In the US, equity markets rose last week, driven by positive trade developments and earnings reports. The S&P 500 reached fresh highs on Monday and Tuesday. A key announcement was a trade deal between the US and Japan, which helped reduce tensions between the two nations and bolstered growth expectations in the Asia Pacific region. Another major contributor to gains was earnings, with Alphabet and Tesla being the standout releases. Asset managers have been launching active Exchange-Traded Funds (ETFs) at a record pace in 2025, with the number of active ETFs being launched doubling that of passive ETFs. Active ETFs differ from their passive counterparts in that active funds aim to outperform the market by deviating from index weightings and taking on more risk. In contrast, passive ETFs are generally index-linked. In another report, EY-Parthenon, a strategic advisor to EY, revealed that geopolitical and economic uncertainty since 2017 has wiped out $320bn across global companies with annual revenues of $1 billion or more. On the energy front, electricity supply costs in the US’s largest power market are expected to reach record highs this year. PJM, which operates in 13 states and Washington, DC, reported that energy supply costs had increased by 22% over the past year, driven by the growing demand for AI and data centres. Finally, Union Pacific, the largest rail freight company in the US, is reportedly in talks to acquire Norfolk Southern, which operates in 22 eastern states. If successful, this acquisition would create a $200 billion coast-to-coast rail network in the US, marking the most significant rail deal in decades. However, it would require intense regulatory approval. The deal has sparked interest from BNSF, owned by Berkshire Hathaway, and CSX, two of the largest rail operators in the eastern US. Rail freight moved 1.8 billion metric tonnes of goods across the US in 2023, utilising 140,000 miles of track. For the week, the S&P 500 and NASDAQ closed higher, up 1.20% and 0.74%, respectively.
In Europe, markets initially started the week lower amid growing concerns over a potential trade deal with the US. However, the US-Japan trade agreement shifted sentiment, with pessimism giving way to optimism that a deal could be reached, and tariffs reduced. There are now hopes that the US will accept a 15% tariff on EU exports, lower than the “Liberation Day” tariff rate of 20%. Markets reacted cautiously to the European Central Bank (ECB) announcement, which was widely anticipated. The ECB held interest rates steady for the first time in a year, as it awaits the future impact of US tariffs. In corporate news, SAP, one of Europe’s largest companies, reported its Q2 earnings last week. The German cloud computing giant posted revenues of €9 billion for the quarter, a 9% increase from the same period in 2024. Importantly, the company’s cloud backlog grew by 22%, reaching €18.1 billion, with cloud revenues increasing by 24% to €5.1 billion. However, the company did not alter its 2025 outlook, which led to a 4% drop in its share price on Wednesday. For the week, the Eurostoxx 50 and Stoxx 600 closed higher, up 0.02% and 0.56% respectively.
In the UK, the FTSE 100 crossed the 9,000 mark once again on Wednesday, buoyed by the US-Japan trade deal and positive market sentiment. In corporate news, AstraZeneca, one of the UK’s largest pharmaceutical companies, announced it would invest $50 billion in the US by 2030. This move comes as pharmaceutical companies continue to make pledges to the US in response to potential threats of increased pharma tariffs. The investment will be focused on a new manufacturing facility in Virginia, which, if completed, would become the company’s largest single manufacturing investment globally. As a result, the FTSE 100 closed 1.38% higher for the week.
