That said, NVDA results + a soft/in-line PCE on Friday, could be conducive of another leg to the broadening the trade (here from Drew) given positioning backdrop (Chart below) and SPX 493 earnings acceleration in 2Q25. The move lower in front-end rates also helps. 2Y1M USD OIS broke below 3% yesterday but likely reflecting the administration effort to reshape the Fed as Inflation expectations creep higher (2yr inflation swaps are now at highest level since late 2022). Continue to watch Gold for possible breakout after a long period of consolidation.
In Europe, a few things.
Francois Bayrou will hold direct talks with lawmakers next week as he battles to avoid being forced out in a September confidence vote. We wrote on France on Weds
The topic of potential internal rotations has picked up pace again in Europe. The two sectors most watched include Healthcare (bottom of the cycle relative valuations) and Luxury (dislocated to China rally – but with reservations given driver of A shares has been liquidity, not macro - and sustained strength of US consumer). Read more thoughts below from the Desk.
With budgets in focus, there is the usual noise on countries with weak finances. This morning, il Corriere reports that Italy may consider a tax on buybacks of listed firms while yesterday, la Stampa said an extension to a law that forces banks to suspend the use of deferred tax assets is being discussed (raising €1 billion and €1.5 billion). At this point, both are still unconfirmed and don’t seem large enough to alter fundamental pictures (but can create noise)
In terms of catalysts, today we focus on claims and tonight’s macro data from Japan (notably Tokyo CPI).
OVERNIGHT RECAP
EU BANKS: Sector extended losses, with the first 3 consecutive sessions in the red since Liberation Day week. France uncertainty weighing on European names and positioning remians stretched at 100th %-ile. Headlines around potential bank tax in Italy have not helped sector.
EU LUXURY: Extends outperformance, with sector prime for mean reversion given underperformance this summer. Sector also lags China equities and proxies (ex. Basic Resources). Positioning remains low at 36th %-ile, and weakness in banks (long momo), helps the luxury strength (short momo) - same as yday. Flow wise, turned net to buy in the sector over past week.
NVIDIA: Impressive quarter, yet several areas need more clarification. Above all, there remains uncertainty around: 1) networking strength, 2) somewhat slower Blackwell growth (versus cont’d Hopper and even H20 demand), and 3) lack of clarity on China. More importantly, expectations were high. With investor expectations already pricing in a $7 EPS, there appears to be nothing concrete in the results to justify a higher stock price
ASEAN EQUITY STRATEGY: Latest rally has been led mainly by domestic investors whilst foreigners continue to remain on the sidelines. Team believes equity bull market will remain intact: base case sees expect lower interest rates, stimulative fiscal policies to boost domestic growth, seasonality (4Q-1Q) and inexpensive valuation to support markets over the next 6 months
EU OIL & GAS: Team takes stock on key sector metrics and provide a renewed EU Majors Question Bank of pertinent issues to discuss in management meetings. Top ideas: OW Shell, Eni, TotalEnergies and Repsol (for diesel); UW Equinor, OMV.
TODAY’S CATALYSTS: a) EA Money Supply, Consumer Confidence; b) US GDP S Q2, Personal Consumption, Core PCE, Claims; c) ECB July minutes d) Informal meeting of EU defence ministers in Copenhagen; e) UST 7Y $44bn; f) Bitcoin Asia 2025 conference in Hong Kong through Aug. 29; EARNINGS: US: DELL; EA: DG; ASIA: ICBC, Citi Securities, CPIC, ZTE, Li Auto, WES
