Are European Stocks Ready To Rise?
Chart of the Week:
US-Russia, US-Ukraine Talks Hint at Breakthrough, but Truce Still Elusive
Trump met Putin in Alaska on Aug 15 and held talks with Ukraine’s president and seven European leaders on Aug 18. While no ceasefire was reached, the US and Europe will start planning a security framework for Ukraine and prepare for a future Zelensky-Putin summit.
Market Recap 1:
Fed Minutes and Chip Tariff Risk Weigh on Growth, Cyclicals
Trump said chip tariffs will be set within two weeks, possibly as high as 200–300%, dragging semiconductors and broader US equities lower. Meanwhile, despite no concrete deal from recent US-Russia and US-Ukraine talks, progress on the conflict eased geopolitical risk premiums, supporting most European markets.
Market Recap 2:
Rate-Cut Bets Ease; Bonds Dip, Dollar Strengthens, Oil Rebounds
Fed Governor Schmid said rate cuts are not urgent, noting key inflation data remain ahead of the September meeting. His hawkish stance, along with July Fed minutes showing most officials cautious on cuts, pushed down rate-cut expectations and left Treasuries slightly weaker ahead of Jackson Hole.
What’s Trending:
China, HK Equities Hold Highs as Liquidity Boosts Risk Appetite; Wealth Effect May Lift Consumption
The Hang Seng Index is hovering near 25,000, up nearly 27% YTD. China and HK equities have performed strongly, with the SSE Composite—led by financials and staples—surpassing pre-Covid levels to a decade high. De-dollarization, easing trade tensions, and accommodative policies have underpinned the rally.
In Focus 1:
Germany to Benefit as Auto Tariff Cut to 15% and Fiscal Expansion Lifts Demand
The US and EU reached a preliminary trade deal, lowering tariffs to 15%—higher than the UK’s 10% but the lowest among the US’s top 10 trade-deficit partners. Official documents confirmed coverage of semiconductors, autos, and pharmaceuticals, easing EU trade-policy uncertainty and improving European firms’ global competitiveness.
In Focus 2:
BoE Retains Room to Cut; UK’s 10% Tariff Advantage Seen Supporting Economy and Equities
Since August 2024, the BoE has cut rates by 125 bps, maintaining a quarterly pace. While core inflation ticked higher recently, slowing average wage growth suggests disinflation ahead, giving the BoE more easing room than markets currently expect.
