Tuesday 12th August 2025 |
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The US indices eased on Monday ahead of prints on consumer and producer prices due out this week. Investors will be focussing on the impact of tariffs on inflation, even as markets have largely priced in a Fed rate cut next month. Clarity over where things will land with America’s third largest trading partner has been pushed out. On the eve of its expiration, Donald Turmp has extended the tariff truce with China for 90 days. Big China-facing chip firms have though been able to firm up their position – Nvidia and AMD have agreed a deal to share 15% of their revenues from AI chip sales to China with the US government. The gold market has also received some clarity with the President confirming that gold bars will not be subject to duties. Another sector also received some good news of sorts – cannabis stocks surged following Trump’s comments that he is considering reclassifying marijuana as less of a danger to public safety. Concern over public safety more generally though appears to have driven a decision to federalise the police force in Washington DC, despite data showing that crime in the capital is at a 30-year low.
The Dow fell 0.5%, while the S&P500 and Nasdaq both backed off from record highs by 0.3%. Intel rose 3.5% as its CEO was said to be meeting Trump after the President’s calls for his resignation. Investors will have to wait a little longer to whether there will be a definitive trade deal between the US and China. Reciprocal tariffs were cut to 10% (with China getting an additional 20% in relation to fentanyl) back in May, with a 90-day trade reducing some rates. Trump has now extended the trade ceasefire through to mid-November.
Trump honed in on the semiconductor sector last week, announcing 100% tariffs for those firms who didn’t commit to bring more manufacturing back to US soil, with Apple held out as a shining example of what is expected. The US is now getting a piece of the action going the other way with Nvidia and AMD agreeing to cut the government in for 15% of their sales to China. Trump said that he had initially asked for 20%, but Nvidia’s CEO negotiated him down. The H20 chip had been off limits to China on national security grounds, but Trump claimed that it was now essentially an “old chip” with Huawei having a similar one. In exchange, the two semiconductor companies will receive export licenses to sell Nvidia’s H20 and AMD’s MI308 chips in China. Shares of both companies were modestly lower (but have had big runs). The deal will put billions of dollars’ worth of potential sales to China back on the table, but has opened up the question of whether similar deals will follow in the sector (and others). Also does it appear that US national security has a price?
The Administration’s efforts to drive American manufacturing appear to be meeting with success. Apple’s announcement of further investment (US$100 billion) last week was noteworthy. On Monday Ford announced it would invest US$2 billion in a Louisville, Kentucky, assembly plant aimed at rolling out more affordable electric vehicles (and with EV tax credits ending next month). The investment comes on top of US$3 billion already planned for a battery park in Michigan. The Detroit automaker plans to produce a midsize, four-door electric pickup at the Louisville Assembly Plant, from 2027.
Detroit is known for its car industry, but also a very high crime rate (top five in the US) although Donald Trump is focussed on a crackdown in the capital. The President placed the Washington DC police department under federal control and has deployed 800 National Guard troops. Trump evoked memories of the recent and not so recent past, saying “This is Liberation Day in D.C., and we’re going to take our capitol back.” The actions are unprecedented, and are interesting given the fact that stats show violent crime in DC has reached 30-year lows, and is down over 25% this year. There have been other claims about the motives and the abuse of power it may represent. The emergency measures need to be renewed every 48 hours, and formally expire after 30 days before requiring Congress approval. There have been questions raised about whether this may be a new trend. Trump deployed the national guard in LA a few months ago, and mentioned the crime rates in New York and Chicago during his conference overnight.
Investors are meanwhile expecting far less extreme things from this week’s inflation numbers. The July CPI is expecting to show a 0.2% increase month-over-month and a 2.8% increase annually. Core CPI is expected to rise 0.3% on a monthly basis and 3.1% yearly, up from June’s respective levels of 0.2% and 2.9%. A “hot” print could though disturb the notion that a Fed rate cut next month is a lock in.
With investors in much of the world focussed on whether inflation prints in the single digits will come in a few tenths of a percentage point higher or lower, it is easy to forget that some countries are dealing with a very different situation. The inflation rate in Zimbabwe hit 95.8% in July. The base interest rate is 35%. The Reserve Bank of Zimbabwe introduced, and subsequently devalued, a new currency last year. However there are still some collectibles of a bygone era from the late 2000’s floating around – the below pic was sent in by a friend who was in Zim watching the Black Caps (congratulations also to his son who took two wickets in his maiden test!).
On the stock front, cinema theatre group AMC Entertainment rose 3.4% as it narrowed quarterly losses from US$32.8 million to just US$4.7 million. Rumours of the box office’s demise may be greatly exaggerated – attendance increased 26% during the period. Revenues rose 35% year on year to US$1.4 billion. Half time choccies are though getting more expensive. Hershey fell 5% as cocoa futures rose 10%.
Also still on the rise are cryptocurrencies. Ether hit a record on Monday. Companies involved in the space are looking to cash in. The cryptocurrency exchange aptly named Bullish has raised the size of its initial public offering to US$990 million, with the Peter Thiel-backed company targeting a valuation of US$4.8 billion.
Americans may be heading back to the movies, but the attractions of home viewing remain as big as ever, including for followers of UFC. Days after completing its merger with Skydance, Paramount has acquired the US rights to TKO Group’s UFC for seven years, beginning in 2026. Paramount is paying an average of US$1.1 billion per year. Notably Paramount won’t charge users any additional fees for access to the events, with management making the bold claim that “The pay-per-view model is a thing of the past.”
Across the Atlantic, the STOXX50 was 0.3% lower. Orsted, the world’s largest offshore wind developer, plummeted 30% after a surprise (~US$9.4 billion) rights issue. The company said that it had ended the partial divestment of its Sunrise Wind project off the coast of New York. The company said there has been “adverse” developments in the US. Donald Trump doesn’t like wind power, and signed an executive order suspending new or renewed onshore and offshore wind leases on his first day in office. Trump, who is pro oil and gas, said at the time “Big ugly windmills ruin your neighborhood.”
In the UK, the FTSE100 rose 0.3%. Marks & Spencer shares rose nearly 3% after the retailer confirmed over the weekend that its click-and-collect service had been restored following a recent cyber-attack. It was a pretty quiet day in the UK aside from the news that Brits may soon be powered by Elon Musk. Tesla Energy Ventures has submitted a request for an electricity license to the British energy regulator Ofgem. Tesla is developing solar energy generation systems and battery energy storage products. It already is an electricity supplier in Texas. Musk will be hoping there is more demand for Tesla’s electricity than its cars – Tesla’s new car sales in the UK dropped by nearly 60% to 987 units last month, down from 2,462 a year ago.
In Asia, the Nikkei was closed while the Hang Seng rose 0.2%. Shares of Chinese vaccine maker Ab&B Bio-Tech surged 160% on their trading debut. Vietnam’s stock market rallied 1.5% to hit a record high.
New Zealand
In New Zealand, the Kiwi market rose 0.5% to 12,911.86. Fisher & Paykel Healthcare rose 0.6%, while Infratil jumped 1.8% on its divestment news. Mainfreight was 1.2% lower but EBOS jumped 0.4%. Fonterra Shareholders’ Fund rose 1.8% to a 5-year high, with reports that French company Lactalis is going to be a primary bidder for the cooperative's consumer business. ERoad rose 7.2%, continuing its rise following the government’s announcement around transitioning the light vehicle fleet to road user charges.
This morning there have been a couple of notable announcements. Spark is selling 75% of its data centre business to private capital manager Pacific Equity Partners. It has been well flagged that Spark was looking to divest this business, and the transaction values the business at up to $705 million. The price looks to be a good one at 30.8x FY25 earnings (EBITDA). The deal will see Spark partner with a highly reputable player, and while giving away some long-term upside will also allow shareholders exposure to the growing demand for data storage on the back of the AI thematic, as it also leverages existing customer relationships. It will also secure a funding pathway to build out Spark’s planned 130MW+ data centre capacity development pipeline. The deal looks to be a good outcome for Spark and one it had to do to pay down debt, preserve its credit rating, and protect the dividend. Spark expects to receive cash proceeds of approximately $486 million at completion, with additional contingent proceeds of up to $98 million.
There was also a very notable release from Vulcan Steel, as we are possibly seeing the first cyclical company to recount sightings of “green shoots.” The company expects to report FY25 earnings (EBTIDA) of $106 million to $109 million (against $148m last year). Net debt has reduced further to $232 million from $242 million at 31 December 2024, and from $276 million at the end of FY24. The company has been dealing with irrational pricing amidst “persistent economic challenges” in both New Zealand and Australia, but management say there are signs that downward economic trends are “beginning to level out.” Pricing will improve as volumes improve. Over the last three months, daily sales activity has shown signs of stabilisation, with a modest uplift in activity in some segments. The company sees sales volumes remaining broadly stable at low levels in the first half of FY26, before firming in the second half of FY26. Green shoots!
The agri sector has been a bright spot in our economy, and this was also evident in results from PGG Wrightson this morning. FY25 Operating Revenue at the ag supply business rose 6% to $975.3 million while earnings (EBITDA) rose 27% to $56.1 million. The Agency group delivered very strong results led by Livestock and Real Estate. The company noted that constrained supply for livestock and increased international demand drove up red meat and dairy commodity prices. This has had a positive influence on the profitability of farming operations. The shares are up 5% and are over 60% higher year to date.
Australia
The ASX200 rose 0.4% to a record 8,844. The mining sector rallied over 1.5%. BHP leapt 1.6% and Rio rose 1.5%. Banks were firmer, with Westpac leading the way higher, up 1.9%. On the downside Block fell 9%, giving back the previous day’s rise and JB Hi-Fi was 8% lower following the resignation of its long-serving CEO which overshadowed its results (FY25 sales +10% to A$10.56 billion and profits up 5.4% to A%462.4 million). Iress fell 7% on its numbers while auto digital marketplace Car Group rose 0.5% on its results.
The mining sector starred. The news that Chinese battery giant Contemporary Amperex Technology had suspended production at a key lithium mine saw lithium stocks surge. Pilbara Minerals soared 20% and Mineral Resources leapt 12%. Iron ore miners were also in demand as prices for the steel-making ingredient gained on reports that authorities have removed some restrictions on property purchases in Beijing.
It's decision day for the RBA – a 25 bps cut or something even grander? Let’s see.
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