Key Takeaways
- Microsoft (MSFT) is poised to reach a $4 trillion market capitalization following strong earnings, driven by its cloud business and leadership in AI.
- The U.S. will impose a 15% tariff on EU wine and spirits starting August 1, 2025, as part of a broader trade agreement, impacting European exporters.
- Qualcomm (QCOM) shares fell 4.9% in premarket trading due to concerns over Apple's (AAPL) in-house modem development overshadowing better-than-expected Q3 earnings.
- Hong Kong's 2Q GDP rose 3.1% year-over-year, exceeding estimates, while Taiwan's 2Q GDP surged 7.96% year-over-year, significantly above expectations, showcasing robust economic performance in Asia.
The global economic landscape is marked by significant movements in the technology sector, evolving trade policies, and varied regional economic performances. Microsoft (MSFT) is on the cusp of a historic milestone, while Qualcomm (QCOM) faces headwinds from a major client. Meanwhile, new tariffs are set to impact transatlantic trade, and Asian economies demonstrate strong growth.
Technology Giants See Mixed Fortunes
Microsoft (MSFT) is expected to achieve a $4 trillion market capitalization, becoming only the second company globally to reach this valuation after Nvidia (NVDA). This surge follows its stronger-than-expected quarterly earnings, with shares jumping as much as 9% in late trading. The company's cloud business, particularly its Azure unit, reported a 39% rise in sales, exceeding analyst expectations and solidifying Microsoft's position in the artificial intelligence (AI) boom.
Conversely, Qualcomm (QCOM) experienced a 4.9% decline in premarket trading. This drop is attributed to concerns over Apple's (AAPL) plans to debut its in-house modem system, potentially phasing out Qualcomm's technology entirely by 2027. Despite reporting better-than-expected Q3 earnings, the prospect of losing a significant portion of its revenue from Apple has overshadowed its financial performance.
Trade Tensions and Monetary Policy Shifts
The U.S. will implement a 15% tariff on EU wine and spirits starting August 1, 2025. This decision is part of a broader trade agreement, and while it avoids a harsher 30% duty, it is expected to significantly impact European producers, potentially leading to higher shelf prices and reduced competitiveness for European imports. The EU had to accept this tariff despite securing exemptions for other sectors like aeronautics and semiconductors.
In monetary policy, traders are reducing expectations for further European Central Bank (ECB) rate cuts this year, preferring no more cuts. The ECB recently held its key interest rate steady at 2%, marking a pause after a series of eight consecutive rate cuts that began in June 2024. This stance reflects the perceived resilience of the European economy and a "wait and see" approach by the central bank.
Asia's Economic Resilience
Hong Kong's 2Q GDP increased by 3.1% year-over-year, surpassing the estimated 2.8% growth. This moderate growth was supported by strong goods exports and a resumption of moderate growth in overall investment expenditure, despite a slight decline in private consumption.
Similarly, Taiwan's 2Q GDP rose significantly by 7.96% year-over-year, well above the estimated 5.70%. This strong performance was driven by a surge in investment, which grew by 15.3% year-over-year, and robust exports, particularly in AI-related products.
In other regional news, Sinopec (600028.SS) reported a preliminary 1H net income ranging from 20.1 billion yuan to 21.6 billion yuan. China also plans to build a third nuclear power plant in Kazakhstan, according to IFX. Beijing City reported 44 fatalities and 9 missing due to heavy rain, as per Xinhua. Spain recorded a May current account surplus of EUR6.435 billion. South Korea announced plans to tax dividends separately to encourage higher payouts, increase corporate income tax by 1% to a range of 10-25%, and offer tax exemptions for investments in AI and cultural sectors, while revoking past tax reliefs on stock investments. Poland has stated it has no intention to reduce social spending in its 2026 budget. Lastly, Germany's unemployment change in July showed an actual increase of 2.0K, better than the estimated 15.0K, with the unemployment rate holding steady at 6.3%.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.