Fin-X Weekly 28th July 2025

This week will be extremely busy with a slew of quarterly results (ref table below) from key market participants in addition to a busy economic calendar with the US Federal Reserve’s interest rate decision scheduled for Wednesday.  

US and global equity indices again reached record highs, supported by strong earnings.

Japan’s share market also jumped on the announcement of a tariff breakthrough, although the deal remains non-binding and ambiguous. The comparatively favourable conditions angered American automakers.

The RBA remains on track to cut rates in August, though incoming data on inflation and updated forecasts will be critical in determining the pace of cuts.

Both the Federal Reserve and Bank of Japan are expected to keep rates on hold this week. Along with a busy week for earnings, US GDP figures, the ISM manufacturing survey, and the latest labour market data are also due out.

International equities continued their climb last week, with several American and global indices reaching record highs. In contrast, the Australian share market experienced choppier conditions and is not expected to follow Wall Street higher at the start of the week.

Gains in the United States were supported by a strong start to the June quarter earnings season and renewed enthusiasm for large-cap technology firms. Alphabet posted a notable +14% annual increase in revenue and a +22% rise in earnings per share, helping to lift sentiment across the sector. Around 80% of S&P 500 companies that have reported so far have beaten expectations for both earnings and revenue. However, overall annual earnings growth for the quarter remains moderate at +6.9%, according to figures compiled by Bloomberg. Despite the gains, US shares lag other regions so far in 2025 in Australian dollar terms.

In Japan, the TOPIX index rallied sharply mid-week, rising +3.2% (in JPY) on Wednesday following the announcement of a tariff agreement with the United States. However, the deal remains non-binding, and inconsistencies have emerged between the US and Japanese versions. The index advanced by +4.1% over the week as political uncertainty also weighed on sentiment, with the Prime Minister expected to resign following a recent poor showing in the upper house elections. The Bank of Japan is widely expected to leave interest rates unchanged at its meeting on Thursday.

Like an earlier deal with the UK, the Japanese deal includes a lower 15% tariff rate on cars than the 25% imposed on other imported components, sparking anger from American manufacturers and questions over the effectiveness of President Trump’s tariff strategy.

General Motors reported a -35% fall in earnings, in part due to a $1.1 billion tariff-related charge. German manufacturer Volkswagen also withdrew its guidance, citing tariff uncertainty, while Tesla announced a -12% drop in revenue and a -42% decline in operating income. The EV maker is also impacted by Chinese competition and customer reactions to Elon Musk’s political activities. The CEO warned investors that the company is likely facing “a few rough quarters” ahead.

Flash PMI surveys revealed more resilience in services than in manufacturing, with firms reporting higher input costs and continued caution regarding investment.

European new orders broadly stabilised after more than a year of contraction. The IFO survey also signalled gradual improvement.

The European Central Bank left interest rates unchanged, with the governing council divided on the pace of future cuts. Inflation is currently at the ECB’s 2% medium-term target, with incoming data broadly in line with previous expectations. The Eurozone economy has shown resilience, supported in part by earlier rate cuts, though the external environment remains “exceptionally uncertain” due to trade tensions and a stronger euro. European firms are still holding back on investment because of global uncertainties and higher export costs.

In Australia, activity indicators showed broad-based gains. Both the services and manufacturing sectors recorded a sharp rise in new orders, accompanied by stronger employment and reduced backlogs. However, services inflation accelerated, prompting firms to increase prices.

While the Reserve Bank of Australia is still expected to cut rates in August, Governor Bullock’s speech last week highlighted the central bank’s cautious approach. She noted that although inflation was moderating, recent data may not show as steep a decline as previously forecast. Upcoming data on consumer prices and retail sales will be closely watched to confirm the direction of travel. Economists expect the quarterly headline and core inflation measures to decline to +2.2% yoy and +2.7% yoy, respectively, when released on Wednesday.

The RBA is also monitoring labour market dynamics. She added that the rise in unemployment to 4.3% in June was consistent with the Bank’s expectations and seen as part of a normalisation in labour demand following a strong recovery period.

Australia’s foreign policy activity also drew attention. A new 50-year agreement with the UK, signed under the AUKUS security framework, aims to support local construction and operation of nuclear-powered submarines, following concerns over the delivery of US vessels.

Separately, Australia relaxed its long-standing import restrictions on US beef, marking a significant shift in access for US producers. While the government has emphasised that this decision was based on scientific evidence, it follows persistent lobbying by US trade representatives.

In the United States, the Federal Reserve is expected to keep policy unchanged this week, despite dovish commentary from Governor Waller and political pressure for rate cuts.

Just after the Fed decision, Q2 GDP will be released and is expected to grow at a +2.4% annualised pace. Due a day later, headline and core PCE inflation are expected to have ticked up to +2.5% and +2.7%, respectively, in June. July unemployment is expected to rise by +0.1% to 4.2% when released on Friday, along with the ISM Manufacturing survey.

There will also be another 161 S&P 500 earnings announcements, as well as the official Chinese PMIs and several European GDP and inflation updates.

US Earnings Week

Monday 28th – Waste Management (WM), Nucor (NUE)

Tuesday 29th – Procter & Gamble (PG), United Health (UNH), Boeing (BA), Paypal (PYPL)

Wednesday 30th - Microsoft (MSFT), Meta Platforms (META), Qualcomm (QCOM), eBay (EBAY)

Thursday 1st – Apple (AAPL), Amazon (AMZN), Mastercard (MA)

Friday 2nd – Exxon Mobil (XOM), Chevron (CVX)

Factset earnings insight

34% of S&P 500 companies having reported second quarter results with earnings surprises (80%) above average, however the level of earnings surprises is below average.

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