Customs disruption fails to instill confidence
In a recent development, the threatened tariffs of more than 100% in US-China trade have been suspended for now, providing temporary relief for both economies. However, experts at Landesbank Helaba have expressed concerns about potential data quality issues that could impact economic forecasts.
Meanwhile, the Euro Stoxx 50 inched up to 5,334 points, while the German benchmark index closed slightly lower at 24,050 points at midday. Sartorius was the biggest DAX winner with a gain of nearly 4%, benefiting from an upgrade by Jefferies analysts. On the other hand, Secunet fell 3.5% following the release of its final quarterly results.
The focus on Tuesday is on US consumer prices, with the current outlook indicating moderate inflation. The core Consumer Price Index (CPI) is expected to rise to around 3%–3.3% by the end of 2025, despite the recent suspension of threatened US-China tariffs reducing immediate tariff-driven inflation pressures. Price increases are projected to be broad-based, though some food price categories will grow slower or decline, and energy prices have shown recent declines.
Key details include:
- US annual inflation rose slightly to 2.8% in July 2025, with core inflation (excluding food and energy) near 3.1% year-over-year; monthly CPI increased 0.2% in July.
- Tariff-driven inflation remains contained currently, as businesses are utilizing pre-tariff inventories and trade zones to absorb costs, but these buffers may fade raising inflation pressures later in 2025.
- Food-at-home prices are forecast to rise by about 2.2% in 2025, slower than the 20-year average, with some categories like eggs and beef rising faster, while others like fresh vegetables and fats are expected to decline.
- Energy prices fell modestly in July 2025, helping to moderate headline inflation.
- The Federal Reserve may start easing interest rates later in 2025 as inflation pressures remain manageable and labor market softening continues.
In the German stock market, Norma Group jumped 10.1% in the SDAX, outperforming expectations in the second quarter and reaffirming its annual targets. Maersk's stock rose by around 4%, benefiting from the extension of the U.S.-China trade truce. However, SAP shares were the worst performer, down 3%, likely due to chart technical pressure. Hannover Rück shares fell 2.5% after reporting half-year results and reaffirming its annual targets but disappointing with its operating result. The MDax lost 0.7% to 31,062 points.
This outlook reflects a shift from tariff-driven price shocks to a more complex inflation environment, with factors such as energy, labor markets, and supply chains contributing to inflationary pressures. As the tariff threat eases, the attention shifts to managing these broader economic factors to maintain a stable and growing economy.
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