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Good evening,
Investor sentiment weakened today, driven primarily by hotter-than-expected PCE inflation data, mounting tariff anxieties ahead of tomorrow’s deadline, and the cautious guidance from the Fed after yesterday’s meeting. Stocks closed lower on both sides of the Atlantic, with most US sectors declining. Healthcare was the clear underperformer amid another busy day for earnings. There were no major moves in Treasuries or currency markets, with the yen’s fall past 150 per $ after the Bank of Japan’s meeting, standing out as the only notable shift.
Today’s notable stock mover was Meta Platforms’ 11% jump to a record high, following yesterday's earnings beat and strong guidance, after the close. Meta is 32% higher YTD for a total market cap of $1.95tn.
Trump agreed to extend for 90 days the existing tariffs on Mexican goods to allow more time for negotiations while countries that have not signed an agreement will face higher tariffs from tomorrow.
US Earnings: key updates came after the close with megacaps Apple and Amazon both beating estimates. However, Amazon’s projected operating income fell short of analysts' expectations and shares are trading 3% weaker in the post-market while Apple is firmer by 2% on robust iPhone sales. Reddit (mcap $30bn) delivered a strong beat and a bullish guidance. Shares gained 7.5% during regular trading hours and added 19% in extended trading following the release.
Economics: Both, US headline and core PCE inflation in June, the Fed’s preferred inflation gauge, rose by 0.3% MoM, signalling a clear acceleration in price pressures. The headline reading climbed to 2.6% YoY, while core inflation held at 2.8% YoY, still above the Fed’s 2% target, reinforcing yesterday’s cautious tone by Jay Powell.
In Europe: July’s preliminary inflation data reflect a decelerating or flat environment across major €-zone economies: 1.8% YoY in Germany (decelerating); 0.9% in France (unchanged); and 1.7% in Italy (steady).
Monetary Policy: the Bank of Japan maintained rates steady at 0.5% as anticipated, the highest level since early 2008, by a unanimous vote and expressed cautious optimism, reflecting reduced trade uncertainty following the recent agreement with Washington. The bank’s core inflation forecast was revised upward to 2.7% for all of ‘25, and signalled that, if the economy and inflaton evolve in line with its targets, the central bank is prepared to raise rates in early ‘26.
European Earnings broadly reflected a mixed-to-negative tone, with some companies like Shell, Unilever, Safran, and Intesa Sanpaolo meeting or slightly exceeding expectations, while others struggled with weaker global volumes and rising costs. Of note were brewer AB Inbev (mcap €99bn) beating top and bottom estimates, but volumes fell sharply in key markets such as Brazil and China, and shares sold off 11.5% to a five-month low but remain 7% higher YTD. French pharma giant Sanofi (mcap €96bn) missed both sales and profit estimates and shares declined 8% to a three-year low.
Corporate Deals: Brookfield Wealth Solutions, a subsidiary of Canadian investment giant Brookfield, agreed to acquire Britain’s insurer Just Group Plc (mcap £2.2bn) for £2.4bn. Just shares jumped 67% today to a 10-year high and accumulated a 30% gain this year.
Spanish renewable energy and water company Cox ABG Group (mcap €780mn) has agreed to buy Iberdrola's assets in Mexico in a deal that values the business at $4.2bn including debt.
Leading European stock and futures exchange Euronext (mcap €14bn) will acquire the Athens Exchange (ATHEX) for €426mn.
IPOs: Figma (FIG), the San Francisco-based design software company, was priced at $33 and had a strong debut today with shares skyrocketing 252% for a total market value of ~$65bn. Adobe had offered $20bn for Figma in 2022 and it was valued at $12.5bn last year. Figma reported $45mn in earnings on $228mn of revenue in Q1. (Axios)
Day ahead: US non-farm payrolls (+110k exp); EU inflation. Earnings: Berkshire H, Exxon and Chevron.
See you tomorrow.
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