Whispers of Trump ousting Fed Chair Jerome Powell have investors worried. This comes at a time when uncertainty over tariffs rattles markets again, with the EU poised to rejig global trade. Interestingly, Levi’s is strutting confidently past the tariff chaos.
In other sector news, disruption – legit and illegal – is taking a bite out of established businesses, with stablecoins eating into the transaction volumes of Visa and Mastercard in the financial services sector, while modern counterfeiters are eating into the luxury handbag market.
Powell power play
A Deutsche Bank AG strategist said President Trump’s potential dismissal of Federal Reserve Chair Jerome Powell is a major and underpriced risk. Quoted in a Bloomberg report, the strategist, George Saravelos, said if Trump were to force Powell out, investors would likely interpret such an event as a direct affront to Fed independence, and the consequences would reverberate far beyond the US market.
Payment denied
The financial services sector took multiple hits after JP Morgan (JPM-NASQ) announced that fintech platforms like PayPal (PYPL-NASQ), will now be charged fees to access customer bank account info. Data that shows stablecoins are now facilitating $800 billion in digital transactions each month also poses a threat to the likes of Visa (V-NASQ) and Mastercard (MA-NASQ), which fell -2.23% and -2.37% respectively on the news.
Tariff fade for Levi
Levi Strauss & Co (LEVI-NASQ) kicked over +11% following a boost to the company’s financial year guidance. The business only imports roughly 5% of goods from Vietnam, which is far less than most competitors, at around 30%, which means it is better placed to deal with the tariff threat.
Earnings anticipation
With the US earnings season upon us, the bar is set really low. The S&P 500 (VOO-NASQ) is trading near a record high, even as earnings forecasts wane and companies navigate President Trump’s trade policies. However, lower estimates could be easier for companies to beat, which could provide a further boost.
EU bulls
UBS strategists are bullish on Europe, predicting that corporate earnings among European companies will likely improve meaningfully from next year, driven by sectors linked to the economic cycle.
Uniting against tariffs
After President Trump sent letters to trading partners, including the EU, declaring tariff rates and suggesting they could be mitigated or increased based on their responses, the European Commission has extended the suspension of trade countermeasures against the US until Aug. 1 to allow for further talks. However, Bloomberg reports that the EU is preparing to step up its engagement with other countries hit by Trump’s tariffs, including potential coordination with nations, such as Canada and Japan.
Coal rally
Coal experienced a sector-wide price rally after Beijing called for tighter control against overcapacity and price wars in metallurgical coal across a range of industries. Bloomberg reported that thermal coal prices have also risen on a summer surge in power demand in China. Peak power loads in Guangdong, Jiangsu, Anhui, Shandong, Henan, Hubei have hit historical highs on summer heatwaves as residents crank up their ACs.
Shock announcement
South32 (S32-JSE) shares dropped more than -5% after the miner flagged it expects the Mozal aluminium smelter in Mozambique will incur impairment costs due to rising electricity bills.
Towering Tencent
The outlook for Naspers (NPN-JSE) and Prosus (PRX-JSE)-owned Tencent is improving as investments in AI drive company growth, with revenue and earnings expected to reach all-time highs over the next two years, especially as China-related regulatory risk fades. Tencent’s financial flexibility is also considerable, with significant generation of free cash flow, with $66 billion in cash and $138 billion of portfolio investments (listed and unlisted) at the end of March.
Luxurious losses
Counterfeiters have perfected the knockoff handbag, and it is disrupting the economics of the luxury industry, according to a report in the Wall Street Journal. People in the second-hand luxury business first noticed a new strain of counterfeits around five years ago. Some of the super-fake handbags were so good that they couldn’t be spotted with the naked eye. A new generation of “super-fakes” look as good as the real thing and cost anywhere from $500 to $5,000. Counterfeiters take orders through encrypted services, such as WhatsApp or Telegram, give real-time customer service and deliver the goods straight to the customer’s door in a branded box. There are early signs that a cooling attitude among young shoppers toward authentic luxury is hitting the industry’s top line. Last year, Gen Z shoppers spent roughly $5 billion less on luxury brands than they did in 2023, data from consulting firm Bain & Co. shows.
Sector focus: Copper
Trump’s threat to levy 50% tariffs on copper imports sent US copper prices up double digits. Copper traders are also looking to shift deliveries into Hawaii and Puerto Rico to cut shipment times due to Trump’s planned tariffs. According to Bloomberg, some traders are willing to pay big premiums, offering close to $400 a ton on top of London Metal Exchange prices, to get their hands on last-minute metal, particularly brands eligible for delivery against Comex contracts. Global supply is going to have to find homes outside the US as tariffs kick in and the US sits on decent stockpiles.
