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Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
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London Quick Take – 23 July – US-Japan Trade Deal Lifts Global Stock Markets
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
You can read our Alphabet earnings preview and our Tesla earnings preview.
London Quick Take – 23 July – US-Japan Trade Deal Lifts Global Stock Markets
Key Points
- Fresh record highs for FTSE 100 and S&P 500 as trade deal optimism rises
- US and Japan secure trade deal, sending automaker stocks surging
- General Motors plunges 8% on tariff hit, Tesla to report tonight
- Bond yields move higher again on weak Japan auction
Global markets are in buoyant mood as the US and Japan secured a trade deal: US futures are up after the S&P 500 notched a fresh record on Tuesday, while the FTSE 100 hit a new record this morning. European stock markets are broadly higher with automakers leading.
Tokyo rallied sharply overnight led by auto stocks after US President Donald Trump announced a “massive” trade deal with Japan. The deal sees the Japan’s exports slapped with a 15% flat tariff, while the country will “open” its market for cars and rice. The 15% tariff applies to cars, which is below the 25% universal rate imposed by the US on cars built outside the country. Shares of Toyota jumped 14%, Honda rose 10%, and Nissan was up close to 8%. Mazda rose 18% to hit its daily limit. The Nikkei 225 rallied 3.59%.
Meanwhile, Japan’s prime minister Ishiba announced his resignation at the same as a weak 40yr bond auction in the country pushed yields higher again. The yen weakened from an almost two-week high against the dollar. Always watch Japan.
Sticking in Asia, the Hang Seng rose over 1.2% while mainland stocks were mixed as it seems the tariff suspension with China looks likely to be extended. The 90-day tariff pause expires on 12 August, but Treasury Secretary Scott Bessent indicated the administration was “working out what is likely an extension”.
It’s unclear right now if the positive news on the Japan trade deal means anything material for Europe striking a trade deal with the US – you would think that it does, and European stock markets are taking their clues from Japan this morning, rising sharply on the hope that the Japan deal means the EU is about to achieve the same. After slipping 1% yesterday the DAX firmed up by the same margin to around 24,300, led by carmakers, while the CAC in France also rose more than 1% as luxury stocks were buoyed on the news, too. Porsche, Volkswagen, Stellantis and Mercedes all climbed 5%, while Kering, LVMH and Hermes all climbed 2%. The FTSE 100 rose over half a percent to 9,073 in early trade, hitting a fresh record high, but YTD top performer Fresnillo was down hard as silver production was down 14.7% year-on-year.
It’s being reported that the European Union is considering whether to deploy its “Anti-Coercion Instrument” should there be no trade deal by 1 August, which would mean 30% tariffs on exports to the US – effectively killing trade between the two...the nuclear option is on the table it seems, but for the moment expectation seems to be veering towards a deal.
The S&P 500 rose to a fresh record, its 11th record close this year, with Tesla and Alphabet rising ahead of their earnings reports tonight after the close. The Dow Jones rose 0.4%, but the Nasdaq Composite dipped the same as chip stocks fell. The Stoxx Europe 600 also fell 0.4% as defence names slipped with Rheinmetall down more than 3%...signs and concerns that some of these momentum defence names are running out of steam now that valuations are stretched.
Bessent meanwhile also said Fed chair Jerome Powell doesn’t need to resign, but reiterated his calls for a review of the central bank.
Companies
Tariffs are hitting home: General Motors beat and reaffirmed guidance, which it had cut in May to include a possible $4 billion to $5 billion impact from auto tariffs. Q2 profit slumped -35% as it absorbed $1.1bn in tariff costs, but shares rose as it beat estimates and stuck to the guidance. US corporates and consumers may be paying for tariffs...this is likely to show up in the economic data soon...stagflationary.
Coca-Cola earnings beat estimates as strong demand in Europe offsets weakness elsewhere.
Lockheed Martin fell almost 11% as special charges amounting to $1.7bn were accounted for in Q2. Adjusted EPS was just $1.46 vs $6.41 estimated as costs of aeronautics and helicopter programmes took their toll. The company stuck to its FY sales outlook but lowered EPS guidance.
Looking ahead to tonight, Alphabet has been attracting PT upgrades in recent days – Stifel went to $218 from $200, implying about 15% upside.
In the UK, Informa rallied nearly 5% after it posted 20% revenue growth and 24% profit growth. Fresnillo down on 14.7% drop in silver production though output did climb 1% from last quarter. Gold production rose 1% on the quarter as well and was 21.3% above the same quarter a year ago. JD Wetherspoon like-for-like sales +5.1%... good weather has helped, as has “clucking good” chicken sales up 50%, apparently.
Tokyo rallied sharply overnight led by auto stocks after US President Donald Trump announced a “massive” trade deal with Japan. The deal sees the Japan’s exports slapped with a 15% flat tariff, while the country will “open” its market for cars and rice. The 15% tariff applies to cars, which is below the 25% universal rate imposed by the US on cars built outside the country. Shares of Toyota jumped 14%, Honda rose 10%, and Nissan was up close to 8%. Mazda rose 18% to hit its daily limit. The Nikkei 225 rallied 3.59%.
Meanwhile, Japan’s prime minister Ishiba announced his resignation at the same as a weak 40yr bond auction in the country pushed yields higher again. The yen weakened from an almost two-week high against the dollar. Always watch Japan.
Sticking in Asia, the Hang Seng rose over 1.2% while mainland stocks were mixed as it seems the tariff suspension with China looks likely to be extended. The 90-day tariff pause expires on 12 August, but Treasury Secretary Scott Bessent indicated the administration was “working out what is likely an extension”.
It’s unclear right now if the positive news on the Japan trade deal means anything material for Europe striking a trade deal with the US – you would think that it does, and European stock markets are taking their clues from Japan this morning, rising sharply on the hope that the Japan deal means the EU is about to achieve the same. After slipping 1% yesterday the DAX firmed up by the same margin to around 24,300, led by carmakers, while the CAC in France also rose more than 1% as luxury stocks were buoyed on the news, too. Porsche, Volkswagen, Stellantis and Mercedes all climbed 5%, while Kering, LVMH and Hermes all climbed 2%. The FTSE 100 rose over half a percent to 9,073 in early trade, hitting a fresh record high, but YTD top performer Fresnillo was down hard as silver production was down 14.7% year-on-year.
It’s being reported that the European Union is considering whether to deploy its “Anti-Coercion Instrument” should there be no trade deal by 1 August, which would mean 30% tariffs on exports to the US – effectively killing trade between the two...the nuclear option is on the table it seems, but for the moment expectation seems to be veering towards a deal.
The S&P 500 rose to a fresh record, its 11th record close this year, with Tesla and Alphabet rising ahead of their earnings reports tonight after the close. The Dow Jones rose 0.4%, but the Nasdaq Composite dipped the same as chip stocks fell. The Stoxx Europe 600 also fell 0.4% as defence names slipped with Rheinmetall down more than 3%...signs and concerns that some of these momentum defence names are running out of steam now that valuations are stretched.
Bessent meanwhile also said Fed chair Jerome Powell doesn’t need to resign, but reiterated his calls for a review of the central bank.
Companies
Tariffs are hitting home: General Motors beat and reaffirmed guidance, which it had cut in May to include a possible $4 billion to $5 billion impact from auto tariffs. Q2 profit slumped -35% as it absorbed $1.1bn in tariff costs, but shares rose as it beat estimates and stuck to the guidance. US corporates and consumers may be paying for tariffs...this is likely to show up in the economic data soon...stagflationary.
Coca-Cola earnings beat estimates as strong demand in Europe offsets weakness elsewhere.
Lockheed Martin fell almost 11% as special charges amounting to $1.7bn were accounted for in Q2. Adjusted EPS was just $1.46 vs $6.41 estimated as costs of aeronautics and helicopter programmes took their toll. The company stuck to its FY sales outlook but lowered EPS guidance.
Looking ahead to tonight, Alphabet has been attracting PT upgrades in recent days – Stifel went to $218 from $200, implying about 15% upside.
In the UK, Informa rallied nearly 5% after it posted 20% revenue growth and 24% profit growth. Fresnillo down on 14.7% drop in silver production though output did climb 1% from last quarter. Gold production rose 1% on the quarter as well and was 21.3% above the same quarter a year ago. JD Wetherspoon like-for-like sales +5.1%... good weather has helped, as has “clucking good” chicken sales up 50%, apparently.
You can read our Alphabet earnings preview and our Tesla earnings preview.
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