Analyst Weekly, July 28, 2025
Markets simply acquired a breather: the US and EU inked a last-minute commerce deal that dodges a tariff conflict and unlocks $1.3 trillion in cross-border commitments.In the meantime, July’s rotation rally picked up steam, with homebuilders, supplies, and mid-caps breaking out, and now all eyes are on Large Tech, Large Oil, and Large Pharma as a stacked earnings week kicks off.
The US-EU Commerce Pact: 15% Tariff, $1.3 Trillion in Commitments
The US and EU have reached a high-stakes commerce settlement that averts a dangerous transatlantic tariff escalation simply days earlier than a crucial August 1 deadline.
Right here’s what we all know:
Key Deal Particulars
Tariff Avoidance: The EU avoids a possible 30–50% tariff hike by accepting a 15% blanket tariff on most exports to the US, together with cars.
US Features:
$750 billion in EU vitality purchases
$600 billion in EU investments within the US
Zero-tariff entry to pick EU markets for American items
Giant navy tools gross sales to Europe
Sectoral Exemptions & Ambiguities: Prescribed drugs and metals (metal, aluminum) stay unsure:
The US says they’re excluded.
The EU says they’re included within the 15% fee, with a quota system being developed for metals.
Quotas in Play: Metal and aluminum could fall beneath volume-based tariff quotas, however phrases are nonetheless evolving.
Stability End result: Either side emphasize this deal avoids a probably market-disrupting commerce conflict over $1.7 trillion in bilateral commerce.
Our tackle it:
In our view, the brand new US-EU commerce settlement is a political and financial win for Washington, and a practical retreat by Brussels. Whereas the 15% tariff on most EU exports is decrease than the threatened 30%, it’s nonetheless a pointy bounce from pre-2025 ranges when many items confronted tariffs beneath 3%, and should add to inflationary pressures within the months forward relying on whether or not firms handle to pass-through price will increase to customers (with the impression on inflation figures additionally depending on whether or not charges keep at restrictive ranges). That mentioned, markets will welcome the lowered uncertainty and the avoidance of an all-out commerce conflict. The actual winners listed here are US sectors: vitality, protection, and infrastructure are set to profit from the EU’s pledges to purchase $750 billion in American vitality and make investments $600 billion into the US economic system. However we nonetheless don’t know whether or not sectors corresponding to metal, autos, chemical compounds could face tighter quotas or future exemptions. Till these particulars emerge, the long-term impression for these sectors stays unsure and should create divergence in sectoral efficiency in Europe.
What to Watch This Week – Earnings Season
Large Tech:
Microsoft (July 30)
What to look at: AI Monetization: Income from Copilot (Workplace 365 AI) and Azure AI workloads. Azure Development Fee: Particularly vs. AWS and Google Cloud.Working Margins: Affected by rising capex and AI infrastructure investments.Steerage: FY26 income and margin outlook tied to enterprise IT budgets.
Meta (July 30)
What to look at: AI Spending and Capex: Meta has ramped AI infrastructure spend; updates on returns are key. Promoting Development: Developments in core advert income, particularly Instagram and Reels. Actuality Labs Losses: Buyers proceed to watch the dimensions of metaverse investments. Person Engagement: Month-to-month and each day energetic consumer development in key areas.
What to look at: AWS Development and Margins: Indicators of reacceleration or margin compression. Promoting Income: Quickest-growing phase; indicators client demand. Capex Steerage: Particularly AI infrastructure spend and logistics investments.
What to look at: iPhone Gross sales in China: Notably post-tariff numbers and regulatory strain impression. AI Technique: Whether or not Apple is catching up in AI/edge computing. Providers Income: Apple Music, App Retailer, iCloud, i.e. margin-rich segments. Gross Margins: Look ahead to any impression from element prices and FX.
Vitality:
Exxon (Aug 1) and Chevron (Aug 1)
What to look at: manufacturing volumes & combine, capital return methods, whether or not they’re effectively positioned to seize upside from EU-US commerce deal and EU’s dedication to purchase US vitality.
Client & healthcare resilience:
Reviews from Mastercard (July 31), Visa (29 July), P&G (29 July), and healthcare names corresponding to AstraZeneca (29 July), CVS (31 July), AbbVie (31 July), will assist traders assess demand and margin strain in gentle of tariffs and inflation.
July Reveals Indicators of Rotation Returning
One of many clearest themes in July has been the return of a rotational market, the place management is shifting throughout sectors moderately than being concentrated in only a few mega-cap names. A standout instance: homebuilders, which have proven robust momentum, particularly after names like D.R. Horton ($DHI) broke above their 200-day shifting averages in a serious means. These technical breakouts counsel additional upside, notably on any short-term pullbacks.
This energy in homebuilders is a part of a broader enchancment inside Client Discretionary, which has been lagging however is now catching up. Whereas some traders have fearful in regards to the market being too slim, July’s bounce in beforehand underperforming sectors helps ease these considerations. Notably, the S&P 500 Equal Weight is near reaching new cycle peaks.
Supplies are additionally taking part within the rotation, with the sector displaying its strongest technical breadth (shares above their 200-day) in practically a 12 months. There are early indicators that relative efficiency in supplies is starting to show up, yet one more optimistic improvement.
SPDR S&P Homebuilders ETF ($XHB)
The XHB rose by 5% final week, closing at 106.29. It additionally marked the fourth consecutive each day shut above the intently watched 200-day shifting common, providing hope for a possible long-term pattern reversal. A robust resistance zone lies across the 112 stage, as this space noticed a number of touchpoints all through 2024 and early 2025. On the draw back, the 100 stage serves as short-term help, the place the ETF fashioned a backside final week. Just under that stage runs the 50-day shifting common, which additional reinforces the help space.
“Made for Germany”: A Purchase Sign for Mid and Small Caps?
An intense race for funding and site competitiveness has damaged out amongst international locations such because the USA, China, and EU member states. The launch of the “Made for Germany” initiative is a direct response. It was based by 61 firms with the purpose of sustainably strengthening Germany as an funding location. The initiative goals to finish the financial stagnation that has now lasted for 3 years. Alongside German companies corresponding to BASF, SAP, and Volkswagen, US giants like Nvidia, BlackRock, and Blackstone are additionally concerned.
Nevertheless, one crucial level stays: the whole funding quantity is a mixture of already deliberate and new capital commitments. The precise share of recent investments remains to be unclear. Reviews counsel {that a} three-digit billion euro quantity in contemporary capital is on the desk. For context: 100 billion euros symbolize round 2.3 p.c of Germany’s GDP. If this capital is actually extra and used effectively, it will be an necessary step, however additional measures would nonetheless be needed.
MDAX as a sentiment indicator: It additionally stays unsure which sectors, areas, or tasks will particularly profit from the “Made for Germany” investments. To this point, there’s a lack of transparency and readability round implementation. Many firms within the MDAX and SDAX are extremely depending on the German home economic system. An enchancment in Germany’s financial framework situations may open up above-average return potential for these shares.
Over the previous three years, the MDAX has gained simply 16%, and on a five-year foundation, the rise is just 15 p.c. The index presently trades round 14% under its all-time excessive. Those that don’t spend money on the whole index ought to remember that not each inventory is prone to profit equally. Buyers needs to be selective and deal with high quality firms with robust steadiness sheets, innovation capabilities, and stable market positioning.
Bottomline: If giant companies stay dedicated to Germany, mid-sized companies, suppliers, and regional ecosystems alongside the worth chain can even profit. Nevertheless, with out complete structural reforms, there’s a danger that the invested capital will fail to ship its supposed impression.
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