Before the bell: New record in Japan

In China, investors barely react to extended US–China trade deal; Japanese market hits new record

In China, investors showed little reaction to the news that the US–China trade deal would be extended. In Japan, however, stocks were actively bought. Later today, attention will turn to the US inflation report, which will help shape interest rate expectations.

New record in Japan

On Monday evening, Donald Trump signed an executive order granting China another 90 days to benefit from current favorable trade conditions. This means Chinese import tariffs will not rise to 80–85 percent as previously planned. This is already the second extension, raising questions about whether the US intends to pursue the trade war as aggressively as before.

In China, investors hardly reacted: the Hang Seng Index remained flat, and the SSE Composite Index in Shanghai gained only 0.5 percent. In Tokyo, it was a different story: the Nikkei jumped 2.2 percent to a new record of 42,738 points, with Sharp (+10.5%) and SoftBank (+5.1%) posting strong gains. The Topix rose 1.5 percent as investors eagerly bought into companies with strong earnings reports.

For Danish wind turbine maker Ørsted (-30%), the news was less favorable: the company needs to raise 60 billion Danish kroner to address financial difficulties. Falling subsidies and rising material costs continue to put profitability under pressure. Belgian palm oil producer Sipef (+6.4%) benefited from strong results and growing investor interest in the sector; it will present its half-year figures on Thursday. In the US, Micron Technology (+4.1%) gained after reporting better-than-expected quarterly results.

This morning, Dutch group TKH reported a 55 million euro drop in its order book, now at 1.08 billion euro. Plans to ramp up production at its new Eemshaven plant have faced delays. Belgian e-invoicing firm Banqup Group announced the completion of the sale of its UK print operations, which had 7 million euro in revenue, though the sale price was not disclosed.

Later today, all eyes will be on the US inflation report. Markets currently expect two interest rate cuts in the US this year, but a higher-than-expected reading could quickly change that outlook. Germany’s ZEW report—measuring economic sentiment among analysts and institutional investors in Germany and the eurozone—will also be released.

Italy ahead of the Netherlands

Do you know Twentsche Kabelfabriek? The Dutch technology company supplies cable and network systems, including fiber optic cables for offshore wind farms. The challenges facing the offshore wind sector also seem to be impacting TKH Group: its order book dropped by 55 million euro to 1.08 billion euro. The new Eemshaven factory, opened in March 2024, is still not operating at full capacity. Trade conflicts have added further headwinds.

Management expects improvement in the second half of the year, but for now, investors must look past the first-half earnings drop, with adjusted EBITA down 27.8 percent due to production problems. While the electrification theme remains attractive, at Spaarvarkens we also keep an eye on competitors such as Prysmian in Italy and NKT in Denmark.

Circle Internet Group: interest income under pressure

How fast will Circle Internet Group’s revenue grow in the coming months? That’s the key question ahead of its quarterly results. Think of Circle as a kind of bank—but instead of holding dollars, it manages USDC, the world’s second-largest stablecoin, pegged to the dollar.

From a business model perspective, the idea is clever: investors deposit dollars with Circle and receive USDC in return. The 65.5 billion dollars in USDC is then invested in short-term US Treasuries, generating interest income. This year, such income is expected to reach around 2.5 billion dollars.

However, we caution against blindly following this popular company. Even if you believe in further USDC adoption, the main profit driver—interest income—will likely face pressure when US rates decline, as expected next year. In the current phase of the interest rate cycle, we see no compelling reason to invest in a company whose core revenue stream may soon be squeezed.

Did you know…

Tank prices in Europe are set to fall as production ramps up, according to Rheinmetall’s CEO. In the past, tanks were produced in such small quantities that no economies of scale were possible. Ammunition prices have already begun to drop.

This article was translated from Dutch and was originally published on Spaarvarkens.be.