- Markets retrench as they focus on US-China talks and Fed rate decision
The world stock market fell on Wednesday, while Treasury yields dipped. This was after the news that top U.S.
officials would be meeting with Chinese counterparts soon and before a Federal Reserve statement about its
monetary policy at the conclusion of their two-day meeting. After three days of declining against the yen, the
dollar index has risen. Gold, the safe-haven asset, fell after a two day rally. The Fed is expected to maintain
interest rates at their current level. The U.S. Treasury secretary Scott Bessent, and the chief trade negotiator
Jamieson Grer will meet China’s highest economic official at the weekend for discussions. This could be a first
step towards an agreement after U.S. president Donald Trump ignited the trade war last month with China’s
second largest economy. Bessent believes the meeting in Switzerland will be about “de-escalation.” China, on
the other hand, sounded more cautious and quoted a Chinese proverb that said actions speak louder than
words. - S&P 500 closes higher in volatile session as traders grapple with Fed and trade developments
The S&P 500 rose in choppy trading after the Federal Reserve signaled that the risks for an economic slowdown
and higher prices are increasing. The broad market index added 0.43% to close at 5,631.28, while the Nasdaq
Composite gained 0.27% to end at 17,738.16. The Dow Jones Industrial Average climbed 284.97 points, or
0.70%, and settled at 41,113.97. The 30-stock index was aided by a nearly 11% pop in Disney shares after the
company reported a fiscal second-quarter earnings beat and a surprise jump in streaming subscribers. As
expected, the Federal Open Market Committee held its benchmark overnight borrowing rate in a range
between 4.25% to 4.5%, where it has been since December. - Oil prices fall as Fed sees growing economic uncertainty
Oil prices fell on Wednesday, as the Federal Reserve sees growing economic uncertainty and investors look
toward U.S.-China trade talks this weekend. Brent crude futures fell $1.03 a barrel, or 1.66%, to close at $61.12
a barrel, while U.S. West Texas Intermediate crude fell $1.02, or 1.73%, to settle at $58.07 a barrel. The
Fed held interest rates steady on Wednesday, but said economic uncertainty has increased further and there
is risk of higher unemployment and inflation. “Uncertainty about the economic outlook has increased further,”
the Fed said in a statement. “The Committee is attentive to the risks to both sides of its dual mandate and
judges that the risks of higher unemployment and higher inflation have risen.” Both benchmarks plunged to
four-year lows this week after OPEC+ decided to speed up output increases, stoking fears of oversupply at a
time when U.S. tariffs have increased concerns about demand. The U.S. and China are due to meet in
Switzerland, which could be the first step toward resolving a trade war disrupting the global economy. The
U.S.-China trade talks come after weeks of escalating tensions that have seen duties on goods imports between
the world’s two largest economies soar well beyond 100%. “While the meeting may signal a thaw, expectations
for a breakthrough remain low,” said Thiago Duarte, market analyst at Axi. “Unless the U.S. receives major
trade concessions, further de-escalation seems unlikely,” he said. Investors also awaited the upcoming Fed
update on Wednesday. They expect the policy rate to remain in the 4.25%-4.50% range until the Fed’s July 29
30 meeting. - Gold slips more than 1% after Fed holds interest rates steady
Gold prices fell more than 1% on Wednesday, pressured by a firmer dollar and U.S.-China trade talks optimism,
while the Federal Reserve held interest rates steady. Spot gold slipped 1.1% to $3,390.26 an ounce. U.S. gold
futures lost 0.7% to $3,399.1. The U.S. dollar gained 0.2% against other fiat currencies. A stronger dollar makes
gold more expensive for other currency holders. The Fed held interest rates steady on Wednesday afternoon.
The U.S. central bank stuck to comments it had made in the past that it was in no hurry to cut rates, but
indicated in a post-meeting statement that it was keeping a close eye on economic volatility. “Uncertainty
about the economic outlook has increased further,” the statement said. “The Committee is attentive to the
risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation
have risen.” Market consensus remains that there will be no cuts before July. Higher interest rates tend to
pressure bullion as it yields no interest. Meanwhile, U.S. Treasury Secretary Scott Bessent and chief trade
negotiator Jamieson Greer will meet China’s economic tsar He Lifeng in Switzerland this weekend for talks that
could be the first step towards resolving a trade war disrupting the global economy. “China and the United
States are formally trying to start a conversation on tariffs, igniting optimism in risk markets,” said Bart Melek,
head of commodity strategies at TD Securities. Gold, considered a hedge against geopolitical risks, has risen
29.1% this year. “While we see limited upside (for gold) near term, we expect prices to push higher again in
second half of 2025, potentially hitting $4,000,” Bank of America said. China’s central bank added gold to its
reserves in April for the sixth straight month, official data showed. Elsewhere, spot silver shed about 1.8% to
$32.65 an ounce. Platinum slipped 0.3% to $982.15 and palladium shed 0.1% to $973.82. - Fed leaves rates unchanged, as expected
The Federal Reserve on Wednesday held its key interest rate unchanged as it awaits fluctuations in trade policy
and the direction of a sputtering economy. In a move that carried little suspense given the wave of uncertainty
sweeping the political and economic landscape, the Federal Open Market Committee held its benchmark
overnight borrowing rate in a range between 4.25%-4.5%, where it has been since December. The post-meeting
statement noted the volatility and how that is factoring into policy decisions. “Uncertainty about the economic
outlook has increased further,” the statement said. “The Committee is attentive to the risks to both sides of its
dual mandate and judges that the risks of higher unemployment and higher inflation have risen.“ However, the
statement did not specifically address the tariffs, though Chair Jerome Powell is sure to be asked about them
in his post-meeting news conference. - Germany finally has a leader. Now comes the hard part for Friedrich Merz
Friedrich Merz on Tuesday became Germany’s chancellor, succeeding in a second-round parliamentary vote
after initially failing to secure the necessary support. The first-round setback was unprecedented in Germany’s
modern history, and bruised Merz before his term even began. Merz is now facing a myriad of challenges,
including keeping his coalition government united and boosting Germany’s struggling economy. - Trump’s ambassador to China sworn in ahead of high-stakes talks in Switzerland
President Donald Trump’s pick for U.S. ambassador to China was sworn in, ahead of the first talks between
Washington and Beijing since Trump announced his 145% tariffs. “Only you could’ve picked this timing,” Trump
said from the White House for former Republican senator David Perdue’s swearing in ceremony. The U.S. and
China have been engaged in a tit-for-tat trade war since April 2 that has injected widespread uncertainty into
the U.S. economy. - Walt Disney shares rose 10.8% after the company reported fiscal second-quarter results that beat
estimates and raised its outlook for the full year, citing strong performances from theme parks and
streaming TV
The company’s experiences division, including resorts and cruises, saw increased visitors and guest spending
at parks in California and Florida, while its streaming business added new subscribers and recorded its fourth
straight quarter of profit. Disney announced plans for its first theme park in the Middle East, a sprawling resort
property in Abu Dhabi, and expects to record a modest sequential increase in Disney+ subscribers in the current
third quarter. Full-year 2025 earnings, excluding certain items, will rise 16% to $5.75 a share, Disney said, about
double its previous forecast for growth. Analysts were looking for $5.44 a share. Excluding some items, fiscal
second-quarter earnings rose 20% to $1.45 a share, beating the $1.20 a share average estimate. Revenue in
the period ended March 29 also came in higher than expectations, increasing 7% to $23.6 billion. - Uber shares fell 2.5% after the company reported weaker-than-expected quarterly gross bookings of $42.8
billion, citing lower US inbound travel and a strengthening US dollar. Analysts projected $43.1 billion
The company’s US rideshare business, which accounts for over half of its profitability, was affected by
decreased gross bookings per trip, partly due to fewer tourists coming into the US. The miss on the mobility
side was big enough to offset better-than-expected results at Uber’s delivery unit. Despite missing
expectations, Uber’s income was a bright spot, with diluted earnings coming in at 83 cents a share, far
exceeding the average analyst estimate of 51 cents. The beat stemmed from revaluations of its stakes in other
companies, it said. - Arm Holdings declined 11.6% in afterhours trading after giving a disappointing sales forecast for the
current quarter, stoking concerns about a tariff-fueled slowdown for the chip industry
Revenue will be $1 billion to $1.1 billion in the fiscal first quarter, Arm said. Wall Street had estimated a number
at the high end of that range. Profit will be 30 to 38 cents a share, minus certain items, also lower than analysts’
projections. The company blamed the conservative forecast on the timing of new agreements with customers.
Arm is in the process of closing licensing deals and wants to make sure they’re signed before it adds the revenue
to its outlook, according to Chief Executive Officer Rene Haas. Customers continue to push ahead with
investment in chips, particularly for artificial intelligence computing, and that’s benefiting Arm, he said. “We’ve
been conservative to make sure we don’t overreach,” Haas said in an interview. “The health of the business is
unbelievably strong. We’re seeing huge momentum in our data center business.” The company decided not to
provide investors with an annual target because of uncertainty, executives told analysts. A dearth of forecasts
from customers for 2025 means that Arm has less data on which to make its own projections, Chief Financial
Officer Jason Child said. Fourth-quarter revenue rose 34% to $1.24 billion, marking the first three-month
period that exceeded a billion dollars. That compares with a $1.23 billion prediction from analysts. - Unity (NYSE:U) Surprises With Q1 Sales But Quarterly Revenue Guidance Significantly Misses
Expectations
Game engine maker Unity (NYSE:U) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but
sales fell by 5.5% year on year to $435 million. On the other hand, next quarter’s revenue guidance of $420
million was less impressive, coming in 1.9% below analysts’ estimates. Its non-GAAP profit of $0.24 per share
was significantly above analysts’ consensus estimates. Unity (U) Q1 CY2025 Highlights: Revenue: $435 million
vs analyst estimates of $416.8 million (5.5% year-on-year decline, 4.4% beat); Adjusted EPS: $0.24 vs analyst
estimates of $0.11 (significant beat); Adjusted EBITDA: $83.94 million vs analyst estimates of $65.02 million
(19.3% margin, 29.1% beat); Revenue Guidance for Q2 CY2025 is $420 million at the midpoint, below analyst
estimates of $428 million; EBITDA guidance for Q2 CY2025 is $72.5 million at the midpoint, below analyst
estimates of $79.05 million; Operating Margin: -29.4%, up from -81.4% in the same quarter last year; Free Cash
Flow Margin: 1.7%, down from 23.1% in the previous quarter; Market Capitalization: $8.86 billion. “The
Company’s first quarter results once again meaningfully exceeded expectations on both revenue and Adjusted
EBITDA, highlighting our progress as we continue to build a culture of execution and discipline,” said Matt
Bromberg, President and CEO of Unity. - Teva Pharmaceutical’s branded drugs boost first quarter profit
Teva Pharmaceutical Industries (NYSE:TEVA) reported a larger than expected rise in first-quarter profit, helped
by strong sales gains for a trio of its branded drugs treating migraines, Huntington’s disease and schizophrenia.
The world’s largest generic drugmaker, Teva is relying on these and other innovative drugs to drive growth and
help it raise its operating margin by four points to 30% by 2027. “Two years ago, nobody thought Teva could
do anything in innovation,” chief executive Richard Francis told Reuters. “What we’re seeing now … shows
whether it’s the US, Europe or international markets, we’re really good at innovative R&D and innovative
commercialization.” Francis said generics remains a key pillar of its growth strategy and Teva plans a number
of copycat launches along with biosimilars in the next two years. Teva said on Wednesday it earned 52 cents
per diluted share, excluding one-time items, in the January-March quarter, up from 48 cents a share a year
earlier. Revenue rose 2% to $3.89 billion. Analysts had forecast earnings of 46 cents per share ex-items for the
Israel-based company on revenue of $3.99 billion, LSEG I/B/E/S data showed. Growth was led by a 39% rise in
sales of Huntington’s disease drug Austedo, a 26% gain in migraine medicine Ajovy and a 156% jump in
schizophrenia treatment Uzedy. Teva expects Austedo sales of $1.95-$2.05 billion in 2025, with Ajovy hitting
around $600 million and Uzedy at $160 million.
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