Breakfast Bites: More Tariffs ahead of US Inflation data release today

Pharma stocks take a hit; US Govt Shutdown risk may be getting real; SPX looks technically weak

Sep 26, 2025

Rise and shine everyone

Happy Friday as we head into the last important data point for the month - the US PCE Inflation reading released at 8:30 am ET. Consensus estimates suggest a slightly higher reading at the headline level, but a lower core reading MoM and stable YoY.

The Fed has already charted a course to 3% and 3.1% core, and if inflation readings remain within this level, the likelihood of two additional cuts this year increases. Spending seems to be going relatively strong as we saw in the Retail Sales data and yesterday’s GDP revision.

Overall, US Q2 GDP was revised up to 3.8% QoQ and more importantly, Real Personal Consumption Expenditures (PCE) was lifted to 2.5%, with services spending revised higher while goods spending edged lower.

Business fixed investment grew 5.7%, led by equipment at 8.5% and intellectual property at 15%. Housing investment remained weak, down 5.1%. Real domestic final sales rose 2.4%.

In other data releases, Durable Goods Orders surprised to the upside in August, rising 2.9% on strong aircraft demand, while orders excluding transportation gained 0.4%. Remember, ordering US aircrafts were part of a number of tariff deals.

Looking at this data, the US economy looks relatively stable. Yes, there are signs of a slowdown in exports, but domestic consumption and relative import data also remain solid. This, however, could lead to inflation remaining sticky.

US Equities seem to be unhappy though, reversing quite a bit of the run-up to the Fed decision. From a technical standpoint, the S&P 500 (SPX) has now lost the 8-day EMA, and bounced at the 21-day EMA yesterday. Closing below the 21-day EMA could spell a little more downside trouble, and could see the 8D & 21D moving averages make a death cross. On the upside though, we are going into the month end and moving out of September.

But, this time the end of September may not come with happy news - i.e., the US Government actually faces a shutdown. President Trump has not just talked about it but has also discussed laying off people if that happens. Things are starting to get a little bit more serious here, and there doesn’t seem to be a very clear roadmap to resolution.

International markets reacted to a new round of tariffs from the US. Starting October 1, tariffs will include 25% on all large trucks over 10,000 pounds, 50% on kitchen cabinets, bathroom vanities, and related products, and 100% on imported branded and patented drugs unless manufacturing is shifted to the US. The US Dollar reversed some of the strength seen in the last two days.

Pharma stocks in Asia opened weaker. In Japan, Sumitomo Pharma fell 5.7%, Otsuka dropped 4.3%, Chugai lost 3.9%, Daiichi Sankyo was down 3.3%, and the TOPIX pharma index declined 1.7%. China’s Innovent slipped 2.9% and CSPC fell 2%. Indian drug-makers were also lower by 2% to 4% in early trade.

Japan’s Finance Minister announced a new facility at JBIC under its $550 billion US investment package, aimed at supporting Japanese companies exposed to the new tariffs.

Beyond pharma, the Kospi underperformed with a 3% drop as Hynix declined 6% and Samsung lost 3.7%. Broader Asia markets showed general weakness but remained relatively stable. Late in the session, reports suggested the administration is also considering tariffs on semiconductor imports for companies that fail to balance domestic and imported chips.

Reports indicated that China agreed to the terms of the TikTok deal involving Oracle, Silver Lake, and MGX, with the three investors said to hold a combined 45% stake. The agreement was followed by an executive order to execute the deal. During the Asia session, Bytedance announced plans to establish a new US company as part of the restructuring, marking the first confirmation from the China side that the deal is moving forward. However, some uncertainty remains around the exact terms.