Key Takeaways
- RBC Capital and Evercore ISI have significantly raised their price targets for Microsoft (MSFT), indicating strong confidence in the tech giant's future growth, particularly driven by its Azure cloud services and AI initiatives.
- The Bank of Japan (BoJ) maintained its short-term interest rate at 0.5% as expected, while raising its growth and inflation outlooks for fiscal years 2025, 2026, and 2027, despite ongoing uncertainty over trade policies.
- French inflation remains subdued at 1% in July, well below the European Central Bank's (ECB) 2% target, primarily due to energy price restrictions, which may support further interest rate cuts by the ECB.
- Treasury yields have slid as investors await the Federal Reserve's preferred inflation gauge, with the Fed maintaining its benchmark rate at 4.25%-4.5% amidst a moderated view of the U.S. economy and ongoing debate about the impact of tariffs on inflation.
- The EU will not fully tariff Indonesian palm oil, with a political agreement reached for zero-percent tariffs on a certain quota, marking a significant development in trade relations.
Confidence in the technology sector is soaring, with analysts significantly upgrading their outlooks for Microsoft (MSFT). RBC Capital has increased its price target for Microsoft to $640 from $525, citing strong future growth prospects. Similarly, Evercore ISI has raised its price target for Microsoft from $545 to $625. These upward revisions underscore analyst optimism regarding Microsoft's continued momentum, particularly in its Azure cloud computing service and artificial intelligence initiatives, which are expected to drive durable double-digit top and bottom-line growth.
In central banking news, the Bank of Japan (BoJ) held its short-term interest rate steady at 0.5% following its July monetary policy review, a decision that was widely anticipated. Despite maintaining rates, the BoJ revised its core inflation forecast for fiscal year 2025 upwards to 2.7% from 2.2%, and also increased its GDP growth forecast for FY 2025 slightly to 0.6% from 0.5%. This comes even as the central bank acknowledges "high uncertainties" regarding the impact of U.S. trade policies on the global economy.
Meanwhile, French inflation remains notably low, holding steady at 1% in July, unchanged from June. This figure is well below the European Central Bank's (ECB) 2% target, largely attributed to energy price restrictions and a sharp decline in energy prices. This subdued inflation in France could strengthen the argument for the ECB to keep the door open for further interest rate cuts, even after having cut rates by 25 basis points to 2.00% in June.
In the United States, Treasury yields have seen a slide as market participants await the Federal Reserve's preferred inflation gauge. The Federal Reserve (Fed) maintained its benchmark federal funds rate in the range of 4.25%-4.5% for the fifth consecutive meeting. While the Fed downgraded its view of U.S. economic activity, it continues to monitor labor market conditions and the impact of tariffs on inflation, with financial markets anticipating two rate cuts before the end of 2025.
On the trade front, the European Union (EU) has reached a significant political agreement with Indonesia regarding palm oil tariffs. Under this agreement, the EU will not fully tariff Indonesian palm oil, instead implementing a zero-percent tariff for a certain quota of crude palm oil (CPO) and palm kernel oil. Any imports exceeding this quota will face a 3% tariff, which is still considerably lower than the 19% tariff imposed by the U.S. on some Indonesian exports. This development is part of a broader Comprehensive Economic Partnership Agreement (CEPA) aimed at strengthening economic ties between the EU and Indonesia.
In the UK, initial findings from the latest Business Insights and Conditions Survey indicate that 51.2% of trading businesses reported no challenges when selling goods or services to customers in other UK nations, a 5 percentage point decrease from April 2025. Despite this, some surveys suggest UK business confidence is at its highest level in 10 years, driven by improved trade prospects and economic outlook. However, other reports present a more subdued picture, with business confidence still below long-term averages according to S&P Global's PMI.
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.