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Good evening,
The lack of tariff-related headlines shifted the focus to corporate earnings from blue-chip names on both sides of the Atlantic. The ECB held its policy meeting without surprises, while Trump maintained pressure on the Fed to lower interest rates next week. Benchmark US bonds continued to move higher, and equity indices finished mixed to marginally firmer, with most sectors ending a touch lower and several large caps posting significant moves driven by quarterly results.
Notable stock movers: Tesla plunged over 8% after missing estimates late Wednesday with sales falling 12% and profits 22% YoY, and Elon Musk warned of "a few rough quarters ahead". Shares lost 24% YTD. Trump said he does not plan to remove subsidies to the sector. IBM also declined ~8% today (+18% YTD) despite beating estimates yesterday but management disappointed analysts with the decision of pausing guidance.
US earnings: Nasdaq Inc (mcap $54bn) and Blackstone (mcap $218bn) delivered strong beats, and sentiment was broadly supportive as stocks rallied 6% and 4% respectively. Blackstone saw strong investor inflows, record AUM growth, announced a dividend hike, highlighted improving deal flow and positive outlook. Shares gained 25% in the past four weeks.
European earnings: results were mixed, with notable stock movers being Swiss giant Nestlé (-4.6%) and Deutsche Bank (+9%). Nestle (mcap $243bn) reported a 10% profit decline in the first semester and a revenues drop of 1.8%, amid sluggish consumer spending in China but maintained its full-year guidance “despite factoring in increased headwinds”. Shares are 21% lower in the LTM.
Deutsche Bank (mcap €56bn) beat top and bottom estimates. Management affirmed the bank is on track for its ‘25 targets, with plans to further increase shareholder returns beyond this year. Q2 net profit rose to ~€1.5bn from a loss a year ago, driven by a non-recurrence litigation provision related to Postbank. Shares jumped 73% this year to the highest level in a decade.
Central banks: The ECB kept all key interest rates stedy today as widely anticipated (refi rate at 2.15%, deposit 2%, and marginal lending 2.40%) in a unanimous, data‑driven, meeting‑by‑meeting pause, as policymakers remain in a “wait-and-see” mode ahead of the August 1 deadline for a trade deal between the EU and the US. Risks to growth remained “tilted to the downside”, Governor Lagarde said and added that the inflationary shock of the past few years was “behind us”, with CPI at 2%, in line the ECBs’ target. Following the news, traders cut their bets on rate cut by year-end from 90% to 60%. The € ended almost flat at 1.1760 today while Bunds yields rose 12bp in the past two days to 2.70%.
Fed-related news: Trump maintains pressure on Jay Powell and toured the construction site of the Federal Reserve to assess the $2.5bn renovation project, after stating he will only force for Powell to resign if he finds a cause. Trump reiterated that he “would love Powell to lower rates”.
Economic data: the preliminary PMI Composite for the US rose to 54.6 points, driven by a strong services sector while the manufacturing sector weakened to contration territory (49.5), its first weak month this year. The €-zone and UK manufacturing sectors remain in contraction while their services sectors improved marginally. Among developed economies, the US maintains the lead in PMI terms.
Deals: In the US logistics sector, railroad operators Union Pacific (mcap $133bn) and Norfolk Southern (mcap $63bn) said they are considering a megamerger that could create a transcontinental US railway valued at >$200bn. (AP)
Chinese e-commerce giant JD.com (mcap $49bn) said it is in “advanced negotiations” to buy Ceconomy (mcap €2.1bn), the German electronics retailer, for ~€2.2bn. Ceco shares rallied 15% and accumulated a 63% gain this year. (Reuters)
IPOs: Increased activity on primary issuance with education publisher McGraw-Hill (MH) raising $415mn on the NYSE, priced at $17 for a market cap of $3.2bn. Shares finished flat. (Bloomberg)
Accelerant Holdings (ARX), a marketplace for specialty insurance, raised $724mn on the NYSE, was priced at $21 and shares rallied 27% on their debut, for a market value of over $6bn.
See you tomorrow.
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