A look at the day ahead in European and global markets from Rae Wee Just as the word was slowly fading away from the memories of investors, it has been foisted upon them again. Asian share markets slumped on Friday after U.S. President Donald Trump made his latest tariff salvo, and attention now turns to Europe. Trump on Thursday unveiled punishing tariffs on a broad range of imported goods, including 100% duties on branded drugs and 25% tariffs on heavy-duty trucks, set to take effect from October 1. H ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China’s Economic Sentiment and Domestic Demand - **Date**: September 24, 2025 - **Source**: Morgan Stanley Asia Limited Core Insights 1. **Domestic Demand Cooling**: Domestic demand in China is slowing more than expected, attributed to a fading fiscal impulse and reduced effectiveness of consumer goods trade-in programs. The growth rate for Q3 GDP is projected at 4.5%[5][6][7] 2. **Exports Remain Firm**: Despite domestic demand cooling, exports are holding steady, with a year-over-year growth of 10.4% in container throughput as of the third week of September, largely due to a low base from adverse weather last year[4][5] 3. **Commodity Prices**: The anti-involution impulse is fading, leading to a short-lived rise in commodity prices. However, this increase may not be sustainable as rising costs for downstream firms may not be passed on to final demand[3][5] 4. **Policy Stance**: The Chinese government is expected to implement modest, targeted quasi-fiscal support rather than large-scale stimulus. This includes potential funding for infrastructure and settling local government payables[5][7] 5. **Cyclical Policy Measures**: Anticipated quasi-fiscal easing measures include Rmb500 billion in new policy-based financial instruments for local infrastructure investment and tapping into policy bank loans to help local governments settle payables, which could total Rmb5-10 trillion[7][5] 6. **Reform Discussions**: The Fourth Plenary Session is expected to discuss structural reforms related to cadre evaluations, tax systems, and social insurance systems, which are crucial for stabilizing inflation expectations and unlocking household savings[7][5] Additional Important Points 1. **Retail Growth Decline**: Retail growth in sectors such as autos and home appliances has cooled further in September, influenced by a high base effect and the diminishing impact of trade-in programs[6][20] 2. **Property Market**: Property sales and construction activities remain subdued, with year-over-year growth for housing sales expected to decline due to base effects[6][5] 3. **Container Throughput Divergence**: There is a notable divergence in performance between exports to the US and other regions, with US-bound shipments showing little change[4][12][14] 4. **High Frequency Data**: Recent high-frequency data indicates a negative sequential price momentum in major upstream sectors since mid-August, suggesting a potential downturn in commodity prices[3][8] This summary encapsulates the key insights and data points from the conference call, providing a comprehensive overview of the current state of the Chinese economy and its implications for investment opportunities and risks.

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China Economic** landscape, particularly regarding **export and import trends** as of August 2024. Key Insights on Exports - **Export Growth Moderation**: China's export growth slowed to **4.4%** in August from **7.2%** previously, falling short of the **5.5%** expected by Bloomberg consensus. This marks the slowest year-over-year growth since January-February [1] - **Real Terms Adjustment**: In real terms, export growth moderated to **7.1%** year-over-year from **10.2%** previously, indicating a softening momentum despite stable shipment levels [1] - **US Shipments Decline**: Shipments to the US contracted by **13%** month-over-month in August, with a **33%** year-over-year decline, reflecting the impact of elevated tariffs compared to other exporters [2] - **Positive Trends in Other Markets**: Shipments to the EU and Japan improved, with ASEAN exports, particularly to Vietnam, reaching historic highs [2] - **Tech Goods Performance**: Export growth of tech products accelerated to **6.2%** in August, driven by component-type products like ICs and panels, while consumer goods continued to drag overall export growth [3] Import Trends - **Import Growth**: Import growth moderated to **1.3%** year-over-year from **4.1%**, marking three consecutive months of year-over-year growth, a rare occurrence since the second half of 2022 [4] - **Commodity Imports Decline**: The major commodities basket saw a year-over-year import value decline of **9.6%**, contributing to slower overall import growth [4] - **Tech Component Imports**: Growth in imports of tech components moderated, raising concerns about the sustainability of China's tech export growth acceleration [4] Economic Outlook - **Upside Risk to Projections**: Despite moderating export growth expectations, the year-to-date export growth stands at **5.9%**, suggesting significant upside risk to the full-year 2025 export growth projection of **1%** [6] - **Improving Demand Indicators**: Soft data, including improvements in new export orders from China's official PMI and RatingDog PMI, indicate potential resilience in export levels [6] Additional Observations - **Consumer Goods Impact**: The wider year-over-year contraction in the consumer goods basket was identified as the biggest drag on overall export growth deceleration [3] - **RMB Performance**: The RMB appreciated modestly against the USD over August, which may influence trade dynamics [28] This summary encapsulates the critical insights from the conference call, highlighting the current state of China's export and import activities, along with economic projections and market dynamics.

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the impact of US tariffs and geopolitical risks on global trade and the economy, particularly focusing on the US, EU, Japan, and emerging markets like Vietnam and Indonesia [2][10]. Core Insights and Arguments - **Tariff Impact**: New higher tariff rates ranging from 10% to 41% took effect on August 7, 2025, which are expected to negatively affect global trade and the US economy in the upcoming months [3][9]. - **Labour Market Concerns**: There are signs of weakness in the US labor market, with payroll data showing negative revisions and weak job growth. This indicates potential cost pressures and inflationary effects due to tariffs [4][37]. - **Global GDP Trends**: Q2 GDP growth has shown a reversal from Q1 trends, with the US experiencing a drop in imports that lifted growth, while other economies faced declines in exports [5][24]. - **Inflation Dynamics**: Outside the US, inflation appears to be moderating, with central banks in Europe, Asia, and Latin America cutting rates, which may buffer against tariff-related uncertainties [6][86]. - **Market Resilience**: Despite the choppy economic data and tariff news, equity markets have reached new highs, indicating a broader resilience in the global economy [7][10]. Additional Important Points - **Trade Deals**: The US has signed numerous bilateral trade deals with countries including Japan, Indonesia, and the EU, which have provided some clarity on trade policies, although higher tariffs are expected to lead to lower growth and higher inflation in the US [9][120]. - **Consumer Behavior**: US consumer spending remains robust despite lower consumer confidence, while retail sales in Europe are primarily driven by Spain [50][55]. - **Trade Deficit Trends**: The US trade deficit narrowed in June as imports fell, particularly for consumer goods and industrial supplies, indicating a complex trade environment influenced by tariffs [62][63]. - **Chinese Trade Adjustments**: Chinese exports are shifting towards ASEAN, EU, and the UK markets, while imports from the US and EU are decreasing due to tariffs [147][151]. - **Electronics Demand**: Taiwan's electronics export orders have been declining, indicating demand pressure in the electronics sector, although chip exports are still growing [161][163]. Conclusion - The conference call highlights the intricate dynamics of global trade influenced by US tariffs, labor market conditions, and inflation trends. The resilience of markets amidst these challenges suggests a complex but cautiously optimistic outlook for the global economy moving forward.

Group 1: Market Overview - Pre-market futures are up, driven by foreign auto companies, especially Japanese firms, following a new trade agreement that reduces tariffs on Japanese imported autos from +27.5% to +15% [1] - Major indexes are showing robust gains, with the Dow up +240 points (+0.54%), S&P 500 up +24 points (+0.38%), Nasdaq up +24 points (+0.10%), and Russell 2000 leading with +19 points (+0.87%) [3] Group 2: Company Earnings - AT&T reported Q2 earnings of 54 cents per share, beating estimates by 3 cents, with revenues of $30.85 billion, up +1% from estimates, but shares are down -2.5% in early trading [4] - NextEra Energy's Q2 earnings were $1.05 per share, also beating expectations by 3 cents, but revenues of $6.7 billion missed estimates by -7.28%, yet the stock is up +0.4% in pre-market [4] Group 3: Upcoming Earnings Reports - Major Q2 earnings reports are expected from Alphabet and Tesla, with Alphabet anticipating over +13% earnings growth and +11% revenue gains, while Tesla is expected to see declines of -25% in earnings and -12% in revenue [6] - Other companies reporting include IBM, Southwest Airlines, ServiceNow, and Las Vegas Sands, indicating a busy earnings season across various sectors [7]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese consumer market** and its dynamics in Q2 2025, particularly regarding household income, spending, and consumer confidence. Key Points 1. Household Income and Spending - Household disposable income growth slowed to **5.1% year-over-year** in Q2 from **5.5%** in Q1, indicating a deceleration in income growth [4][5] - Nominal consumption growth remained flat at **5.2% year-over-year** in Q2, with per capita consumption growth decelerating to **4.3% quarter-over-quarter annualized** from **8.3%** in Q1 [4][5] - The decline in consumption growth was attributed to weaker spending in categories such as food, education, culture and entertainment, and transport and telecommunications [4] 2. Labor Market Conditions - Signs of softening in the labor market were observed, with the weighted average of employment sub-indexes under various PMI surveys declining in Q2 compared to Q1 [18][21] - Year-over-year growth in official wage income and migrant workers' average monthly income decreased to **4.7%** and **3.0%**, respectively, from **5.2%** and **3.3%** in Q1 [4][24] - Urban wage growth moderated to **3.9% year-over-year** in Q2 from **4.2%** in Q1 [27] 3. Household Savings and Deposits - The household savings rate fell below pre-COVID trend levels in Q2, with an estimated **RMB 55 trillion** in "excess deposits" compared to pre-COVID trends [37][40] - Household bank deposits continued to increase, indicating a shift towards saving rather than spending [37][40] 4. Consumer Confidence - The NBS consumer confidence index remained depressed in the first two months of Q2, with reports of nationwide childbirth subsidies being rolled out, though their impact is yet to be determined [4][46] - The number of marriage registrations has shown a structural downward trend for over a decade, complicating efforts to boost consumer confidence [47] 5. Retail Sales and Auto Sales - Retail sales growth accelerated in Q2, driven by stronger goods sales, although new property sales declined sequentially [8][13] - Auto sales volume was above last year's level in Q2, with a **16.2% year-over-year** increase in June [12] 6. Other Notable Trends - The labor cost sub-index in the CKGSB Business Condition Index survey showed slower growth in Q2, reflecting broader economic challenges [4][24] - The year-over-year increase in the migrant worker population has slowed in recent quarters, indicating potential labor market constraints [31][32] Conclusion - The Chinese consumer market is experiencing a slowdown in income growth and consumption, alongside signs of labor market softening. Despite some positive trends in retail and auto sales, overall consumer confidence remains low, influenced by structural demographic trends and economic uncertainties.

Trade Tariffs Impact - The EU is concerned about the 30% tariff on goods and the remaining 25% sector tariffs on autos [1] - These tariffs are negatively impacting Mercedes, Porsche, and Volkswagen's Audi [1] - Automakers are absorbing some of the tariff costs, affecting their bottom line [2] Future Outlook - The key question is whether a deal can be reached before the fall of 2020, prior to the release of the 2026 car models [2]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - Core CPI showed a modest improvement, with a year-on-year increase of 0.1 percentage points to 0.6% and a month-on-month improvement to 1.2% SAAR, indicating a recovery since the policy pivot in September 2024 [2] - PPI deflation pressures continue, with a month-on-month decline of 0.4% for three consecutive months, leading to a year-on-year decrease of 3.3% [3] - Weak energy prices have significantly impacted both headline CPI and PPI over the past three months, while core prices remain resilient due to targeted policies [6] Summary by Sections Consumer Price Index (CPI) - In May 2025, the CPI year-on-year was -0.1%, with food prices down by 0.4% and non-food prices stable at 0.0% [5] - Core CPI (excluding food and energy) was at 0.6%, reflecting a slight increase from previous months [5] Producer Price Index (PPI) - The PPI year-on-year was reported at -3.3%, with notable declines in producer goods (-4.0%) and mining and quarrying (-11.9%) [5] - Durable goods prices turned positive month-on-month, driven by the automotive sector, although this may not fully reflect recent price cuts [3][5] Key Drivers - The resilience in core prices is attributed to targeted policies such as the consumer goods trade-in program, while a supply-demand imbalance persists [6] - The renewed competition in the automotive sector may not have been adequately captured in the current readings, indicating potential volatility in future reports [6]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the U.S. economic outlook, particularly focusing on the first quarter GDP and private domestic demand trends. Core Insights and Arguments 1. **GDP Revision**: The second release of Q1 GDP shows a modest contraction in growth at -0.2%, revised from -0.3%, primarily due to a surge in imports before tariffs [1][3] 2. **Private Domestic Demand**: Final private domestic demand rose by 2.5%, indicating stronger underlying demand than the overall GDP figure, although revisions suggest a softer demand than previously thought [1][6] 3. **Consumption Trends**: Consumption, especially in services, was revised down significantly from 2.4% to 1.7%, with overall consumption growth at 1.2%, the weakest since Q2 2023 [3][7] 4. **Business Investment**: Business investment in equipment was revised modestly higher, reflecting potential front-loading of investments before tariffs, particularly in information processing equipment [4][8] 5. **Residential Investment**: Residential investment contracted by 0.6% in Q1, indicating potential ongoing weakness in the housing market, which could signal broader economic concerns [4][9] 6. **Inflation and Corporate Profits**: Core PCE inflation was revised slightly lower to 3.41%, while corporate profits fell by 11.3% QoQ annualized, marking the largest decline since Q4 2020 [5] 7. **Trade Dynamics**: Trade remains a volatile factor in GDP growth, with expectations that a decline in imports could boost growth, but this may be offset by weaker consumption and investment [10] Additional Important Insights 1. **Front-loading of Purchases**: The increase in goods spending in March was attributed to front-loading purchases before tariffs, particularly in autos, which may not sustain in the following quarters [7] 2. **Future Economic Outlook**: The expectation is for continued weakening in final private domestic demand throughout the year, influenced by higher prices from tariffs and financial concerns [6] 3. **Upcoming Data**: Advance data on goods trade for April is anticipated to provide insights into trade patterns for Q2 [10]

Core Viewpoint - President Trump criticized Walmart for not absorbing the costs associated with his tariffs, suggesting that the retail giant should not pass these costs onto consumers [1][5][16] Group 1: Impact of Tariffs on Walmart - Walmart warned that prices for various products, including bananas and children's car seats, could increase due to tariffs [2][8] - Walmart's CFO indicated that a $350 car seat made in China could see a price increase of $100, representing a 29% rise [11] - The company has reported strong first-quarter sales but emphasized the limits to which it can keep prices low amidst rising costs [12] Group 2: Economic Context and Consumer Sentiment - Economic analyses suggest that tariffs could worsen inflation, with a recent consumer sentiment survey indicating that approximately 75% of respondents mentioned tariffs as a concern [2][8] - The tariffs have contributed to a decline in consumer sentiment, marking the second-lowest measure on record [8] - Trump's tariffs have created uncertainty in the U.S. economy, affecting major companies and their supply chains [11][14] Group 3: Trump's Economic Agenda - Trump insists that his economic agenda will lead to more domestic manufacturing jobs, urging Walmart to sacrifice profits for this cause [4][16] - The administration has reduced tariffs from 145% to 30% for a 90-day period, but has maintained high tariffs on various imports, including autos and steel [12][14] - Trump has called for the Federal Reserve to cut benchmark rates, despite concerns that this could accelerate inflation [16][17]