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Oil, tech and US tariffs weigh on markets

Stock markets in the US and Europe declined on Thursday as higher oil prices and post-earnings losses in Alphabet and Tesla weakened sentiment. The European Central Bank (ECB) held rates unchanged as it assessed the inflationary effects of the Middle East conflict. Friday starts off with equity markets in Asia also taking a hit from newly announced US tariffs, oil price volatility and pressure on tech shares. 

  • Data
  • Autore Alessandro Fezzi, Content & Publications
  • Tempo di lettura 5 minuto

Oil
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Asian equity markets fell on Friday after new US import tariffs affecting 60 trading partners took effect, adding pressure to export-oriented economies. Japan’s Nikkei 225 dropped about 3%, South Korea’s KOSPI at times lost nearly 6%, and markets in Hong Kong, mainland China, Australia and Singapore also declined. Brent crude remained above USD 100 per barrel amid disruption risks in the Middle East, heightening inflation concerns, while weak US technology earnings weighed on sentiment. In Japan, core consumer inflation rose to 1.6% year on year in June, its first increase since March, according to data released on Friday. Headline inflation accelerated to 1.7% from 1.5% in May, while the measure excluding fresh food and energy eased to 1.7%, its lowest level since August 2022. Government subsidies limited the annual fall in energy prices to 0.1%, but higher oil costs and yen weakness are increasing companies’ import expenses, with producer-price inflation reaching 7.1%. The figures may heighten pressure on the Bank of Japan to raise interest rates sooner if fuel prices and the weaker yen sustain broader price pressures.

Brent crude surpasses USD 100

Brent crude rose more than 6% to USD 100.05 per barrel on Thursday, its first move above USD 100 since May, after reports that tankers off Saudi Arabia had been attacked. US West Texas Intermediate crude gained more than 5%, leaving Brent and WTI on track for monthly increases of about 36% and 30%, respectively. Yemen’s Houthi movement claimed responsibility for strikes on two Saudi tankers, although the incidents could not be independently verified. Tensions also intensified after US President Donald Trump threatened strikes on Iranian infrastructure in response to attacks on shipping through the Strait of Hormuz.

US stocks fall on AI and oil fears

On the New York Stock Exchange equities declined on Thursday as concerns over rising AI investment and oil prices above USD 100 per barrel renewed inflation and interest-rate fears. The Nasdaq 100 fell 1.9% to 28,454.81 points, while the S&P 500 lost 1.2% to 7408.30 points and the Dow Jones Industrial Average fell 1.0% to 51,711.65 points. Google parent Alphabet dropped 7.1% despite stronger-than-expected revenue after announcing further AI infrastructure spending, while electric vehicle maker Tesla plunged 14.5% as heavy investment reduced profits. The Magnificent Seven index fell 4.8%, erasing almost USD 800 billion in market value.

Initial US jobless claims fell by 22,000 to 187,000 last week, data released on Thursday showed, undershooting economists’ expectations. The prior week’s figure was revised up by 1000 to 209,000 claims. The still-low level of applications points to a resilient labour market, an important consideration for Federal Reserve policy. The Fed held its target range at 3.50% to 3.75% in June and will announce its next rate decision next week.

ECB holds rates amid inflation risks

The European Central Bank kept its deposit rate at 2.25% on Thursday, pausing after its first increase in almost three years in June. Euro-area inflation slowed to 2.8% year-on-year in June from 3.2% in May, although the conflict between the US and Iran has pushed Brent crude towards USD 100 per barrel and renewed pressure on prices. The ECB said the energy shock’s full inflationary effects remain uncertain, while its June projections put average euro-area inflation at 3% this year. Economists expect the central bank to consider another rate increase in September once updated inflation and growth forecasts are available.

Lagarde rejects early ECB departure

ECB President Christine Lagarde said on Thursday that she will remain in office until her term ends in October 2027, dismissing renewed speculation about an earlier departure. Lagarde had indicated earlier this month that she could consider leaving ahead of France’s presidential election in April 2027, arguing that the campaign required a European voice. Reports have suggested French President Emmanuel Macron may favour an early exit so he can influence the choice of her successor before his final term ends.

Euro-area consumer confidence improves

Euro-area consumer confidence rose by 1.7 points to minus 15.9 in July, exceeding economists’ expectations, according to data released by the European Commission on Thursday. The indicator has recovered for three consecutive months after the Iran war weakened sentiment in March and April. Nevertheless, confidence remains below its long-term average and has not yet regained the ground lost since February.

European equities fell on Thursday on higher oil prices, intensifying inflation concerns and fears of further interest-rate increases. The EuroStoxx 50 dropped 1.7% to 6210.17 points, while Switzerland’s SMI fell 0.7%. Nestlé fell 8% after lower profitability overshadowed stronger first-half organic growth, while Roche gained about 5% after the Swiss drugmaker reported higher quarterly profit and confirmed its annual targets.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from American Express, Exxon Mobil, NextEra Energy, SGS, Verizon, and Volkswagen.

Economic data in focus: UK retail sales (08:00), German GfK Consumer Climate (09:00), French Purchasing Managers’ Index (09:15), German Purchasing Managers’ Index (09:30), euro-area Purchasing Managers’ Index (10:00), UK Purchasing Managers’ Index (10:30), US building permits (14:00), US Purchasing Managers’ Index (15:45) and US new residential sales (16:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.