The Art of the Deal
As the August 1st trade deadline approaches, it increasingly appears to be a non-event for markets. The United States—still in discussions with China (though the tone seems constructive)—has also signed an agreement with the European Union, effectively settling trade relations with most of its key partners.
Key points on the EU agreement:
- 15% tariffs agreed (including Auto but excluding Pharma)
- 50% tariffs maintained on steel & aluminium
The EU commits to:
- $750B in energy imports
- $600B of investments in US economy
- purchase of important quantities in military equipment
- full market access for US goods
Novo Nordisk shares plunge
Shares in Novo Nordisk plunged by as much as 30% after the Danish drugmaker cut its guidance and named a new chief executive, pinning its hopes on a company veteran to revive growth
- The company said U.S. sales continue to be hurt by copycat versions of its blockbuster Wegovy weight-loss drug, and the continuation of the practice known as compounding, despite U.S. regulators ordering an end to it
- Multiple entities are still marketing and selling unbranded versions of semaglutide, the main ingredient in both Wegovy and diabetes treatment Ozempic
- Competition and slower sales growth of its Ozempic diabetes drug in the U.S. also dragged on its results, it said
- Maziar Mike Doustdar, an insider who has spent more than three decades at the Danish drugmaker, will be tasked with the turnaround as the company loses ground to Eli Lilly & Co. in the obesity market
Earnings season
Earnings season continues, with a wave of quarterly reports expected from both European and US firms. Special attention will definitely be paid to several companies within the exclusive group known as the “Magnificent Seven.” While Nvidia—the undisputed leader of the group—is scheduled to report only at the end of August, four key names will release earnings, representing a significant 20% weight of the S&P 500 index:
- Wednesday: Meta and Microsoft
- Thursday: Amazon and Apple
As usual, we believe the focus should go beyond headline figures. Particular attention should be paid to developments related to artificial intelligence, especially in light of the recent reopening of relations with China, and to the overall tone and guidance offered by each company.
Fed: Mounting dissent
Fed officials are expected to hold interest rates steady, though the mounting dissent within the FOMC may bolster expectations for future cuts
- Fed Chair Powell remains under heavy pressure from President Trump to reduce borrowing costs – may face stronger opposition from officials who want to show support to slowing labor market
- Analyst see possible dissent coming from Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman – both are Trump appointees that have expressed concern over current level of rates
- Interest rate futures are showing investors betting on a more likely rate reduction in September – Fed watchers will be looking for any hint to support that view
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