European Airlines Outfly U.S. Rivals Amid Tariff Turbulence and Travel Disparities

Economic

Summary:

European airline stocks have significantly outperformed their U.S. counterparts in 2025, buoyed by cost discipline, premium offerings, and resilient transatlantic demand...

European Airline Stocks Climb Despite Regulatory Headwinds

Over the past six months, European airline stocks have defied geopolitical and macroeconomic uncertainty, with carriers like Air France-KLM, Lufthansa, and IAG reporting strong second-quarter results. Air France-KLM leads the gains, benefiting from its elevated luxury image and successful premium seat sales, particularly on transatlantic routes.

These performances contrast with persistent complaints from European airline CEOs regarding environmental levies and airport taxes. Nonetheless, the discipline in cost control and strategic positioning have yielded positive investor sentiment, helping European carriers outperform in the equity markets.

U.S. Airlines Weighed Down by Weak Consumer Confidence

By contrast, U.S. airlines such as Delta, United, and American have seen share prices decline through much of 2025, reflecting a slowdown in discretionary travel spending. The uncertainty created by President Trump’s aggressive tariff policies, including sweeping new levies on 68 countries and the EU, has dented both consumer and corporate confidence.

While the recent tax-and-spending bill provided some clarity and sparked a short-term rebound in airline stocks, the overall sentiment remains fragile. Earnings forecasts for 2025 have been revised down, and analysts remain cautious about the near-term outlook.

Transatlantic Demand Softens but Doesn’t Collapse

Analysts note that fears of a collapse in transatlantic demand have not materialized. While demand has softened, especially on North Atlantic routes, it remains relatively stable, with Americans continuing to book travel to Europe, often opting for European carriers. This divergence has given European airlines a relative edge in the global aviation market.

Goodbody analyst Dudley Shanley noted that demand "was a little weaker but it has not collapsed as had been feared by investors," suggesting that pessimism may have been overdone. This sentiment has helped stabilize share prices in both regions, though the gap remains wide.

Tariff Fallout May Be Temporary but Risks Persist

Booking Holdings’ CFO confirmed that U.S. travel demand still lags behind Europe and Asia. This reflects not only economic conditions but also differences in regulatory and consumer behavior across regions. Analysts like Conor Cunningham of Melius Research remain cautiously optimistic, indicating that if corporate travel and consumer confidence improve, the current dip could be seen as a temporary tariff-induced pause.

Yet the prospect of more trade frictions remains a looming risk. The uncertainty tied to retaliatory measures and geopolitical volatility continues to cast a shadow over U.S. carriers, making sustained recovery more difficult.

In 2025, European airlines have navigated macroeconomic headwinds more effectively than their U.S. peers, leveraging strong transatlantic demand and tighter cost structures. Meanwhile, U.S. airlines are caught between inflation, regulatory ambiguity, and trade war fallout. Whether the current performance gap narrows depends largely on how quickly U.S. travel demand rebounds and how global trade tensions evolve.

Source: Reuters

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Gerik

Economic

Inflation Concerns Shift BOJ Stance Toward Hawkish Tilt

The Bank of Japan (BOJ) took a subtle but significant step toward resuming monetary tightening by explicitly warning that persistent increases in food prices may trigger broader inflationary pressures. For the first time, the BOJ’s quarterly report included detailed concerns about second-round effects where higher costs in essentials like food spill over into wage demands and broader pricing behavior.

The revised report eliminated previously cautious language, such as the term "extremely" when referring to U.S. trade policy uncertainty. It also upgraded the inflation forecast and signaled a more balanced view of risks, indicating a potential end to the BOJ's cautious pause that followed the initial shock of Trump's tariff announcement in April.

Dovish on Surface, But Signals Preparation

Although markets initially interpreted BOJ Governor Kazuo Ueda’s comments as dovish, analysts argue that the underlying message reveals a central bank quietly preparing for action. Ueda stated the BOJ would not necessarily wait for inflation to firmly hit the 2% target but would act if the likelihood of achieving it sustainably becomes convincing.

He emphasized that the current 0.5% rate remains accommodative and that each upcoming policy meeting from September to December will be “live,” suggesting a rate hike could occur at any time depending on economic signals.

Hike Odds Rise for October and December

Interest rate swaps now imply a 54% probability of a hike to 0.75% in October and a 71% chance by December. These expectations align with a Reuters poll showing that most economists anticipate a hike before year-end, especially as inflation expectations gain traction and corporate behavior adjusts.

Ueda’s remarks coincided with signs of stabilization in Japan’s trade exposure. The bilateral trade agreement with the U.S. in July has mitigated tariff-related risks, helping the BOJ regain confidence in its outlook despite ongoing global tensions.

Second-Round Effects: From Groceries to Wages

The BOJ highlighted that over 1,000 food items rose in price this August, and projections show over 3,000 more to increase in October. Companies are no longer absorbing raw material, labor, and logistics costs but are instead passing them to consumers. This change could pressure wage negotiations, feeding into a feedback loop that anchors inflation above 2%.

Such trends reinforce the BOJ’s view that underlying inflation once deemed fragile is becoming more embedded, especially if wage growth sustains. However, Ueda stopped short of confirming the central bank was behind the curve, instead maintaining that more data was needed to confirm the trajectory.

The BOJ is clearly signaling its readiness to hike interest rates again, driven by persistent inflation and changing corporate dynamics. However, by keeping the door open on timing, it maintains the flexibility to react to evolving domestic and global conditions. For investors, each upcoming meeting now carries weight, with Japan’s monetary policy entering a more active, responsive phase.

Source: Reuters

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S&P Global Inc.

Forex

Economic

Eurozone manufacturing output rises marginally again in July

Key findings:

● HCOB Eurozone Manufacturing PMI at 49.8 (Jun: 49.5). 36-month high.

● HCOB Eurozone Manufacturing PMI Output Index at 50.6 (Jun: 50.8). 4-month low.

● Production volumes tick up despite marginal decrease in new orders

Data were collected 10-24 July

The euro area manufacturing sector recorded a broad stabilisation of operating conditions at the start of the third quarter.Output growth was sustained, although the upturn was the softest since March, while new orders saw a fresh (albeit marginal)reduction amid a deterioration in export* demand. Positively, factory job shedding cooled to its least pronounced in almost twoyears.As for prices, input costs were unchanged and this was practically true for output charges too. There was a slight easing inyear-ahead growth expectations, although forecasts remained slightly above their long-term average.

The HCOB Eurozone Manufacturing PMI®, a measure of the overall health of eurozone factories compiled by S&P Global,edged up to a three-year high of 49.8 in July, from 49.5 in June. Posting only just below the 50.0 threshold, the latest figureindicated a near-stabilisation of operating conditions across the eurozone goods-producing sector.Of the euro area countries with Manufacturing PMI data available, Ireland had the strongest-performing factories in July, withgrowth slowing but remaining solid overall. Meanwhile, there were pick-ups in momentum across both the Netherlands andSpain, posting their fastest expansions in 14 and seven months, respectively. Greece continued its growth trend in July,extending the current sequence to two-and-a-half years. In the remaining countries, Manufacturing PMI prints rose butremained below the crucial 50.0 mark, signalling sustained but slower deteriorations on the month. Both Germany and Francesaw fractional increases in the headline PMI since June, with the former hitting its highest mark in close to three years. As forFrance, its manufacturing sector was tied with Austria as the worst-performing at the start of the third quarter.

The eurozone as a whole saw factory production levels rise in July, marking five successive monthly expansions. The increaseslowed slightly from June, however, and was the softest since March. Weighing on output was a fresh decline in new business.The deterioration in demand was small, but nevertheless the quickest in four months. Export sales were a drag on total ordervolumes, latest survey data revealed, with new work received from international clients falling after stabilising in the previousmonth.Meanwhile, eurozone manufacturers dampened their retrenchment efforts in the latest survey period. Both input purchasing andemployment moved closer to stabilisation during July, posting their slowest reductions in 37 and 23 months, respectively.July survey data pointed to a slight intensification of supply chain pressures as average input lead times lengthened for asecond month in a row and to the greatest extent since November 2022. At the same time, pre- and post-production stockscontinued to decrease, although rates of depletion softened.

The eurozone manufacturing sector registered stable prices during July. Input costs were unchanged, following three months ofdeclines, while prices charged saw virtually no movement.Looking ahead, eurozone goods producers remained optimistic of growth over the next 12 months. In fact, the overall level ofoptimism was just above its long-term average despite falling from June’s 40-month high.

Comment

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Manufacturing in the eurozone is cautiously regaining momentum. It is primarily the smaller economies that offer reasonsfor optimism. The PMIs from Spain and the Netherlands indicate accelerated economic growth, while Ireland and Greeceremain in expansion territory. In the three largest economies as well as Austria, the PMI signals that the industrial recessionhas significantly eased. This broadens the scope of the recovery. With the newly agreed trade framework between the EUand the U.S., uncertainty should decline, and the signs point to a continued upward trend in the coming months.

“France is currently the biggest drag on growth in the eurozone’s manufacturing sector. It is particularly discouraging thatproduction in France has declined over the past two months, while employment has slightly increased during the sameperiod. The problem lies in the resulting drop in productivity, which makes economic growth even harder to achieve. InGermany, the situation is reversed: production is growing while employment is being reduced. France is also burdened bythe prospect of an austerity budget and the associated risk of the current government stepping down. This contrasts withGermany, where much of the growth hopes rest on expansionary fiscal policy and the political situation is significantly morestable than in France. Less political and fiscal uncertainty in the eurozone’s second-largest economy would be important tohelp the eurozone manufacturing sector achieve sustainable growth overall.

“Supply chains remain relatively strained. Delivery times have lengthened. Given the fragility of the recovery, it is notdemand that is causing customers to wait longer for their goods. Volatile U.S. tariff policies and uncertainty stemming fromgeopolitical tensions may play a key role here. We expect that companies will continue to face sudden supply chaindisruptions for the foreseeable future.”

Source:S&P Global

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Glendon

Economic

Forex

Euro zone manufacturing moved closer to stabilization in July as factory activity contracted at its slowest pace in three years, despite a dip in new orders and slower output growth, a survey showed.

The HCOB Eurozone Manufacturing Purchasing Managers' Index, compiled by S&P Global, edged up to 49.8 in July from 49.5 in June, reaching its highest level since July 2021.

That matched a preliminary estimate and was only a whisker away from the 50.0 mark separating growth from contraction.

Factory output grew for the fifth consecutive month but at a slower pace with the output index easing to 50.6 from 50.8, marking a four-month low.

"Manufacturing in the euro zone is cautiously regaining momentum. With the newly agreed trade framework between the EU and the U.S., uncertainty should decline, and the signs point to a continued upward trend in the coming months," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The U.S. struck a framework trade agreement with the European Union on Sunday, imposing a 15% import tariff on most EU goods.

Germany, Europe's largest economy, saw its manufacturing PMI rise to a 35-month high of 49.1, though still indicating contraction. France and Austria tied as the worst performers with identical readings of 48.2.

Among euro zone countries, Ireland led manufacturing performance with a PMI of 53.2 although this represented a two-month low. The Netherlands and Spain both recorded 51.9, marking 14-month and seven-month highs respectively. Greece maintained its growth streak at 51.7.

New orders declined marginally as export sales proved a drag following their brief stabilisation in June.

Price pressures remained largely absent in July, with input costs unchanged following three months of declines, while output prices showed virtually no movement.

The European Central Bank left interest rates unchanged last week and offered a modestly upbeat assessment of the currency union's economy.

Business confidence regarding future output remained above the long-term average in July, though it retreated from June's 40-month high, suggesting manufacturers maintain a cautiously optimistic outlook for the year ahead.

Source: Yahoo Finance

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Samantha Luan

Commodity

Forex

Key points:

● Trump hits dozens of countries with steep tariffs

● US dollar index hovers near two-month high

● Silver, platinum, palladium set for weekly losses

Gold prices held steady on Friday, but is poised for a third consecutive weekly loss pressured by a stronger dollar and diminished expectations for U.S. rate cuts, while uncertainty from U.S. tariffs on trading partners offered support.Spot goldwas steady at $3,288.89 per ounce, as of 0733 GMT. Bullion is down 1.4% so far this week.U.S. gold futuresedged down 0.3% to $3,339.90.The dollar indexhit its highest level since May 29, making gold more expensive for other currency holders.

"Gold remains weighed by reduced bets for Fed rate cuts for the rest of 2025. This week's U.S. GDP, weekly jobless claims, and PCE figures also shored up the Fed's reluctance to commit to a rate cut," said Han Tan, chief market analyst at Nemo.Money.Fed held rates steady in the 4.25%-4.50% range on Wednesday and dampened expectations for a September rate cut.U.S. President Donald Trump slapped steep tariffs on exports from dozens of trading partners, including Canada, Brazil, India and Taiwan, pressing ahead with his plans to reorder the global economy ahead of a Friday trade deal deadline.

"The precious metal should, however, remain supported amid the still-uncertain impact from U.S. tariffs on global economic growth," Tan said.U.S. inflation increased in June as tariffs on imports started raising the cost of some goods.Focus now shifts to U.S. jobs data, due later on Friday, as investors assess the Federal Reserve's policy trajectory, with July job growth expected to have slowed and the unemployment rate projected to rise to 4.2%.

Gold, often considered a safe-haven asset during economic uncertainties, tends to perform well in a low-interest-rate environment.Physical gold demand in key Asian markets improved slightly this week as a pullback in prices sparked buying interest, though volatility kept some buyers cautious.Spot silverfell 0.7% to $36.50 per ounce, platinumlost 0.8% at $1,278.40 and palladiumwas down 0.2% to $1,188.28. All three metals were headed for weekly losses.

Source: TradingView

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Gerik

Economic

Tariff Shock Sparks Sell-Off Across Asia

Friday’s session saw widespread weakness across Asian equities after President Trump unexpectedly reinstated and expanded tariffs on dozens of countries, including key trade partners in Europe and Asia. The Nikkei 225 lost 0.4%, while the Kospi plunged 2.8%, reflecting South Korea’s acute vulnerability given its export-heavy economy and recent manufacturing slowdown.

Markets across the region followed suit. Australia’s ASX 200 dropped 0.8%, the Hang Seng Index shed 0.2%, and Taiwan’s TAIEX fell 0.4%. The Shanghai Composite slipped 0.1%, despite China's efforts to cushion economic softness. India’s Sensex also declined 0.4% as investors weighed the prospect of higher input costs and reduced export competitiveness.

‘Imperial Trade’ and Regional Fallout

Strategists voiced concern about the long-term implications of the U.S. trade move. Benjamin Picton of Rabobank warned of “imperial trade,” arguing that the U.S. is cherry-picking global markets to its own advantage by demanding preferential access while protecting high-value industries domestically.

Mizuho Bank analysts noted an unexpected shift Southeast Asia, previously hurt by the "Liberation Day" tariff measures, may now stand to gain from relative tariff advantages compared to harder-hit economies such as Japan and South Korea. However, they cautioned that intra-regional tariff disparities are still narrow and the overall impact remains uncertain.

Wall Street Reactions and Healthcare Drag

U.S. equities mirrored the turbulence, with the S&P 500 falling for the third consecutive session down 0.4%. The Dow dropped 0.7% and the Nasdaq barely moved, finishing slightly lower. Healthcare stocks bore the brunt after the White House demanded that pharmaceutical companies cut prices within 60 days, sending shares of major players like UnitedHealth and Bristol-Myers sharply lower.

Despite the pullback, gains from Big Tech offered some support. Meta surged over 11% after surpassing earnings expectations, while Microsoft added 3.9% on robust Azure cloud performance and AI momentum.

Currency and Oil Markets React Cautiously

The U.S. dollar edged higher to 150.68 yen, reflecting safe-haven demand, while the euro remained relatively steady at $1.1418. In the commodity space, oil prices paused their rally, with WTI slipping to $69.21 and Brent to $71.67 as traders digested Trump’s tariff order and its implications for global demand.

Trump’s aggressive tariff escalation has reintroduced volatility into global markets, particularly in Asia, where export-driven economies are most exposed. As trade partners prepare retaliatory measures and central banks reconsider policy paths, the coming weeks are likely to see heightened market sensitivity to geopolitical developments.

Source: Reuters

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Daniel Carter

Economic

UK house prices bounced back in July in a sign demand is recovering after a tax increase in April discouraged prospective homebuyers, according to one of Britain's largest mortgage lenders.

Nationwide Building Society said the average price of a home rose 0.6% to £272,664 ($359,980) following a 0.9% fall the month before. The increase was the strongest since December and larger than the 0.5% economists surveyed by Bloomberg had expected.

The housing market is showing signs of stabilizing after a surge in transactions ahead of an increase in stamp-duty taxes turned into a sharp slow down once the higher rates took effect. Strong wage gains and easing mortgage rates are helping lure buyers back to market. However, headwinds remain from fears of job losses and tax rises, while buyers have a plentiful supply of properties to choose from.

"Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well," said Robert Gardner, Nationwide's chief economist. "Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive."

Mortgage approvals data provided further signs that the market is stabilizing. The number of UK home loans given the green light rose to a three-month high in June, according to Bank of England figures published Tuesday.