Trump calls for higher EU tariffs

General market commentary

US equity markets ended last week on a positive note overall, despite a muted finish to the latest trading session. The S&P 500 and Nasdaq reached new intraday highs before the rally lost steam, while the Dow Jones Industrial Average closed slightly lower. The pause came amid renewed geopolitical concerns, as reports surfaced that President Trump is seeking a minimum 15 to 20 per cent tariff in any trade agreement with the European Union, which is working toward a deal before the 1 August deadline. Despite the headline risk, investor sentiment held up well, supported by a stream of positive economic indicators. Retail sales came in above expectations, jobless claims declined, and consumer sentiment rose to a five-month high, signalling underlying strength in the economy. Inflation expectations continued to ease, and dovish comments from Federal Reserve Governor Waller added to hopes that monetary policy may soon turn more accommodative.

Over the week, the S&P 500 rose 0.6 per cent, ending just below Thursday’s record high, as confidence grew in the economic outlook and corporate earnings. Technology shares led gains with strong momentum, followed by defensives such as utilities, while cyclicals like energy and materials underperformed, reflecting a drop in oil prices and mixed earnings results across sectors. Investor focus is now increasingly shifting to the path of interest rates. While recent data support a “goldilocks” narrative of solid growth and moderating inflation, uncertainty remains over the timing and scale of Fed rate cuts. Markets currently see a higher chance of easing in September, though some officials have suggested action could come sooner. With corporate results continuing to surprise to the upside and economic indicators showing resilience, the broader market backdrop remains constructive, even as geopolitical and policy uncertainties linger.

Latest market and economic update

Most Asian equities advanced this morning, led by gains in China and Hong Kong after the People’s Bank held lending rates at record lows. South Korea and Singapore also rose, with the latter hitting a record high. However, Australian shares fell 1 per cent on profit-taking and trade concerns, while Japanese trading was muted due to a holiday.

US equity futures edged higher late on Sunday as investors looked ahead to a packed week of earnings, with Alphabet and Tesla in focus. Verizon and Domino’s Pizza report later today. Strong early results show over 86% of reporting S&P 500 firms have beaten expectations. Markets also remained alert to trade tensions ahead of the August deadline.

European equities closed lower on Friday, reversing early gains as investors assessed corporate news and US-EU trade talks. The Eurozone’s STOXX 50 slipped 0.3%, while the STOXX 600 dipped below flat. Tech shares, including ASML, declined, alongside luxury and auto names like LVMH and Mercedes. Vivendi and Saab bucked the trend, surging 13.2% and 16%, respectively.

The US dollar index held steady near 98.4 on Monday amid trade tensions and Fed rate cut expectations. Fed Governor Waller signalled support for easing, citing weak inflation and labour market softness. The euro edged higher, with EUR/USD trading at 1.1621, as investors weighed dollar softness against ongoing political uncertainty in Japan and trade-related caution.

Oil prices were little changed in Asian trading, with Brent crude near $69.27 and WTI at $67.44, as traders weighed new EU sanctions on Russian oil and concerns over US tariffs dampening demand. While supply fears persist, markets appeared sceptical about the sanctions’ impact. Analysts expect prices to stay within a $64–$70 range this week.

Equities on the move

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

Microsoft issued a security alert over the weekend warning of active cyberattacks targeting vulnerabilities in its SharePoint server software, used by businesses to store data and collaborate internally. The attacks, reportedly aimed at U.S. and international agencies, do not affect SharePoint Online. Microsoft released a security update on Sunday to protect affected on-premise versions.

Nvidia has informed Chinese clients of limited supplies of its H20 chip, the most powerful AI chip allowed under current U.S. export restrictions, according to The Information. Production was halted following an April ban, with TSMC reallocating capacity. Restarting production could take up to nine months. Meanwhile, Nvidia is developing a new export-compliant RTX Pro GPU for China.

Invesco Capital Management shares surged 13% after filing to convert the Invesco QQQ Trust Series 1 from a unit investment trust to an open-ended fund, potentially boosting revenue by becoming its investment adviser. The move, subject to shareholder approval, could shift fees from Bank of New York Mellon and Nasdaq, while Nasdaq shares fell slightly.

Porsche CEO Oliver Blume has initiated talks on a second round of cost-cutting measures to tackle ongoing challenges in China and the impact of 27.5% US import tariffs. The German carmaker, which has faced falling sales and struggles since its 2022 equity market debut, plans further savings after announcing 1,900 job cuts by 2029.

Block Inc’s shares surged 8.5% in extended trading on Firday after its inclusion in the S&P 500, replacing Hess Corp following Chevron’s acquisition. The change takes effect on July 23, 2025, prompting index-tracking funds to buy shares, boosting the equity. Meanwhile, Robinhood and Applovin each dropped around 1%, as investors reacted to their exclusion from the index.

Sarepta Therapeutics shares plunged 36% on Friday, falling another 5% after hours, after the company disclosed a patient death linked to its gene therapy trial for limb-girdle muscular dystrophy. This follows earlier fatal cases of liver failure, leading to a new safety warning and significant workforce reductions amid ongoing clinical and financial challenges.

Bank of America raised its price target for Microsoft shares to $585, citing strong cloud momentum, AI Copilot traction, and solid partner feedback ahead of Q4 results. Analysts expect 35.5% Azure growth and 13% growth in Productivity and Business Processes. Despite rising capex, Microsoft remains BofA’s top pick with potential for further gains.

BMO Capital Markets upgraded Chipotle Mexican Grill to Outperform, raising its price target to $65, anticipating a second-half 2025 rebound in same-store sales and margins. Despite near-term challenges, easing food costs and operational efficiencies should improve margins. The upgrade reflects Chipotle’s undervalued shares amid expectations of stronger fundamentals and margin recovery.

Citi analysts expect European banks to report weaker earnings than strong U.S. peers, citing regional factors, FX impacts, and market share losses. While U.S. banks saw rises in investment banking and trading revenues, European rivals like Barclays, Deutsche Bank, and UBS face declines. Barclays was downgraded to neutral after a 125% share surge.

Upcoming data and events

This week markets will focus on US trade talks and a busy earnings calendar featuring major companies like Alphabet, Tesla, Verizon, Coca-Cola, T-Mobile, and IBM. Key US economic data and central bank decisions from the ECB, Russia, and Turkey will draw attention. Global PMI readings, consumer confidence, and Japan’s upper house election results will also be closely watched.

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