The Davy Digest - 5th August 2025

Global equities continued to make new highs last week, boosted by strong mega cap tech earnings and trade deals. The EU struck a 15% tariff deal with the US and agreed to significant purchases of US energy products and military equipment. In the US, Q2 GDP data came in at 3%, stronger than the 2.3% forecast. US job growth slowed sharply in July, with just 73k jobs added. The FOMC met on Wednesday and decided to leave rates unchanged, with Fed Chair Powell citing the inflationary risks of tariffs. In Europe, Eurozone GDP rose 0.1% in Q2. Germany fell back into contraction territory while Spain led growth. The Bank of Japan also met last week and held rates steady, inflation forecasts were revised upwards. Finally in Brazil, the BCB left rates unchanged at 15%. The US announced 50% tariffs on imports from Brazil, but with exemptions for key Brazilian exports and a deadline extension for the implementation of the tariffs. Brazilian equities responded positively to the announcement as it was better than feared.

Last week's highlights

	Preliminary Q2 GDP (30/07) - Came in strong at 3% vs 2.3% expected. Core PCE Index (31/07) Federal Reserve Meeting (30/07) - Rates unchanged as Powell noted the infationary risks of tariffs.
	Preliminary Q2 Gross Domestic Product (30/07) - Eurozone GDP rose 0.1% in Q2. Germany fell back into contraction territory while Spain led growth.
	S&P Manufacturing PMI (01/08)
	Brazilian Central Bank Meeting (30/07) - Kept the policy rate at 15% as expected. Bank of Japan Meeting (31/07) - Held rates steady and revised up inflation forecasts. China NBS PMI (30/07) - July NBS Manufacturing PMI dropped to 49.3, Non-Manufacturing PMI eased to 50.1.

Looking ahead to this week, the US ISM services PMI is due out on Tuesday. On Wednesday, there is a 10-year note auction. In the UK, the Bank of England will meet on Thursday and are expected to cut rates by 25 bps due to a slowing job market. In China, investors will receive exports data, and the Caixin Services PMI will be released. Finally, in India, the Reserve Bank of India will meet on Wednesday and are expected to hold rates steady.

What's on the radar

	US ISM Services PMI (05/08) 10-year Note Auction (06/08) Initial Jobless Claims (07/08)
	Germany Balance of Trade (07/08)
	Bank of England Meeting (07/08) UK Halifax House Price Index (07/08)
	China Caixin Services PMI (05/08) Reserve Bank of India Meeting (06/08) China Exports Data (07/08)

Chart of the moment - Big fish, small pond

Source: Bloomberg, as at 30^th July 2025. 

• Nvidia's market value is nearing the market value of the 50 largest companies in the Eurozone.
• Nvidia has rallied significantly since the tariff pause on 8th April as mega cap tech companies continue to ramp up AI related spending.
• Despite Nvidia's strong performance, European equities have outperformed the US so far in 2025.
• Davy has a positive view on European equities for the remainder of 2025 due to the following catalysts:
  • Trade clarity after the EU/US trade deal
  • Higher fiscal spending in Germany
  • Further interest rate cuts from the ECB

Davy has a positive view on European equities for the remainder of 2025. Catalysts for continued outperformance include trade clarity after the EU/US trade deal, higher fiscal spending in Germany and further interest rate cuts from the ECB.