With tariffs set to take effect on Thursday, 1 August, markets continued to trend slightly upwards in a week ruled by the same themes that have defined US President Donald Trump’s presidency to date: noisy tariff negotiations, a weakening dollar, and increased pressure on the US Federal Reserve to lower rates and danger warnings to its independence.
For the week, the S&P 500 and Nasdaq were up 1.06%% and 0.78%% respectively at the time of writing, both notching up fresh record highs. The indices have made remarkable recoveries from the lows they recorded when Trump announced his “Liberation Day” tariffs back in April, with the S&P up 27.7%% and the Nasdaq up 37.9% since then.
A trade deal with Japan and hopes of an agreement with the EU before high tariffs are due to kick in on 1 August gave investor sentiment a lift this week. This was despite the new agreements suggesting that Trump is aiming to make 15% rather than 10% the new minimum rate for US tariffs on many imports.
Meanwhile, second-quarter earnings started to roll in throughout the week. A third of the way through the second quarter season, about 83% of US companies have beaten earnings estimates, pointing to a resilient and adaptable corporate sector. Analysts on average expect S&P 500 companies to report a 7.5% increase in earnings for the second quarter, according to a Reuters Report.
Recent earnings from banks such as JPMorgan, Wells Fargo and Bank of America, powered by good performance from investment banking and consumer lending divisions, show that the American consumer is still in good health – for now. Many consumer discretionary stocks have also exceeded earnings expectations.
The tech sector was once again the biggest mover and shaker, with investors showing continued appetite for AI-themed stocks. Alphabet and Tesla reported second-quarter results. Alphabet beat expectations while Tesla disappointed with weaker European sales and downbeat forecasts for upcoming quarters.
Among the Magnificent Seven, Nvidia was more or less flat for the week, taking a breather from a rally that drove its stock above a $4 trillion valuation. Microsoft also moved sideways, while Amazon, Alphabet, Apple and Meta notched up strong gains for the week. Tesla was down 7.4% for the week.
This might be an early sign of a divergence within the “Magnificent Seven” as earnings and fundamentals assert their influence over hype. Amazon, Apple, Meta and Microsoft are due to report earnings next week, which may provide more clarity on how sustainable the hype around AI is.
While the overall result has been positive, there are some sectors experiencing tariff-related pain. Automakers and toymakers with cross-border supply chains are reporting margin pressure. General Motors said tariffs shaved $1.1 billion off its second-quarter operating income, while Stellantis, a multinational automotive manufacturing company, also flagged a $350 million tariff hit.
On the currency front, the US dollar has been under pressure for most of the week, slipping to a two-week low before stabilising. In the first six months of Trump’s presidency, the US dollar has shown its worst start to the year in five decades. The weaker greenback might be helping to mask some softness in domestic demand and potential pressures on profit margins as inflation increases over the coming months. This is a factor that is worth watching.
Trump’s visible irritation at Fed Chairman Jerome Powell’s cautious approach to lowering interest rates and fears that he may try to fire Powell are undermining investor confidence in Fed independence, but current dollar weakness has no doubt helped to lift second-quarter earnings and may be a continued tailwind for exporters’ earnings in quarters to come.
In short, this week felt like more of the same noise about AI, tariffs, the dollar and Trump. Markets have become complacent about the clamour. Wall Street’s “fear gauge”, the CBOE Volatility Index, dipped to its lowest level in over five months. Should tariff uncertainty abate, we might be moving into an environment where fundamentals start to matter again.
“The market is consolidating recent gains and is in a bit of a holding pattern with some huge catalysts over the next week or two, including the August 1 tariff deadline and a lot of important Magnificent Seven earnings.”
– Ross Mayfield, an investment strategy analyst at Baird
Global News
- On Tuesday, Trump announced a trade agreement with Japan that will impose 15% tariffs on imports, including automobiles, while establishing a $550 billion fund for domestic investment. The deal, reached after a final 75-minute Oval Office meeting with Japanese negotiators, spares Japan from a threatened 25% tariff set to take effect next week.
- This agreement with the world’s fourth-largest economy, covering commitments for US-bound investment and loans, is the most significant of several deals secured by Trump so far. It increases pressure on China and the EU, both facing key August deadlines. Economists see the deal as a potential model for other US trade negotiations, with many believing the global economy can withstand a 15% tariff level. Trump has stated he won’t go below that threshold as he sets reciprocal tariffs ahead of the 1 August deadline. Despite pauses, exemptions, and reductions, the new tariffs mark the most substantial protectionist shift by the US in nearly a century.
- The number of shipping containers carrying US imports fell for a second consecutive month, suggesting one of the steepest year-on-year reversals on record, according to a private gauge. Inbound container volume dropped 7.9% in June and 6.6% in May, driven by Trump’s tariffs, veteran analyst John McCown reported, citing data from the 10 largest US ports. These declines erased a nearly 10% spike in April from inventory front-loading, leaving Q2 volumes down 1.8% year-on-year. Yet, US customs revenue topped $100 billion for the first time, fuelled by the higher tariffs.
- Treasury Secretary Scott Bessent on Tuesday voiced support for Powell, despite ongoing criticism from Trump administration officials. In an interview with Fox Business, Bessent said Powell should be allowed to serve out his term until May next year or step down voluntarily. Powell has faced months of pressure from Trump for holding interest rates steady, resisting further cuts due to inflation concerns linked to tariff hikes. Yesterday, during a visit to the Fed to tour a construction site he had previously criticised for its $2.5 billion cost, Trump downplayed tensions with Powell, saying there’s no need to fire him. He described the project as “very luxurious” and acknowledged that heightened security adds to the expense.
- Trump’s newly signed tax and spending law is projected to increase US deficits by $3.4 trillion over the next decade and leave millions without health care coverage, according to a new estimate from the nonpartisan Congressional Budget Office. Released on Monday, the analysis shows a $4.5 trillion drop in revenue and a $1.1 trillion reduction in spending through to 2034, compared to a current-law baseline. The estimate does not factor in potential dynamic effects, such as changes to economic growth or interest rates. Trump signed the “One Big Beautiful Bill” into law on 4 July after prolonged negotiations.
- US existing home sales dropped to a nine-month low in June as higher mortgage rates and economic uncertainty keep potential buyers on the sidelines, pointing to a deepening housing market slump. The report from the National Association of Realtors on Wednesday added to weak single-family homebuilding last month in suggesting that residential investment, which includes homebuilding and home sales through broker commissions, likely remained a drag on the economy in the second quarter. The housing market is the segment of the economy most sensitive to interest rates and has a large impact on GDP.
- On Wednesday, the Trump administration released its AI action plan, a set of initiatives and policy proposals aimed at securing US dominance in a technology seen as transformative as the internet. The White House’s approach emphasises limited regulation to encourage innovation, with a notable exception focused on removing perceived political “bias” in AI, aligning with “Make America Great Again” (MAGA) priorities. The plan is built on three main pillars: accelerating AI development, expanding domestic AI infrastructure, and establishing American hardware and software as the global standard for AI innovation.
- European Central Bank President Christine Lagarde said yesterday that the ECB is in “wait-and-see” mode after holding interest rates steady, offering no forward guidance due to ongoing uncertainty around tariffs. While the ECB noted the economy’s resilience, it described the outlook as “exceptionally uncertain,” particularly given trade tensions. Lagarde said eurozone growth is largely meeting or slightly exceeding expectations, though risks remain skewed to the downside. The decision to leave rates unchanged aligned with the consensus among analysts surveyed by Bloomberg.
- Since the start of the year, the euro has gained more than 11% against the US dollar, reaching a four-year high of $1.18, as investors grow increasingly concerned about the dollar’s safety and stability. The dollar has weakened significantly, largely due to Trump’s tariff policies. In response, many investors have shifted to the euro, which has also appreciated against other major currencies during this time, suggesting its strength reflects more than just the dollar’s decline. Lagarde has previously noted that this could be a pivotal moment for the euro to enhance its global standing.
- Britain and India signed a free-trade agreement yesterday during a visit by Indian Prime Minister Narendra Modi, sealing a deal to cut tariffs on goods from textiles to whisky and cars and allow more market access for businesses. The two countries concluded talks on the trade pact in May after three years of stop-start negotiations, with both sides hastening efforts to clinch a deal in the shadow of tariff turmoil unleashed by Trump. The agreement between the world’s fifth and sixth-largest economies aims to increase bilateral trade by a further $34.41 billion by 2040.
- Surging demand from AI and data centres has driven electricity costs to record highs on PJM Interconnection, the largest US power grid. In its latest capacity auction, prices rose 22% to $329.17 per megawatt-day, triggering $16.1 billion in payments to secure future supply. The spike raises concerns about whether current infrastructure can keep pace, with industry leaders calling for urgent investment in new power generation and transmission. The result underscores how emerging technologies are reshaping US energy markets.
- General Motors was the latest US company to disclose how Trump’s levies are raising costs, with the automaker saying on Tuesday that the duties dented profits by more than $1 billion as it chose to absorb the blow. General Motors did not reveal a plan for a near-term fix to return to pre-tariff profit levels. Its absorption of costs goes some way towards explaining why car prices were static in recent inflation data. Increases for other imported goods like toys and appliances showed that costs are being passed on to consumers. Meanwhile, import prices excluding fuel were up notably in June, suggesting foreign companies aren’t offering US firms lower prices, challenging the president’s claims that other countries pay the rate.
- Volvo shares surged more than 10%, while Germany’s Porsche, BMW, Mercedes-Benz, and Volkswagen rose between 4% and 7% on Tuesday amid reports that the auto tariff on Japanese imports would be reduced from 25% to 15%. However, the US trade group representing General Motors, Ford, and Stellantis criticised the agreement, claiming it gives Japanese imports an unfair edge over vehicles produced in Mexico and Canada by US automakers using American parts. Currently, most imported vehicles, including US-branded cars assembled overseas, face a 25% base tariff.
- Alphabet said on Wednesday that demand for AI products boosted quarterly sales and now requires an extreme increase in capital spending, heightening pressure on the company to justify the cost of keeping up in the AI race. Google’s parent company said 2025 capital expenditures will be $85 billion, or $10 billion greater than an earlier forecast. Although Alphabet beat expectations for second-quarter revenue and profit, its stock initially sank in after-hours trading, then rebounded after CEO Sundar Pichai explained that the investments are necessary to keep up with customer needs.
- Elon Musk warned that Tesla faces a tough year ahead, compounding concerns after the company posted one of its weakest quarters in a decade. He cited the looming loss of US EV incentives and delays in rolling out driverless technology, suggesting it may be late 2026 before Tesla sees “compelling” financials again. The company’s adjusted earnings missed already-lowered Wall Street forecasts, while revenue dropped 12%, its steepest decline in at least 10 years. Tesla shares fell as much as 5.3% in after-hours trading Wednesday and are down 18% for the year, despite a partial recovery from March and April lows.
- Luxury brand Kering is expected to post another quarterly sales decline, heightening concerns about a prolonged slowdown in the $400 billion luxury market, especially as US import tariffs loom. Yesterday, LVMH reported weaker sales, with consumers pulling back on high-end purchases like Louis Vuitton bags and Dior jackets, signs that the luxury giant remains mired in a post-pandemic slump. Revenue from its fashion and leather goods division fell 9% organically in the second quarter, missing analysts’ forecasts of a 7.8% drop. LVMH shares have dropped by about 30% in the past 12 months
- AstraZeneca plans to spend $50 billion to expand manufacturing and research capabilities in the US by 2030, it said on Monday, the latest big investment by a pharmaceutical company reacting to Trump’s tariff policy. It will also upgrade the Anglo-Swedish drugmaker’s US clinical trial supply network and support ongoing investment in novel medicines. Its expansion supports its ambition to reach $80 billion in annual revenue by 2030, with half coming from the US. The US accounted for more than 40% of AstraZeneca’s annual revenue last year.
- As at Thursday’s close the S&P 500 was 1.06% up for the week.
Local News
- South Africa’s Trade, Industry, and Competition Minister Parks Tau confirmed in his budget vote yesterday that South Africa is actively negotiating a trade deal with the US, having submitted a framework proposal in May and signed a “condition precedent” agreement with the US Trade Representative to support finalisation. The effort aims to retain duty-free access under the African Growth and Opportunity Act (AGOA) and avoid steep tariffs set for 1 August. Tau stressed the importance of collaboration with business, labour, and civil society, and noted ongoing engagement with China and Japan to support South Africa’s industrialisation and economic diversification.
- A research think-tank warns South Africa that cosying up to controversial Iran threatens the country’s stability and diplomatic standing in the world. The Middle East Africa Research Institute (MEARI) said its recent report, titled “Ties to Tehran: South Africa’s Democracy and its Relationship with Iran,” was a critical examination of South Africa’s “enduring and often controversial relationship with Iran”. It said that South Africa continues to partner with regimes that undermine its human rights and democratic values. MEARI is a research think-tank focused on analysing complex dynamics between the Middle East and Africa.
- US Congressman Ronny Jackson has introduced a Bill, to be called the US-South Africa Bilateral Relations Review Act of 2025, enabling Trump to impose sanctions on “corrupt South African government officials who choose to support America’s adversaries like China, Russia, and Iran”. The Bill, which was passed by the US House of Representatives Foreign Affairs Committee this week, will mandate a full review of the relationship between the US and South Africa because of South Africa’s US-alleged racial discrimination. The Full House has yet to vote on the Bill, and it is in recess until September.
- The DA has reversed its decision to withhold support for the Appropriations Bill following President Cyril Ramaphosa’s dismissal of Higher Education Minister Nobuhle Nkabane. The party’s leadership held an emergency meeting on Tuesday and resolved to back the bill, which was passed in Parliament on Wednesday. DA leader John Steenhuisen said the decision was made in the national interest after Nkabane’s removal. The party had previously pledged to oppose budget allocations for the Higher Education and Human Settlements Ministries, citing corruption allegations involving their political heads.
- The South African Reserve Bank is drafting a law to overhaul the national payments system, aiming for the most significant reform in a generation and a potential 0.5% GDP boost. As part of its 2030 strategy, the Bank sees payments modernisation as key to reducing the R30 billion annual cash-management cost and expanding access for underserved groups. Reforms would include regulatory changes, such as allowing non-banks to issue e-money and accept payments.
- A wave of cyber-attacks targeting Microsoft’s SharePoint document management system has affected several entities in South Africa, as well as South Africa’s National Treasury, putting government-specific and other sensitive data at risk. The National Treasury confirmed it had identified malware on its Infrastructure Reporting Model website, an online system that tracks how public funds are spent on building and maintaining infrastructure, while the South African Reserve Bank said there has been no breach of any of its systems, according to a spokesman.
- Economists from Old Mutual, Investec, and Standard Bank see room for a rate cut at next week’s policy meeting, while Goldman Sachs and Investec forecast up to three more cuts this year. BNP Paribas, however, expects a more gradual approach.
- Economist Dawie Roodt warned on Wednesday that South Africa has crossed the tipping point of the Laffer Curve for both personal and corporate income taxes, meaning that further tax increases are now likely to reduce revenue because individuals and companies will seek ways to minimise their tax burden. He argues that high tax rates are already suppressing investment and growth, ultimately shrinking the tax base and undermining future government revenue and economic prospects.
- South Africa’s benchmark stock index, the JSE, crossed the psychological level of 100,000 for the first time in its 137-year history on Wednesday due to optimism that a crucial budget vote would get support from key parties in the governing coalition. The index has advanced about 19% this year, hitting multiple record highs and outperforming a gauge of emerging stocks. However, the gains have been driven by platinum-group metal miners including Sibanye Stillwater and Northam Platinum Holdings, and gold shares such as Gold Fields, whereas many ‘SA Inc’ sectors have experienced negative performance. Gold has also been rallying, helping companies such as Gold Fields. (Refer to last week’s article entitled Decoding a flying JSE versus a grounded South African economy, which dissects this year’s sectoral performances of the JSE).
- The JSE is considering following the example of the world’s largest stock exchanges in pursuing 24-hour trading hours. This comes as the London Stock Exchange, Nasdaq and New York Stock Exchange have either announced or are said to be considering extending their trading hours to 24 hours. A quarter of the companies on the JSE are dual-listed. If implemented, round-the-clock trading could expand access for both retail and institutional investors, allowing South Africans and global investors to engage with global shifts in real time.
- Canal+ received South African anti-trust approval to buy MultiChoice, which will clear the way to make it the largest pay-TV and streaming business on the continent. The deal got the go-ahead from the anti-trust watchdog this week, enabling a transaction that values MultiChoice at about R52.7 billion. Canal+ has been buying up stock in the market since announcing the deal in 2024 and will now purchase the rest from shareholders. The parties are on track to complete the offer before the so-called long-stop date of 8 October, they said in a statement on Wednesday.
- Visa has opened its first data centre in Africa as part of a R1 billion investment over the next three years in South Africa. The payments giant said yesterday that this move represents a significant expansion of its global processing network, VisaNet, which powers more than 100 billion transactions annually across 200 countries and territories. The payment giant says local infrastructure investment will “play a vital role in advancing South Africa’s dynamic digital economy by enabling the core technologies that power secure, fast and reliable payments”.
- Fashion retailer Mr Price grew sales in the first quarter of its new financial year, gaining market share despite a weaker end to the period. The group reported that retail sales increased 6.3% in the quarter ended 28 June, while comparable store sales grew by 3%. Market share gains of 10bps were recorded during the period as the group outperformed the total comparable market’s retail sales growth, according to the Retailers’ Liaison Committee. It gained more than R300 million in market share from competitors over the last 12 months, highlighting the effectiveness of its differentiated fashion-value offering, the group said.
- As at the time of writing, the rand was 0.1% weaker against the dollar, and the ALSI was 0.48% up for the week.
Sources: Dynasty, Bloomberg, BusinessLIVE, CNN, Business Report, Reuters, ITWeb, IOL, Daily Investor, NYT, WSJ, etc.
