Investors look for signs European earnings can defy tariff turmoil

Economic

Summary:

European investors eye Q2 earnings for clues on resilience amid tariff uncertainty. Despite strong stock gains, earnings are expected to contract slightly. Guidance and FX headwinds remain key concerns as trade risks persist.

European investors are bracing for a pivotal second-quarter earnings season, which could offer the first meaningful insight into how companies are navigating a new era of trade volatility and, crucially, how resilient their share prices remain.

Markets staged a textbook V-shaped recovery to hit record highs after April's tariff-driven selloff after U.S. President Donald Trump announced sweeping tariffs, which he then paused for 90 days, effectively covering the entire second quarter.

Europe's STOXX 600 , is hovering near record highs, yet earnings for its constituents are expected to contract 0.2% in Q2, LSEG I/B/E/S said, from 2.2% growth in the last quarter.

Investors look for signs European earnings can defy tariff turmoil_1

Column chart showing the quarterly earnings growth rate for STOXX 600 companies

"Q2 data will be difficult to read," said Mohit Kumar, Chief Financial Economist for Europe at Jefferies.

"The question is: what about the guidance? That is much more important than the earnings amount."

Last quarter, a higher than usual number of companies withdrew their forecasts, given Trump's on-again-off-again trade policy. Analysis from Barclays found guidance sentiment was at its weakest since the COVID-19 pandemic.

"There are tariff-related implications that I don't think the market fully contextualises," said Luke Barrs, head of fundamental equity client portfolio management at Goldman Sachs Asset Management.

"We can understand conceptually what it means, we can understand the challenges it creates, but I don't think we've seen yet how it will feed through into the market."

With the 90-day reprieve now expired, uncertainty has resurfaced. Trump has notified 14 countries, including key exporters Japan and South Korea, of impending tariffs unless agreements are reached by August 1.

He has also escalated trade tensions by targeting copper, semiconductors, and pharmaceuticals. Europe, so far, has been spared.

The STOXX has gained 8% so far in 2025, compared with around 6% in the S&P 500, marking its second-best performance against the U.S. index at this point in the year in 20 years - aside from 2022, when it fell less than the S&P.

Increased capital flows into European assets from the U.S. have been a contributing factor. Defence companies such as Rheinmetall , and software company SAP , have helped drive the rally, along with European banks, now nearing pre-2008 crisis level.

DOWNGRADES PICK UP PACE

Analysts have been steadily revising down 2025 earnings forecasts for 55 consecutive weeks, although the pace of downgrades has eased since May. Full-year earnings growth for Europe is now expected at 3%, down from 8% at the start of the year.

"The vast majority of regions and sectors are seeing more downgrades than upgrades," said Dennis Jose, chief equity strategist at BNP Paribas CIB.

EPS downgrades ahead of earnings often mean that stocks can perform well through reporting season as the bar to beat expectations is lower.

Deutsche Bank chief strategist Binky Chadha said lighter positioning in equities this time around could amplify that effect.

"The magnitude of gains was tied inversely to positioning going in, which at slightly below neutral this time, is supportive of another rally," he said.

Valuations reflect this optimism. The STOXX 600 trades at 14.2 times forward earnings, close to its highest in three years, although some way behind the S&P 500, at 21.9.

FEELING THE FX

The euro's strength is another emerging issue. The dollar has weakened sharply under Trump's tariff regime, pushing the euro up more than 13% so far this year. Some analysts think it could hit $1.20 in the coming months, from around $1.17 now.

This poses a problem for the STOXX 600's export-focused constituents, which derive just 40% of revenue from within Europe, compared with 70% for S&P 500 members.

UBS analysts say the impact will be sector specific, with currency fluctuations more likely to weigh on margins rather than sales.

"For the most part, especially in the larger-cap space (in Europe), companies have pretty good controls and understand their revenue exposure," GSAM's Barrs said.

"There are always going to be scenarios where companies with significant external revenues that are printing earnings in euros haven't managed that well and will surprise the market, but these will be the exception not the norm."

Source: Reuters

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Warren Takunda

Economic

Stocks

The FTSE 100 index of the most valuable companies on the London Stock Exchange has soared to a new record high as investors shrugged off concerns over Donald Trump’s trade wars.

The FTSE 100 had the 9,000-point mark in its sights on Thursday, as it climbed to 8,973 points, above its previous all-time high of 8,908 points.

Stocks rose in London amid a global rally, as traders grew confident that Trump would either reach agreements with US trading partners, or again delay or dial back his threatened tariffs.

Mining stocks led the FTSE 100 risers, with Anglo American up more than 5%, closely followed by Glencore and Rio Tinto.

Victoria Scholar, the head of investment at Interactive Investor, said: “Commodities are fuelling the gains for the FTSE 100, with copper in the green and gold catching a bid on the back of a weaker US dollar.”

The blue-chip share index has now risen by more than 9% during 2025, having recovered from sharp losses in early April when markets tumbled after Trump announced new tariffs on what he called “liberation day”, before recovering after he postponed them.

The precious metals producer Fresnillo has been the top-performing FTSE 100 stock so far this year; its shares are up 140% since 1 January, driven by gains in the prices of gold and silver.

The British defence company Babcock’s share price has doubled so far this year, while weapons-maker BAE Systems is up 63% year-to-date, helped by expectations of a surge in defence spending as the Russia-Ukraine war continued.

Shares have pushed higher this week despite Trump announcing new tariff rates that will be imposed on imports from 1 August – postponed from a previous date of 9 July.

Chris Beauchamp, the chief market analyst at IG, said investors were in an “ebullient summer mood”.

“Perhaps most notable is the market’s apparent indifference to escalating trade tensions. Trump’s 50% tariff on copper imports and threats toward Brazil triggered little reaction. Many now view such announcements as political posturing, summed up by Taco: Trump always chickens out,” he said.

Germany’s DAX share index also hit a record high on Thursday. It has gained more than 23% so far this year, lifted by plans from the German chancellor, Friedrich Merz, to increase government spending to drive investment and lift growth.

The FTSE 100 is seen as a gauge of optimism about the world economy, as many of the largest companies listed in London have a global focus.

Susannah Streeter, the head of money and markets at Hargreaves Lansdown, said: “The FTSE 100 is stuffed full of multinationals which are sensitive to the outlook for the world economy and with the so-called ‘Taco trade’ in full swing, it’s benefiting from more optimism around.

“Investors expect that Trump will ‘chicken out’ from imposing his threat,” Streeter added.

Source: Theguardian

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Damon

Economic

Brazil scrambled to respond to U.S. President Donald Trump’s announcement of 50% tariffs on Brazilian exports, with President Luiz Inacio Lula da Silva convening an urgent cabinet meeting on Thursday as officials worked to de-escalate the crisis.

Brazilian diplomacy "has always been available to the American government to seek a solution of greater partnership and greater understanding, as we have always done," Finance Minister Fernando Haddad told reporters on Thursday.

"I don't believe this situation will continue," he said, calling the tariffs announced by Trump on Wednesday "unsustainable."

Two government sources told Reuters that Lula is calibrating Brazil's response and is unlikely to announce concrete measures on Thursday. His chief of staff said the government is forming a working group to decide how to react.

While Lula said on Wednesday that Brazil would respond to any tariffs with reciprocal measures, the sources said diplomatic efforts were gaining traction within the government on Thursday.

The U.S. tariffs, slated to take effect on August 1, were tied by Trump to Brazil’s treatment of former President Jair Bolsonaro, who is standing trial before the country's Supreme Court under charges of plotting a coup to stop Lula from assuming office in 2023.

Haddad criticized Bolsonaro and Brazil’s far-right opposition for perpetuating claims of legal persecution against the former president. "This blow against Brazil, against national sovereignty, was orchestrated by extremist forces within the country," Haddad said. "Even the far right will have to admit sooner or later that it shot itself in the foot."

The U.S. is Brazil's second largest trading partner after China and has a rare trade surplus with world's top economic power.

The tariffs could have a significant impact on food prices in the U.S., experts say, with the South American agricultural powerhouse being a major seller of coffee, orange juice, sugar, beef and ethanol to the U.S., among other products.

Brazil's real weakened as much as 2% against the U.S. dollar in spot trading on Thursday, before paring some losses to trade down 0.7%. Benchmark stock index Bovespa slipped 0.7%, with planemaker Embraer and meatpacker Minerva among the biggest fallers.

Source: Yahoo Finance

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Adam

Economic

The European Union (EU) is stuck in limbo as uncertainty persists around when a trade agreement with the U.S. might be reached.

The goal had been to agree on a framework by July 9, when a temporary reprieve from U.S. President Donald Trump’s “reciprocal” tariffs was initially meant to expire. The EU was seemingly still working to this timeline earlier in the week.

But that deadline has now passed — without the trading partners coming to an agreement.

A framework may, however, still be established as soon as this week, Trump himself suggested Tuesday.

“We’re probably two days off from sending them a letter. We are talking to them,” he said, suggesting that a letter being sent would mean a deal, or decision on tariffs, has been reached.

Trump said on social media on Monday that letters had been sent to 14 countries outlining new tariff rates.

Then, on Wednesday, he said at least seven more countries had received letters outlining punitive duties, and announced a 50% tariff on Brazil partly in retaliation against the current trial against former Brazilian President Jair Bolsonaro for his role in an alleged attempt to overturn the country’s 2022 election results.

The EU has — so far — not received a letter.

‘Treating us very nicely’

Trump has indicated that communication between the EU and U.S. has improved.

“They treated us very badly until recently, now they’re treating us very nicely. It’s like a different world,” he told a Cabinet meeting at the White House on Wednesday. “They were among the toughest to deal with.”

This marked a shift in tone from Trump, who has often taken issue with the trade relationship between Washington and Brussels, suggesting that is unfair and unbalanced.

According to the European Council, trade between the EU and U.S. was valued at around 1.68 trillion euros ($1.97 trillion) when accounting for both goods and services in 2024. The EU recorded a surplus when it comes to goods trading, but logged a deficit in the services trade, leaving its overall trade surplus at around 50 billion euros last year.

U.S. Commerce Secretary Howard Lutnick, meanwhile, also suggested a deal was on the table.

“The European Union, to their credit, has now made significant, real offers, meaning we’re going to take down our barriers, we’re going to open our markets to American farmers, ranchers, fishermen, really open their markets, and let Americans, finally American entrepreneurial spirit finally get to sell to Europe,” he said, speaking to CNBC’s “Power Lunch” on Tuesday.

“The president’s got those deals on his desk and he’s thinking about how he wants to play them,” he added.

The EU is broadly expected to agree to a 10% baseline tariff, with the hope that it can negotiate some exemptions or strike other deals on specific sectors. This would be sharply below the 50% tariff Trump has previously called for.

European Commission President Ursula von der Leyen appeared cautious in her response to Trump’s comments, stating Wednesday: “We stick to our principles, we defend our interests, we continue to work in good faith, and we get ready for all scenarios,” she told the European Parliament.

Speaking to CNBC’s “Squawk Box Europe” on Wednesday, Peter Chase, senior fellow at the German Marshall Fund, said the question was not whether a 10% duty was acceptable for Europe, but for the U.S., ultimately.

“You know, it’s the importer who pays the tariff, not the exporter,” he said. “If the Europeans have a tariff of 10% and Korea has a tariff of 25% then ... an American business is paying more for the same product from Korea than it would be paying for one from Europe,” Chase explained.

European businesses would therefore “deal with it, but it’s the American customer that’s the one that will be paying for it,” he said.

Source: cnbc

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Michelle

Economic

Forex

Vietnam has become the third country (after the UK and China) to reach an agreement with President Donald Trump over the ‘reciprocal tariffs’ he announced on 2 April. Trump had originally imposed a 46 per cent tariff on Vietnamese exports to the US – the fifth highest figure announced on his ‘Liberation Day’. All those tariffs were suspended within hours but were due to be reimposed within 90 days (a deadline that has now been pushed to August 1).

Announcing the deal with Vietnam last week, Trump said that the US will instead impose a 20 per cent tariff on Vietnamese goods. A higher rate of 40 per cent will apply on any goods from Vietnam it considers to have been ‘trans-shipped’ – i.e. simply moved through Vietnam rather than being manufactured or assembled there. The Trump administration has previously accused Vietnam of trans-shipping Chinese goods into the US market, in effect concealing part of China’s trade surplus with the US.

The Vietnamese government has worked hard to reach an agreement with Washington. It has conducted well-publicized raids on sellers of counterfeit products to try to assuage Washington’s concerns over protecting intellectual property. Ministers have held multiple rounds of talks online, sent trade delegations to the US and pledged to buy billions of dollars’ worth of American products. Some reports even suggest Vietnam is considering buying American F-16 fighter jets, which would have been unthinkable even a few months ago in line with Hanoi’s long-held aversion to becoming dependent on Washington for strategic defence systems.

That said, all these purchases add up to a tiny fraction of Vietnam’s overall trade surplus with the US, perhaps $10 billion compared to a surplus in 2024 of $123 billion. According to President Trump, Vietnam has also pledged to cut all tariffs on imports from the US. This prompted him to declare that American-made SUVs ‘will be a wonderful addition to the various product lines within Vietnam’. While this seems optimistic given that many Vietnamese streets are too small for American cars, it is quite possible that Vietnamese government ministries might be told to ‘buy American’ for their next vehicle purchase to reduce the trade surplus a little more.

Vietnam’s economic incentives

Vietnam has moved so fast to reach an agreement with Washington primarily because its economy depends on exports to the American market, and the country’s leadership knows it will be judged on its economic performance. The Communist Party of Vietnam (CPV) will hold its five-yearly Congress within a few months and its General-Secretary, To Lam, wants to be selected for another term in office. Keeping the country’s exports flowing to the US is a big win for him and his recently unveiled development strategy, which is firmly aimed at increasing economic growth.

To Lam’s strategy involves the embrace of the private sector, which was endorsed by the new Politburo in May. He has also largely ended the anti-corruption campaign initiated by his hard-line predecessor, which had hobbled the economy. This approach is intended to help catapult Vietnam into the ranks of ‘high income countries’ by 2045, the centenary of the Vietnamese Declaration of Independence, and avoid falling into the ‘middle income trap’ like most of its Southeast Asian neighbours.

To achieve this ambitious goal, Vietnam needs to sustain annual economic growth of at least eight per cent for the next 20 years. This will depend on maintaining very high levels of exports, particularly to the US and Europe.

Between Chinese factories and Western markets

At the same time, Vietnam is becoming more connected to Chinese-controlled supply chains. Vietnam’s economic growth has been driven in part by foreign firms building factories in the country to assemble products using components made in China. Historically, these assembly lines were owned by Japanese, Korean or Taiwanese firms. Increasingly, however, Chinese-owned companies are also setting up production in Vietnam.

There are three reasons for this. Firstly, corporations are seeking to mitigate the risks of having all their production in one country; secondly, they need to reduce their exposure to US tariffs on China; and thirdly, because it is made possible by Vietnam and China both being part of the huge 15-country free trade area known as the Regional Comprehensive Economic Partnership (RCEP).

For now, Vietnam’s major economic role globally is as an assembly line between Chinese producers and Western markets. This has rankled the Trump administration, which says China has trans-shipped products via Vietnam to avoid US tariffs. The higher tariff rate on trans-shipped products in the deal announced by Trump is intended to counter this. But exactly where the boundary lies between Vietnamese goods and trans-shipped goods will occupy trade negotiators, diplomats and customs officials for many months to come.

Impact on Vietnam’s foreign relations

While the deal will certainly contribute to improved US–Vietnam relations it is unlikely to signal a major change in Vietnam’s foreign policy orientation. Hanoi cannot afford to antagonize either of its major partners. It needs the US as a market, but also relies on trade with, and political support from, China.

While Vietnam has developed close economic ties with the US, the CPV has remained wary of Washington’s political agenda. President Trump’s apparent lack of interest in promoting democracy abroad will help alleviate some of those fears, though some suspicion will inevitably remain.

China has been damaging its relations with Vietnam recently with aggressive moves in the South China Sea and it is possible that Hanoi could reach out to Washington for some assistance in defending its position. This was certainly the case during the 2010s. However, Vietnam will not be part of any potential American military efforts that specifically target China.

China will have mixed feelings about the US–Vietnam deal. Some of its companies and factories may benefit from continuing to route their production networks through Vietnam, but others may lose out from having their trans-shipment practices curtailed. Officials in Beijing may also be concerned about whether Hanoi has privately agreed other issues with Washington, such as greater security cooperation in the future. Hanoi will have to make full use of its communist party-to-party connections to reassure Beijing that it has not been flipped into the US camp.

There is also a role here for third parties. Vietnam risks becoming a casualty of the power competition between China and the US. European countries and others with an interest in a multipolar world and a liberal trading order can offer stability to Vietnam. But perhaps they could also start to ask for things in exchange.

Rather than reducing carbon emissions, Vietnam has been increasing the use of coal and gas-fired power stations and European manufacturers of, for example, clean energy generation technology have been blocked from the Vietnamese market by various non-tariff barriers. Vietnam is also failing to curb illegal migration to Europe. These issues are included in the EU and UK free trade agreements with Vietnam, and in other agreements on partnership and migration, but Vietnam is not upholding its side of the bargain. Perhaps it is time for Europeans to get tough too.

Source: Chatham House

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Adam

Economic

Why stop at $4 trillion? Nvidia (NVDA) bulls are looking to the next milestone: a market cap of $5 trillion.

It's not particularly farfetched to imagine Nvidia becoming the first publicly traded company to grab both of those records. It was just over two years ago that Nvidia joined the $1 trillion club, riding the excitement over the breakout success of ChatGPT and reaping the rewards of building out an AI-focused data center business before AI became an earnings call buzzword.

The stock is up 21% this year, the best performer in the Magnificent Seven behind only Meta (META), which has been busy building an ultra-niche Avengers team of highly-paid AI experts.

"There is one company in the world that is the foundation for the AI Revolution and that is Nvidia with the Godfather of AI Jensen having the best perch and vantage point to discuss overall enterprise AI demand and the appetite for Nvidia's AI chips looking forward," wrote Wedbush analyst Dan Ives in a note on Wednesday.

Nvidia's chips are at the forefront of the generative AI boom. The company has shed earlier concerns of being less well suited for use in AI models after they are trained and has benefited from countries vying to keep their AI data centers within their borders. Nvidia has also managed to shake off regulatory concerns at home.

It pays to have a superior product. But Nvidia's empire was also built by having the best customers.

As my colleague Dan Howley has reported, the biggest players in tech, each in command of vast fortunes and attempting to execute on grand ambitions, are spending hundreds of billions of dollars on the company's hardware.

Tech behemoths, including Amazon (AMZN), Google (GOOG), Meta, Microsoft (MSFT), and Tesla (TSLA), rely on Nvidia's products to build out their data centers. The cloud-based AI offerings and internal AI models at the heart of the latest tech transformation have generated an industrywide line item paid out to Nvidia.

The symbiotic relationship also favors Nvidia because the major tech platforms sit downstream of its chip supply. It's true that every player in the AI ecosystem is taking on huge risks. DeepSeek unleashing a brief investor panic was a painful reminder of that.

But where the tech platforms have to eventually deliver on new, AI-centered services, fulfill promises and hype around building novel consumer habits, and usher in a new age of automated agents, all Nvidia has to do is keep selling chips.

That's an oversimplification. And the fates of chipmakers and AI service providers are and will be intertwined.

But the point stands: The onus of justifying enormous AI investments will fall more on the companies that have yet to profit from them. The tech giants still have to convince the rest of us to use and keep using their newfangled AI tools. All the while, Nvidia will be cashing checks from further up the hype chain.

Source: finance.yahoo

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Glendon

Political

Middle East Situation

An Israeli strike hit Palestinians near a medical centre in Gaza on Thursday, killing 16 including children and wounding more people, local health authorities said, as ceasefire talks dragged on with no result expected soon.

The strike in Deir al-Balah in the central Gaza Strip came as Israeli and Hamas negotiators hold talks with mediators in Qatar over a proposed 60-day ceasefire and hostage release deal aimed at building agreement on a lasting truce.

However, a senior Israeli official said on Wednesday that an agreement was not likely to be secured for another one or two weeks.

Khalil al-Deqran, spokesperson for the health ministry in Gaza's Hamas-run government, said Israel had targeted a medical centre and that six of the dead were children. Many of those injured had suffered severe wounds to the head and chest, he said.

Israel's military said it had struck a militant who took part in the Hamas-led October 7, 2023, attack that triggered the war. It said it was aware of reports regarding a number of injured individuals and that the incident was under review.

Videos on Thursday verified by Reuters showed a scene of carnage, with the bodies of dead and injured, mainly women and children, lying in blood amid a cloud of dust as people screamed all around, and of motionless children lying in blood on a donkey cart.

At Deir al-Balah's al-Aqsa Martyrs Hospital, where the dead and wounded were taken, Samah al-Nouri said her daughter had been killed in the morning's strike after attending the clinic to seek treatment for a throat ailment.

"They hit her with a shell. Her brother went to check and he said they all died. What did they do? What's their fault? She was only getting treatment in a medical facility. Why did they kill them?" she said.

Israeli attacks on Palestinian hospitals and health facilities, detentions of medics, and restrictions on the entry of medical supplies have drawn condemnation, opens new tab from the United Nations.

The United Nations humanitarian agency OCHA said in May that the U.N. had documented at least 686 attacks impacting healthcare in Gaza since the war began.

Dwindling fuel supplies risk further disruption in the remaining, semi-functioning hospitals, including to incubators at the neonatal unit of al-Shifa hospital in Gaza City, doctors there said.

"We are forced to place four, five or sometimes three premature babies in one incubator," said Dr Mohammed Abu Selmia, the hospital director, adding that premature babies were now in a critical condition.

TALKS

U.S. President Donald Trump met Israeli Prime Minister Benjamin Netanyahu this week to discuss Gaza amid reports Israel and the Palestinian militant group Hamas were nearing agreement on a U.S.-brokered ceasefire proposal after 21 months of war.

The Israeli official who was in Washington with Netanyahu said that if the two sides agree to the ceasefire proposal, Israel would use that time to offer a permanent truce requiring Hamas to disarm.

If Hamas refuses, "we'll proceed" with military operations in Gaza, the official said on condition of anonymity.

A Palestinian official said the talks in Qatar were in crisis and that issues under dispute, including whether Israel would continue to occupy parts of Gaza after a ceasefire, had yet to be resolved.

The two sides previously agreed a ceasefire in January but it did not lead to a deal on a permanent truce and Israel resumed its military assault in March, stopping all aid supplies into Gaza and telling civilians to leave the north of the tiny territory.

Israel's military campaign in Gaza has now killed more than 57,000 people, according to Palestinian health authorities. It has destroyed swathes of the territory and driven most Gazans from their homes.

The Hamas attack on Israeli border communities that triggered the war killed around 1,200 people and the militant group seized around 250 hostages according to Israeli tallies.