Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Access both platforms from your single Saxo account.
London Quick Take – 31 July – Tariff denouement, Hawkish Fed, Insane Meta earnings, Roll-Royce lifts guidance, Shell profits tumble
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
No shot in the Arm from AI: Arm Holdings' stock dropped 8.5% post-earnings release, as it forecast lower profits due to increased spending on AI-focused developments. Projected Q2 earnings are 29-37 cents, with revenue estimates ranging $1.01-$1.11 billion.
Qualcomm beat expectations with $2.77 EPS and $10.37 billion revenue. Despite providing strong guidance, shares fell 5% in extended trading.
Nvidia – shares rose another 2% yesterday and another 2.3% in after-hours trading to new ATHs as everyone wants AI chips
Fed sticks
Two dissenting voices on the FOMC voting for a cut couldn’t take the hawkish tinge out of the Fed rate decision last night. The FOMC voted 9-2 to keep the Fed funds rates in the 4.25%-4.5% band, with Trump-appointed Governors Christopher Waller and Michelle Bowman voting to cut.
“There are many, many uncertainties left to resolve,” Powell said in the press conference. “It doesn’t feel like we are very close to the end of that process.” That did not feel like someone teeing up a cut in the next meeting in September.
The S&P 500 slipped 0.1%, the Dow lost 171 points, while the Nasdaq rose 0.2%. Futures are indicated a lot higher because of META and MSFT. As noted in yesterday's indices piece on the Nasdaq 100, the 127% Fib extension of Feb-Apr drop takes bulls to 23,781.
The Fed underpinned a strong upside move in the US dollar although it's paring gains a bit today. Sterling plunged to $1.322 or thereabouts, its weakest since the middle of May, while the euro was also sharply down as the dollar is attracting bid from the tariff denouement.
The US economy keeps going strong, sort of
Ahead of the FOMC we had strong ADP jobs numbers and US GDP showed amazing strength in the last quarter, at +3.0% vs +2.6% expected... big fall in imports added to growth. Real final sales at 1.2% were down from 1.9% in Q1 and the lowest since Q4 2022... net exports were the largest driver of growth as imports decline due to what one can only assume tariffs ... an economy getting a statistical boost from trade dynamic and tariff expectations. ADP job numbers came stronger at +104k vs est +76k.
Inflation watch
PCE inflation today – the Fed’s preferred gauge of inflation is the core reading. Inflation has been relatively benign but it’s the next few months that matter as tariffs could bite. Month-on-month core PCE inflation has been 0.0%, 0.1% and 0.2% in the April-May period, but the Jul-Sep data is likely to tick higher. June’s data today is expected to rise to +0.3%, or +2.70% annually. We could see it continue to tick up further on a monthly basis in the Jul-Sep period to 0.5% and 3.0% annually – a reason why the Fed is happy to wait and see for now.
India tariffs and oil
India gets a 25% tariff beginning 1 August plus Trump said the country would face an additional “penalty” for buying Russian arms and oil, without specifying exactly what this meant.
Oil prices kept upwards despite running up against stalling US data as the EIA reported the biggest inventory build in 6 months. The 7.7mn barrel increase was the largest since January and came a day after API reported an unexpected build. Prices however remained supported as President Trump seems to be getting tired with Russia and oil markets have priced in the chance of a potential supply disruption. Watch this and 1 August tariff deadline tomorrow and rising OPEC+ output. Brent and WTI have both made clear breaches of the 200-day SMA with momentum indicator (MACD) turning positive.
London Quick Take – 31 July – Tariff denouement, Hawkish Fed, Insane Meta earnings, Roll-Royce lifts guidance, Shell profits tumble
Key Points
- Insane results for Meta send shares up 11% after-hours, Microsoft also leaps 8% on earnings
- Markets look towards tariff deadline as South Korea strikes trade deal with US
- Fed sticks to the script and sends signal it's not in rush to cut
- Rolls-Royce profits rise 50% and lifts guidance, Shell profit drop not as bad as feared
The Fed left rates on hold as expected and leant a little more hawkish, underpinning a solid day for the dollar and less positive move for US stocks, but the big story as expected was in the big tech earnings picture as Meta and Microsoft delivered knockout results.
US stock futures are roaring higher with strong tailwinds from the tech and AI narratives with Meta +11.5% after-hours and Microsoft +8%. Investors are now looking ahead to results from Apple and Amazon later.
In addition to the Fed, we have Trump’s tariff deadline tomorrow – South Korea the latest to get in the 15% club, whilst India gets cold shoulder 25% tariffs for dealings with Russia. US inflation is out later, expected to tick higher with tariff effects.
In Britain, Shell profits are down but not as bad as feared after the company provided a soft trading update at the start of the month, sending shares higher. Rolls-Royce can do no wrong, shares up 12% at the open as it raised guidance. The FTSE rallied half a percent after a flat day yesterday with corporate earnings on side and weaker sterling, while European stock markets also responded to the positive move in the US futures and corporate earnings of their own. Asia was weaker with Hang Seng down nearly 1.5% amid disappointing China data, with manufacturing PMI showing contraction and weak economic growth.
Rolls on
A 12% jump at the open betrayed a sense that Rolls-Royce is ticking all the boxes for investors. Strategy and execution nearly flawless combined with powerful secular tailwinds in defence and aerospace make for a stock that’s about 13x from its lows in late 2022. Underlying operating profit rose 50% in the first half of this year, with beats in aerospace and power systems and only slightly behind in defence, which is probably just a budget timing thing really – defence spending in coming down the pipe. The company raised its full year 2025 guidance, saying it now expects £3.1bn-£3.2bn underlying operating profit and £3.0bn-£3.1bn free cash flow. Small nuclear reactors will be profitable by 2030.
Shell's up
Profits down but not as bad as feared seems to be the main message – shares rallied 2.5% early doors in London on the earnings update. Profits fell 32% to $4.3bn in the second quarter from $6.3bn a year before – but crucially ahead of the $3.7bn expected after the early July trading update. Oil prices are trading above their 200-day line with Russia-related sanctions disruption in play.
Next lifts
Next another one: Q2 full price sales at Next were up 10.5%, some £49mn ahead of the guidance for growth of 6.5%, with the good weather in the UK the key factor – management had worried about a pull-forward in Q1 but this has not materialised. Guidance for full price sales in the second half is being raised from +3.5% to +4.5%, allowing the company to marginally increase its full-year profit guidance by £25mn.
Unilever split
ULVR shares flat on decent underlying sales growth of +3.8% in Q2, ahead of the 3.6% expected. For the first half, underling sales growth of 3.4% with perhaps a little light of what we had hoped for, though with gross margins looking good, ice cream separation complete, productivity plan ahead of schedule, things are looking not too unhappy. Underlying operating profit of €5.8bn was a bit ahead of the €5.7bn expected.
Insane Meta earnings
Meta earnings surged 36% to $18.3bn vs $15.3bn expected.. seemed to blow apart any doubts about its AI spending blowout - The company raised the lower end of its 2025 capital expenditures forecast to between $66bn and $72bn from its April outlook of $64bn to $72bn. It seems that spending massively on AI is still ok with investors as long as the earnings growth from the rest of business keeps pace broadly. Meta did advise on spending likely being even higher as “there are a few factors we expect will provide meaningful upward pressure on our 2026 total expense growth rate”. It forecast third-quarter revenues of $47.5bn to $50.5bn, above the consensus estimates of $46.3bn.
Microsoft delivered a more modest 18% revenue growth, as the Azure cloud business drove the fastest pace of expansion in three years. Sales from Azure and other cloud services rose 34% to $75 billion.
In addition to the Fed, we have Trump’s tariff deadline tomorrow – South Korea the latest to get in the 15% club, whilst India gets cold shoulder 25% tariffs for dealings with Russia. US inflation is out later, expected to tick higher with tariff effects.
In Britain, Shell profits are down but not as bad as feared after the company provided a soft trading update at the start of the month, sending shares higher. Rolls-Royce can do no wrong, shares up 12% at the open as it raised guidance. The FTSE rallied half a percent after a flat day yesterday with corporate earnings on side and weaker sterling, while European stock markets also responded to the positive move in the US futures and corporate earnings of their own. Asia was weaker with Hang Seng down nearly 1.5% amid disappointing China data, with manufacturing PMI showing contraction and weak economic growth.
Rolls on
A 12% jump at the open betrayed a sense that Rolls-Royce is ticking all the boxes for investors. Strategy and execution nearly flawless combined with powerful secular tailwinds in defence and aerospace make for a stock that’s about 13x from its lows in late 2022. Underlying operating profit rose 50% in the first half of this year, with beats in aerospace and power systems and only slightly behind in defence, which is probably just a budget timing thing really – defence spending in coming down the pipe. The company raised its full year 2025 guidance, saying it now expects £3.1bn-£3.2bn underlying operating profit and £3.0bn-£3.1bn free cash flow. Small nuclear reactors will be profitable by 2030.
Shell's up
Profits down but not as bad as feared seems to be the main message – shares rallied 2.5% early doors in London on the earnings update. Profits fell 32% to $4.3bn in the second quarter from $6.3bn a year before – but crucially ahead of the $3.7bn expected after the early July trading update. Oil prices are trading above their 200-day line with Russia-related sanctions disruption in play.
Next lifts
Next another one: Q2 full price sales at Next were up 10.5%, some £49mn ahead of the guidance for growth of 6.5%, with the good weather in the UK the key factor – management had worried about a pull-forward in Q1 but this has not materialised. Guidance for full price sales in the second half is being raised from +3.5% to +4.5%, allowing the company to marginally increase its full-year profit guidance by £25mn.
Unilever split
ULVR shares flat on decent underlying sales growth of +3.8% in Q2, ahead of the 3.6% expected. For the first half, underling sales growth of 3.4% with perhaps a little light of what we had hoped for, though with gross margins looking good, ice cream separation complete, productivity plan ahead of schedule, things are looking not too unhappy. Underlying operating profit of €5.8bn was a bit ahead of the €5.7bn expected.
Insane Meta earnings
Meta earnings surged 36% to $18.3bn vs $15.3bn expected.. seemed to blow apart any doubts about its AI spending blowout - The company raised the lower end of its 2025 capital expenditures forecast to between $66bn and $72bn from its April outlook of $64bn to $72bn. It seems that spending massively on AI is still ok with investors as long as the earnings growth from the rest of business keeps pace broadly. Meta did advise on spending likely being even higher as “there are a few factors we expect will provide meaningful upward pressure on our 2026 total expense growth rate”. It forecast third-quarter revenues of $47.5bn to $50.5bn, above the consensus estimates of $46.3bn.
Microsoft delivered a more modest 18% revenue growth, as the Azure cloud business drove the fastest pace of expansion in three years. Sales from Azure and other cloud services rose 34% to $75 billion.
No shot in the Arm from AI: Arm Holdings' stock dropped 8.5% post-earnings release, as it forecast lower profits due to increased spending on AI-focused developments. Projected Q2 earnings are 29-37 cents, with revenue estimates ranging $1.01-$1.11 billion.
Qualcomm beat expectations with $2.77 EPS and $10.37 billion revenue. Despite providing strong guidance, shares fell 5% in extended trading.
Nvidia – shares rose another 2% yesterday and another 2.3% in after-hours trading to new ATHs as everyone wants AI chips
Fed sticks
Two dissenting voices on the FOMC voting for a cut couldn’t take the hawkish tinge out of the Fed rate decision last night. The FOMC voted 9-2 to keep the Fed funds rates in the 4.25%-4.5% band, with Trump-appointed Governors Christopher Waller and Michelle Bowman voting to cut.
“There are many, many uncertainties left to resolve,” Powell said in the press conference. “It doesn’t feel like we are very close to the end of that process.” That did not feel like someone teeing up a cut in the next meeting in September.
The S&P 500 slipped 0.1%, the Dow lost 171 points, while the Nasdaq rose 0.2%. Futures are indicated a lot higher because of META and MSFT. As noted in yesterday's indices piece on the Nasdaq 100, the 127% Fib extension of Feb-Apr drop takes bulls to 23,781.
The Fed underpinned a strong upside move in the US dollar although it's paring gains a bit today. Sterling plunged to $1.322 or thereabouts, its weakest since the middle of May, while the euro was also sharply down as the dollar is attracting bid from the tariff denouement.
The US economy keeps going strong, sort of
Ahead of the FOMC we had strong ADP jobs numbers and US GDP showed amazing strength in the last quarter, at +3.0% vs +2.6% expected... big fall in imports added to growth. Real final sales at 1.2% were down from 1.9% in Q1 and the lowest since Q4 2022... net exports were the largest driver of growth as imports decline due to what one can only assume tariffs ... an economy getting a statistical boost from trade dynamic and tariff expectations. ADP job numbers came stronger at +104k vs est +76k.
Inflation watch
PCE inflation today – the Fed’s preferred gauge of inflation is the core reading. Inflation has been relatively benign but it’s the next few months that matter as tariffs could bite. Month-on-month core PCE inflation has been 0.0%, 0.1% and 0.2% in the April-May period, but the Jul-Sep data is likely to tick higher. June’s data today is expected to rise to +0.3%, or +2.70% annually. We could see it continue to tick up further on a monthly basis in the Jul-Sep period to 0.5% and 3.0% annually – a reason why the Fed is happy to wait and see for now.
India tariffs and oil
India gets a 25% tariff beginning 1 August plus Trump said the country would face an additional “penalty” for buying Russian arms and oil, without specifying exactly what this meant.
Oil prices kept upwards despite running up against stalling US data as the EIA reported the biggest inventory build in 6 months. The 7.7mn barrel increase was the largest since January and came a day after API reported an unexpected build. Prices however remained supported as President Trump seems to be getting tired with Russia and oil markets have priced in the chance of a potential supply disruption. Watch this and 1 August tariff deadline tomorrow and rising OPEC+ output. Brent and WTI have both made clear breaches of the 200-day SMA with momentum indicator (MACD) turning positive.
Copper crush
Copper prices in New York plunged about 20% in a blink of an eye as Trump did another TACO and retreated from imposing swingeing tariffs on imports of the metal.
Copper prices in New York plunged about 20% in a blink of an eye as Trump did another TACO and retreated from imposing swingeing tariffs on imports of the metal.
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