Talking Point This Week — Ugly, Or Not?

Another batch of upbeat US economic data including solid retail sales boosted risk appetite on Thursday, pushing to the back of investors' minds President Donald Trump's attacks on Fed Chair Jerome Powell and lifting the S&P 500 and Nasdaq to fresh record highs. The Indian stock market experienced a bearish trend, driven by selling pressure in IT and auto stocks following lacklustre Q1 earnings from companies like TCS, and coupled with a sombre reportage from Axis Bank. The Bank Nifty index also declined for the week, reflecting caution. Defence has had a terrible July, down over 7% this month so far, with the slide continuing in the week gone by. India welcomed US' terror tag for Pakistan-based group behind Pahalgam attack, while Iran's Supreme Leader Khamenei threatened ‘bigger blow’ to foes. And by the way, did you know that America’s State Department has warned its embassies that someone is impersonating Marco Rubio using artificial intelligence? The person has apparently sent AI-generated messages on Signal to three foreign ministers and two American politicians.

Here are the key talking points of this week:

Tariffs Finally Bite US; Powell Gets Ammo To Hold

The US Bureau of Labor Statistics reported on Tuesday that inflation rose less than expected for the fourth consecutive month. However, unlike prior months, the latest data shows companies actively passing tariff-related costs to consumers. With overall prices increasing 2.7% in June compared to last year, appliances surged the most in nearly five years, toys rose at the fastest rate since early 2021, and household furnishings and sports equipment climbed at the highest pace since 2022. Omair Sharif, president of Inflation Insights, noted that core goods prices, excluding cars, jumped 0.55% in June—the largest monthly increase since November 2021. “Today’s report confirms tariffs are starting to impact consumers,” he stated in a note. Jerome Powell gets the ammo to hold on to rates, presuming nothing happens to him in the position of his in the ensuing weeks.

This Could Get Ugly

If Donald Trump follows through on his latest deadline when it comes to tariffs, a growing number of European Union member states want the bloc to activate its most powerful trade tool against the US. A French-led charge to deploy the bloc’s so-called anti-coercion instrument is said to be backed by more than half a dozen European capitals. Benjamin Haddad, France’s minister for European affairs, said earlier this week that the response from Brussels should include the option of using the tool, which gives officials broad powers to take retaliatory action. Those measures could include new taxes on US tech giants or targeted curbs on US investments in the EU. They could also involve limiting access to certain parts of the EU market or restricting US firms from bidding for public contracts in Europe. “In this negotiation, you need to show strength, you need to show force, unity and resolve,” Haddad told Bloomberg Television on Monday, adding “we can go further.”

Results This Week

This week, several Indian companies announced their Q1FY26 results, reflecting varied performances across sectors. Axis Bank reported a 4% year-on-year decline in net profit to Rs 5,806 crore, missing estimates due to higher provisions, despite a 2.8% rise in net interest income. Wipro saw a 2% sequential decline in constant currency revenue to Rs 22,080 crore, slightly below expectations, but its EBIT of Rs 3,813 crore beat forecasts, supported by operational improvements and an interim dividend of Rs 5 per share. LTIMindtree delivered robust results, with net profit rising 11% quarter-on-quarter to Rs 1,254 crore, and revenue rose 8%. L&T Technology Services reported a marginal 0.66% increase in net profit to Rs 315.7 crore, with revenue up 16.4% year-on-year, though it did face a 3.9% sequential revenue decline. Amongst others, Sterling and Wilson Renewable Energy posted a strong recovery, with net profit surging to Rs 38.7 crore from Rs 4.8 crore. However, the decline in order inflow to Rs 800 crore from the earlier Rs 2,000 crore brought the stock lower in trade.

Asian Markets Can Really Rip, Says Gavekal

Historically, the main driver of Asian stock markets has been the US dollar. When the dollar rose, Asian markets typically struggled—debt servicing costs rose, domestic monetary policy tightened and savers shifted from local currencies to dollars. In local currency terms, food and energy prices often rose, squeezing disposable income. However, off late, western fiscal issues, China's low electricity costs and emergence of other markets like India, and increasing local currency trade in Asia are reducing the dollar's dominance. As a result, Asian debt markets, measured in dollars, only rallied when both US interest rates and the dollar fell. Asian equity markets can now rise largely independently of US dollar movements or US interest rates—within reason, of course! Rather than relying on a weaker dollar, they now depend mainly on the strength of local bond markets. That said, if both align—local bonds rally and the dollar weakens—Asian equities could really rip.

As we end, one more interesting development in the media space. Apple is reportedly seeking to buy the rights to broadcast Formula One racing events in America after the success of “F1”. Starring Brad Pitt, the film is Apple’s biggest box-office hit, and goes with the excitement in the company around the media business. A personal preference - I will watch Kay Kay Menon's Special Ops Season 2. Hopefully it lives up to the expectations. Have a great weekend everyone.