Update equities: Uncertainty rules markets
So far, there is no truce in the tariff duel between the US and China. Although a US announcement of tariff exemptions for some consumer electronics provided a bit of relief, uncertainty about the implementation and duration of tariffs again created uncertainty for manufacturers and investors. This week, Federal Reserve Chair Jerome Powell stressed the importance of a healthy US labour market and stable prices. He is waiting for greater clarity before considering any adjustment to the policy rate.
The uncertainty and unpredictability of trade tariffs and potential consequences have also been noticeable in several quarterly earnings reports across different sectors. Luxury goods producer LVMH was impacted because the US and China are two key markets. The company reported weakening sales in the first quarter of 2025, due to disappointing demand for luxury goods in these markets and a looming trade war. Although it is still early to assess the impact the recent market turmoil could have on luxury consumer spending, the consequences of geopolitics for consumer confidence and the economic environment, in general, could be a headwind for the luxury goods sector. On the other hand, LVMH with its strong global brands, is well positioned compared to competitors.
In the information technology sector, ASML and Nvidia suffered from uncertainty in investments and orders. ASML sales in the first quarter of the year matched expectations; and although the CEO sees a lot of strength from the artificial-intelligence boom in 2025 and 2026, orders fell short of expectations. Nvidia warned of current quarter write-downs of about USD 5.5 billion, due to the US government barring sales of its H20 chip in China without an export license.
In financial services, US banks are traditionally among the first companies to report earnings. JP Morgan kicked off with revenues that exceeded expectations. There was a jump in transaction fees from equity trading in the first quarter of 2025. The rise was partly because of increased trading activity due to economic uncertainty. But this uncertainty can also cast a shadow on the rest of the year, despite the prospect of expected higher interest rate revenues. Bank of America also did better than expected, based on profit and revenue targets due to robust trading revenue in the past quarter. Interest rate and fee income also showed healthy growth.