A day late and a buck short
A soggy end to the month for markets despite blowout numbers from two of the Mag 7 on Wednesday night, namely Microsoft and Meta, closely followed by decent results after hours on Thursday from Apple and Amazon. Microsoft reached the milestone of the 2nd 4 trillion dollar company after Nvidia. Apple was an all-around beat driven by strong iPhone sales and sales growth in China. Despite beating expectations, Amazon shares were weaker after hours as third-quarter operating income guidance fell short, suggesting tariffs are weighing on profitability, but they are not alone in that. Amazon shares were down 6% in after-hours trading.
There was a myriad of macro news as the Fed left interest rates unchanged, failing to bow to Mr Trump’s bidding, and the market is now beginning to doubt the Fed’s desire to cut at their next meeting in September. There were two dissenters from the decision, an unusual event, which last happened in 1993, as it is accepted etiquette for members of the Federal Reserve to project a sense of unanimity and expertise. One of the dissenters, Governor Waller, has his hat in the ring to replace Powell next year, so he is playing politics. Expect further attacks in the coming weeks on Mr Powell.
On the macro level, US GDP grew at an annualised rate of 3%, exceeding expectations and reversing the 0.5% contraction seen in the first quarter. US economic figures are becoming inconsistent as industries adapt to Trump’s constantly changing tariff policies. Overall, there is evidence that the US economy is slowing down compared to last year, with growth averaging 1.2% annually in the first half of this year, down from the 2.5% average pace in 2024. The latest US inflation data, in the form of the monthly PCE Index, showed a rise in the annual rate ahead of expectations, further dampening rate cut hopes, as the yield on the 2-year US treasury rose to almost 4% again and the dollar had its best week in a while.
There was more tariff news overnight as Trump’s August 1 deadline was reached; some countries have made deals, such as the UK, Europe, and Japan. However, last night, President Trump signed an executive order on July 31, 2025, imposing new global tariffs ranging from 10% to 41% on imports from over 67 countries. Having said he was not planning any extension to the timeline, President Donald Trump extended Mexico’s current tariff rates for 90 days to allow more time for trade negotiations.
Markets in Asia were weak overnight and are expected to be weaker this morning in Europe. August historically can be dodgy for markets.