Before the bell: Europe promises significant cost reductions for businesses

Fed wants to cut rates, but Trump fuels uncertainty. Europe steps in to support businesses. Microsoft, Meta, and Tesla report billion-dollar figures.

Wall Street closed yesterday with a half-percent loss but was trading significantly lower earlier in the day. While the Fed kept interest rates unchanged as expected, Jerome Powell’s commentary helped soften the losses. Powell stated that rates are relatively high and slowing the economy while predicting further inflation declines. In short: rate cuts are still in the pipeline. However, he also highlighted uncertainty due to potential import tariffs and the ongoing immigration situation. Effectively, he passed the hot potato to President Trump. In Europe, Commission President Ursula von der Leyen promised to introduce legislation within the first 100 days of her mandate aimed at reducing regulations and cutting European business costs by 37 billion euros per year. This includes easing reporting obligations, which will be welcomed by the financial sector and fund managers, among others. However, the real impact remains to be seen. In any case, implementation will take time, as European directives must first be translated into national legislation.

This morning in Asia, Japan’s Topix climbed 0.2%. Hong Kong remains closed for the Chinese New Year holiday. Following the Fed’s decision, attention now shifts to the ECB, which is expected to proceed with rate cuts. Today, we expect earnings from WDP (EPS 1.50 euros, with a livestream presentation at 10 a.m.), KPN, Deutsche Bank, H&M, and Quest For Growth. After Wall Street closes, Apple and Intel will release their results.

Billions from M&M

Tech giants Microsoft and Meta both reported quarterly earnings after the market closed yesterday. Meta’s results were particularly strong, with revenue of 48.5 billion dollars and earnings per share of 8 dollars—significantly exceeding expectations. The biggest surprise was profitability. Analysts pressed CEO Mark Zuckerberg on whether AI’s reduced operating costs would lead to lower investments. Zuckerberg responded: “That’s already factored into our 65 billion dollar investment budget announced a few weeks ago. Otherwise, it could have been even more!” User numbers also saw a sharp increase, while the average ad price grew by 14%. Meta’s stock surged over 5% in after-hours trading. Microsoft had no reason to be ashamed either, posting revenue of 69.6 billion dollars (+12%) and earnings per share of 3.33 dollars. However, its cloud revenue grew 31%—slightly below the expected 31.8%. Last quarter, growth stood at 34%, so the stock dipped in after-hours trading. CEO Satya Nadella also confirmed that Microsoft has no plans to reduce AI investments.

Still waiting for the robotaxi

Tesla’s earnings were in line with the weaker sales figures the company had already disclosed. Profit margins fell further due to discounts aimed at avoiding lower revenue figures. The company’s operating profit margin declined by 25% over the year. Tesla’s net profit for 2024 totaled 7 billion dollars, marking a 53% decline from the previous year. However, industry experts argue that the real game-changer is Tesla’s upcoming cheaper model, expected before the end of the first half of the year. Even more critical is the long-anticipated robotaxi, scheduled for a 2026 launch. Tesla shares rose 4.2% in after-hours trading.

Did you know…

Donald Trump isn’t the only one advocating for domestic companies? The European Commission plans to prioritize European firms in strategic sectors when awarding public contracts.

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