Weekly house view | Tariffs hiccup

Weekly house view | Tariffs hiccup

The CIO’s view of the week ahead.

The week in review

A US appeals court found last week that most of President Trump's tariffs are an overreach of his use of emergency powers, but agreed to leave them in place until mid-October while the White House pursues a further appeal. That appeal to the Supreme Court could yet take months, bringing uncertainty to markets. The S&P 500i dipped 0.1% last week (in USD). Tech underperformed after Nvidia results that showed a slowdown in growth. Fed Governor Waller continued to push for rate cuts, advocating a 25bps cut in September. Fed board member Cook refused to quit after Trump attempted to fire her. In Europe, French Prime Minister Bayrou called a vote of confidence for 8 September over his deficit-cutting budget plans, raising the prospect of a potential government collapse. The slow-brewing political crisis is keeping France’s borrowing costs elevated. They have been converging with those in Italy. The risk of a French sovereign rating downgrade has increased, with Fitch’s decision on 12 September being crucial. European equities underperformed their US counterparts, losing 2% on the week. UK banks tumbled after a think tank called for a new levy on lenders. In Italy, the government is seeking additional budget funds from domestic banks.

Quote of the week

“It is up to the political parties to rise to the occasion by finding ways of compromise and stability,” said French President Macron. “If they were to choose disorder, they would bear a heavy responsibility in the current
delicate geopolitical moment.”

Key data

US core PCE inflation came in line with expectations, rising 0.3% month on-month. This pushed the annual reading to 2.9% from 2.8%. Sales of US new homes exceeded forecasts in July as prices eased. China’s industrial profits have started to increase sequentially, though they are still in negative territory, going from a 4.3% year-on-year slump in June to a 1.5% drop in July. Japan’s Tokyo CPI inflation measures eased to 2.6% year-on-year for August from 2.9% in the previous month.

[i] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, S&P 500 Composite (net 12-month return in USD): 2020, 18.4%; 2021, 28.7%; 2022, -18.1%; 2023, 26.3%; 2024, 25%.

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