Breakfast Bites - Quiet Start to a Busy Week
Fed, BoJ on Wed; Plenty of Macro Data; MSFT, META, AAPL, AMZN earnings this week
Rise and shine everyone
We have a busy, busy week ahead of us.
Central Bank Decisions - Fed on Wed; Bank of Japan on Thu (Wed night US)
Big Earnings - Microsoft & Meta on Wed; Apple & Amazon on Thu (also Visa, Starbucks, MasterCard, Chevron, Exxon, Boeing, UPS, UNH, P&G)
Macro Data - US GDP on Wed, US PCE & Employment Cost Index on Thu, EA Inflation on Friday; US employment data on Fri
Aug 1 - Deadline for tariffs
Gladly it’s a quiet Monday, and there’s not much to focus on other than the fact that the US and EU have reached a deal for 15% tariffs. Given the size of the relationship, this was a much needed step.
Even so, there seems to be a misstep in communication according to Bloomberg. The statement from EU seems to suggest that this is a blanket tariff covering all items and doesn’t overlap with the sectoral tariffs.
Markets initially reacted positively, with the euro up slightly and European indices broadly higher. However, sentiment turned as analysts labeled the deal a major win for the U.S. and a loss for the EU. Germany’s VDMA warned it will cost the auto industry billions annually, with Europe investing heavily in the U.S. while receiving little in return. German media also noted the lack of offsetting import-export terms for vehicles.
The EU deal may have given the Trump administration space to keep talks with China open longer, with reports suggesting the U.S. and China will likely extend the current tariff pause by another three months. This comes ahead of Treasury Secretary Bessent’s meetings with Chinese officials in Stockholm on July 28–29. Separately, reports indicate President Trump is considering freezing export controls to help secure a trade agreement with China.
Chart of the Day - Earnings Update from SocGen
SocGen discusses a strong earnings season, with 84% of companies beating EPS and 79% beating revenue estimates—the best top-line surprises in four years. Stocks are reacting rationally, with outperformers gaining and misses falling. Profit margins are also broadening across sectors.
The EPS revision ratio is at a 3-year high of 1.4, with the U.S. leading global upgrades. S&P 500 earnings have outpaced global peers 74% of the time over the past five years. SocGen adds that a weaker dollar offsets tariffs—every 10% USD drop adds 4% to EPS, while a 10% tariff cuts 3%.
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
