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Update Equities: Second-quarter earnings season begins

On Tuesday, the 2025 second-quarter earnings season started, as is tradition, with the results of US banks. Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo and CitiGroup generally beat expectations. This was mainly due to their trading activities that profited from volatility related to US President Donald Trump's tariffs.

BlackRock saw better than expected earnings, but net inflows were very disappointing at USD 68 billion compared with USD 85 billion that had been expected. The company's strong historical growth in exchange-traded funds seems to be fading. BlackRock’s share price declined by 5.9%.

In the health care sector, Johnson & Johnson raised its full-year sales and earnings forecast after reporting better than expected results for the second quarter, partly due to foreign exchange and the accelerated growth in MedTech. Novartis shares dropped after it reported its second-quarter results. Revenues were in line with expectations and   earnings were better than expected, but the sales of a key psoriasis drug disappointed. Investors also did not appreciate the retirement of widely respected Novartis CFO Harry Kirsch. Initially, share prices dropped by 3% but recovered later in the day to be ultimately unchanged.

In the information technology sector, ASML’s results were ahead of expectations, but the company withdrew its growth outlook for 2026 citing uncertain macroeconomic circumstances, tariff threats and geopolitical instability. As a result, ASML shares lost 11.4%. TSMC also had better than expected results, due to strong demand for the high performance chips needed for artificial-intelligence applications. TSMC's outlook for the third quarter was in line with analyst expectations.

Among automotive companies, Renault’s share price declined by 18% after lowering its margin outlook for the year. Renault is likely not the only automaker to cut its guidance due to commercial pressures, tariff headwinds and pricing pressure. Renault has also appointed a new interim CEO after the sudden departure of Luca de Meo to Kering.

Based on these results, we conclude that the second-quarter earnings season is off to a good start. The looming impact of the Trump administration’s tariffs, however, has caused profit warnings and retractions of earlier guidance. Bank trading activities seem to be one of the few areas to profit from current market volatility.

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