar softness.

Oil prices fell in Asian trade on Tuesday, with Brent and WTI both down 0.7%, as investors weighed the impact of US tariff hikes on major importers and rising OPEC+ output. Despite Monday’s brief rebound on Saudi price increases, concerns over supply growth and potential trade disruptions pressured sentiment, keeping crude markets under renewed strain.

Equities on the move

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

Samsung Electronics projected a 56% drop in second-quarter operating profit due to weak AI chip sales and US restrictions on advanced chips for China. Delays in supplying high-bandwidth memory to Nvidia also weighed on results. Despite challenges, Samsung plans a $2.85 billion share buyback and expects gradual profit recovery supported by new phone launches and broader chip demand.

Apple’s AI lead, Ruoming Pang, is leaving to join Meta’s new superintelligence team, reportedly with a multi-million-dollar package. Meta recently reorganised its AI efforts under Meta Superintelligence Labs, led by Alexandr Wang, former Scale AI CEO. The move highlights fierce competition among tech giants to secure top AI talent amid rapid industry advancements.

Tesla shares dropped nearly 7% yesterday after CEO Elon Musk announced plans to launch a new U.S. political party, raising concerns about his focus amid falling sales. The move sparked investor unease and calls for board action. Musk’s political ambitions and declining deliveries weigh on Tesla’s valuation and the wider EV sector, impacting competitors like Rivian and Lucid.

Goldman Sachs raised its S&P 500 return forecasts, citing expected US rate cuts and strong large-cap fundamentals. It now projects gains of 3% in three months, 6% in six months, and 11% over 12 months, targeting 6,400, 6,600, and 6,900 respectively. The bank also raised its forward P/E estimate to 22, maintaining 7% EPS growth forecasts.

Citi raised Nvidia’s price target to $190, citing a 13% larger AI data centre semiconductor market forecast for 2028, now $563 billion. Networking revenues were also increased, reflecting growing demand. Nvidia’s Blackwell platform rollout is progressing well, with expected margin expansion. Risks include possible new U.S. export restrictions, but Nvidia remains well positioned.

William Blair downgraded Tesla to Market Perform, warning that the removal of corporate fuel economy fines under Trump’s “Big, Beautiful Bill” could severely impact profitability, alongside lost regulatory credits and EV tax incentives. Concerns over Elon Musk’s political focus add to risks. Tesla’s high valuation appears vulnerable, pending clarity on robotaxi progress.

Piper Sandler downgraded CrowdStrike to Neutral from Overweight, citing stretched valuations after a 60% share rise and limited near-term upside. Concerns include slowing momentum, federal spending uncertainty, workforce cuts, and ongoing investigations. Despite a positive long-term view, growth expectations were lowered, with the $505 price target unchanged amid recent operational disruptions.

Macquarie raised TSMC’s target price by 14% to NT$1,282, citing strong AI-driven demand and leadership in advanced nodes like N2 and N3. They forecast over 20% revenue growth in 2025 despite FX headwinds. TSMC’s pricing power and capex growth support solid returns, with potential for a P/E re-rating akin to the 2020 consumer electronics boom.

Seaport Research downgraded Netflix to Neutral from Buy, citing that while long-term valuation looks positive, more time is needed to meet expectations. The firm expects global price rises and a 40% boost in ad revenue by 2023, but sees less than 10% upside currently. Netflix aims to grow viewership through live sports and expanded content.

Raymond James downgraded Wells Fargo to Market Perform, citing limited near-term upside after a 15% rally and a premium valuation. However, it remains positive on Wells Fargo’s long-term fundamentals. Conversely, U.S. Bancorp was upgraded to Strong Buy, with expected improvements in operating leverage and a raised price target of $57 reflecting renewed investor optimism.

UBS initiated coverage on GE Vernova with a Buy rating and a $614 price target, citing surging electricity demand and tight supply driving pricing power and profit growth. They forecast 70% earnings growth over five years, with margins boosted by pricing discipline and backlog profitability, despite a high valuation supported by strong growth prospects.

Bank of America downgraded Stellantis to Neutral, cutting its price target from €16 to €10 due to weak European performance and expected disappointing H1 results, including a 15% revenue drop and low EBIT margin. Despite challenges with BEV strategy and cash burn, BofA sees potential recovery in North America by 2026, driven by new Jeep and RAM models.

Citi upgraded its outlook on US semiconductor equipment equities, raising 2025-26 wafer fab equipment forecasts due to eased geopolitical risks and stronger memory and AI cloud spending. It raised price targets for KLA, Lam Research, and Applied Materials, favouring KLA for its exposure to leading-edge logic sales, while noting ongoing macro and geopolitical risks.

Jefferies downgraded MP Materials to Hold, citing China’s new short-term export licences for rare earth magnets, which reduce supply disruption risks and the scarcity premium supporting MP’s valuation. The broker views limited upside without new demand drivers, noting the high capital costs and risks of MP’s expansion plans make the risk/reward profile neutral.

Upcoming data and events

The economic calendar today is quite sparse, with only some trade data from France.

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