A quiet and tentative optimism is gracing European markets at the start of the new trading week, with stocks poised for a slightly higher open on Monday.

This fragile calm comes after a turbulent end to the previous week and against a complex global backdrop, as investors digest conflicting economic signals from China and the lingering echo of a pivotal policy hint from the US Federal Reserve.

With US financial markets closed for the Labor Day holiday, Europe is left to set its own tone, and early indications point to a cautious but positive start.

Data from IG suggests Germany’s DAX and Italy’s FTSE MIB will both open around 0.12% higher, with France’s CAC 40 up 0.1%.

The Asian ambiguity: a conflicting signal from China

The session is unfolding against a mixed and somewhat confusing picture from the Asia-Pacific region. The key data point overnight was a set of dueling manufacturing reports from China.

The private RatingDog survey—formerly the Caixin PMI—showed a welcome return to expansion, with a reading of 50.5. However, the official government data, released on Sunday, remained in contraction territory at 49.4.

This divergence paints an ambiguous picture of the health of the world’s second-largest economy, leaving investors to wonder which signal to trust.

The diplomatic thaw: a new partnership in the east

On the geopolitical front, a more clearly positive narrative is emerging. Investors are continuing to assess the significant warming of relations between India and China.

Following a landmark meeting at the Shanghai Cooperation Organization summit, leaders from both nations agreed that they are “development partners, not rivals,” a major diplomatic breakthrough that could have long-term positive implications for regional stability and trade.

The shadow of the Fed: a dovish echo lingers

While the immediate economic calendar in Europe is light, the market is still very much operating in the shadow of last week’s events.

Regional markets closed lower on Friday as traders wrestled with a volley of inflation data.

But the week’s defining moment was a speech from Fed Chair Jerome Powell, which was widely interpreted as dovish-tilting and significantly stoked expectations for an interest rate cut at the central bank’s next meeting on September 16-17.

It is this prospect of easier monetary policy that is providing a quiet, underlying support for equities as a new and uncertain week begins.

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The CAC 40 Index has slumped in the past few days as concerns about the country’s political crisis has continued. It has slumped to a low of €7,740, down by 3.28% from its highest point this month. This article explores what to expect now that bond yields have jumped.

Why French stocks have plunged

The CAC 40 Index has plunged in the past few days, moving from a high of €8,000 in August to a low of €7,740. The crash happened as investors reacted to the ongoing political crisis that could see the Prime Minister, Francois Bayrou, lose his job in the near term. 

Bayrou is the country’s fifth prime minister since 2020. He took over from Michel Barnier, who was the prime minister between September and December last year. Gabriel Attal was the premier between January and September last year, while Elisabeth Borne lasted for two years. 

The ongoing political crisis is primarily driven by the country’s fiscal situation as the debt pile continues rising. As a result, the government has attempted to implement some reforms that will help it to reduce spending. 

Like Italy, it has attempted to implement fiscal discipline, which has led to substantial protests. As a result, with no end in sight, borrowing costs have surged even as the European Central Bank has slashed interest rates in the past two years.

Read more: Top CAC 40 shares to watch: LVMH, BNP Paribas, Vivendi and more

Data shows that the 10-year bond yields has jumped to 3.56%, its highest level since March 17. Similarly, the five-year yield has risen to 2.85%. In contrast, the German 10 year yield has risen to 2.7% and the five-year has risen to  2.30%.

The rising government bond yields have made stocks less attractive, with many investors rotating to the bond market.

Meanwhile, the index has been affected by the ongoing performance of the Chinese market. French stocks are more exposed to the Chinese market because most of them do a lot of business there. 

Some of the most exposed firms are luxury brand firms like LVMH, Kering, and Hermes. Kering’s stock has dropped by 4% this year and 53% in the last three years.

Hermes, often seen as the gold standard of the industry, has dropped by 10% this year, while LVMH has slumped by 20% this year. 

Other companies exposed to China like Pernod Ricard and Accor have also slumped. Capgemini’s stock price has plunged by 23% this year as demand for tech consulting has waned. 

Some of the top laggards in the CAC 40 Index are companies like Carrefour, Renault, Stellantis, and Publicis Groupe. 

On the other hand, the top gainers in the index are companies like Legrand, Safran, Thales, Vinci, Société Générale, and BNP Paribas.

CAC 40 Index technical analysis 

The daily chart shows that the CAC 40 Index has pulled back in the past few days, moving below the 50-day and 25-day moving averages. It formed a triple-top pattern at €7,956 and a neckline at €7,500. 

The most likely scenario is where the stock drops further ahead of the vote of no confidence. If this happens, the next point to watch will be at €7,500. A move above the resistance point at €7,956 will invalidate the bearish outlook.

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On Monday, Norwegian energy giant Equinor publicly committed its support for Orsted’s proposed $9.4 billion rights issue. 

This significant financial move by the Danish offshore wind developer comes as the company endeavors to strengthen its balance sheet, according to a Reuters report. 

The decision to bolster its financial standing is largely influenced by the challenging political climate in the US, particularly the perceived hostility towards wind power from President Donald Trump. 

Orsted’s initiative reflects a proactive strategy to navigate potential headwinds in the renewable energy sector, ensuring its long-term stability and continued investment in offshore wind projects despite external pressures.

Strategic alliance and challenges

The decision by the Norwegian energy conglomerate, with the state holding a substantial 67% ownership stake, underscores its strategic intent to deepen its collaboration and forge stronger alliances with Orsted. 

This concerted effort comes at a crucial juncture as both companies endeavor to navigate the intricate and often challenging regulatory landscape within the burgeoning US offshore wind market. 

The move is indicative of a broader ambition to consolidate their positions and overcome the various governmental and environmental stipulations that define this rapidly evolving sector.

“In response to the challenges facing offshore wind, the industry will see consolidation and new business models,” Equinor said in a statement.

Equinor believes that a closer industrial and strategic collaboration between Orsted and Equinor can create value for all shareholders in both companies.

The leading Danish multinational power company, is set to convene an extraordinary general meeting (EGM) of its shareholders this Friday. 

The primary agenda for this crucial meeting is to seek approval for a significant capital raise. This decision comes in response to what the company has termed “material adverse developments” impacting the US renewable energy sector, particularly within the offshore wind market where Orsted holds substantial investments.

The need for additional capital underscores growing challenges within the American clean energy landscape, including inflationary pressures, supply chain disruptions, and rising interest rates, which have collectively increased project costs and diminished anticipated returns for developers. 

Equinor’s interest

Equinor has announced its firm intention to subscribe for new shares in Orsted, a leading developer of offshore wind power. 

Equinor, which currently holds a 10% stake in Orsted, plans to invest up to 6 billion Danish crowns (approximately $941 million) in this subscription. 

This substantial investment underscores Equinor’s strong confidence in Orsted’s strategic business direction and its robust project pipeline. 

This move by Equinor is anticipated to further strengthen Orsted’s financial position, enabling it to accelerate its ambitious development plans for new offshore wind farms around the world. 

The continued collaboration and investment from key partners like Equinor are vital for driving the large-scale deployment of renewable energy infrastructure necessary to meet global climate goals.

Equinor intends to nominate a candidate for election to Orsted’s board at the upcoming annual general meeting.

Industry outlook

Last month, the US Bureau of Ocean Energy Management (BOEM) issued a work-stop order for Orsted’s Revolution Wind project, valued at $1.5 billion, despite it being 80% complete. 

This marks the second significant suspension of an offshore wind project by BOEM this year.

Equinor’s Empire Wind 1 project, located off the coast of New York, was previously halted by BOEM in April. 

Equinor stated that it is closely monitoring the situation in the US and will continue to engage in dialogue with Orsted as developments occur.

Orsted, 50.1% owned by the Danish state, has reaffirmed its commitment to a rights issue, a decision supported by the Danish finance ministry, despite a recent setback in the US.

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Ola Electric’s stock leaped as much as 13% on Monday, extending the two-week uptrend that has driven gains of over 45% since mid-August.

Key triggers behind this spike include strong technical momentum: the stock performed a breakout above previous resistance, supported by high volume and a series of higher price lows.

The Relative Strength Index (RSI) touched 75, signalling an overbought zone and hinting at either a pause or profit booking ahead.

The underlying catalyst was regulatory: Ola’s top-selling Gen 3 scooter range received coveted Production Linked Incentive (PLI) certification, making the company eligible for government support worth 13–18% of sales until 2028.

This covers the lion’s share of Ola’s scooter volume and is intended to boost both margins and profitability from Q2 FY26 onwards.

Management and analysts say the improvement in cost structure could be significant, positioning Ola closer to EBITDA positivity “sooner than earlier expected”.

In addition to PLI benefits, investors have reacted positively to Ola’s push into local battery manufacturing, efforts to reduce dependence on rare earth metals, and technological upgrades in charging speed.

The company also launched new models like the S1 Pro Sport and Roadster X+, aiming for delivery rollouts through late 2025 and early 2026.

Ola Electric’s stock: Financial progress, but caution lingers

Despite the stock euphoria, Ola’s underlying financials are still under pressure.

For Q1 FY26, Ola reported a net loss of ₹428 crore, wider than the previous year but an improvement from the March quarter as operating costs fell.

Quarterly revenues halved year-on-year to ₹828 crore, though gross margin improved to 25.6%.

Notably, Ola’s auto segment turned EBITDA positive for the first time in June, reflecting impact from cost cuts, vertical integration, and initial incentives.

The company has guided for full-year improved profitability and a gross margin target of 35–40% in subsequent quarters, contingent on higher PLI benefits and growing market share.

Ola delivered 68,192 vehicles in Q1, with new models expected to drive further growth.

However, the stock still trades 43% lower year-to-date and remains well beneath its ₹76 IPO price.

Sentiment among analysts is mixed as some see Ola as a potential long-term winner in the Indian EV sector, especially as production scale rises and policy support persists.

The others point to continued cash flow challenges, pressure to capture and defend market share, and the memory of this year’s steep share declines.

Inflection point, or passing wave?

The current rally in Ola Electric is an intersection of bullish policy momentum, early signs of financial improvement, and technical excitement.

If cost controls, PLI incentives, and ambitious production targets are delivered on, Ola could indeed mark a turning point for India’s EV industry.

But with losses still substantial, the market likely awaits proof of sustained profitability to turn recent optimism into long-term conviction. For now, the rally is equal parts hope and risk, a microcosm of the maturing Indian EV marketplace.

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Tesco share price jumped to a decade high on Monday, continuing an uptrend that started in April when it bottomed at 302p. TSCO stock soared to a high of 435p, bringing its market capitalization of over £28.4 billion. 

Tesco is thriving and growing its market share

Tesco, the biggest retailer in the UK, has continued to grow its market share in the past few months. A recent report by Kantar showed that its market share rose to 28.4%, almost double that of Sainsbury’s, which has about 15% in share. 

Tesco’s market share is also much higher than ASDA’s 11.8% and Aldi’s 10.8. The company will likely continue growing its market share after the recent data showed that inflation in the country was rising.

Its market share is notable because analysts were expecting  Aldi’s price cuts to boost its market share, which has not happened because of Tesco’s price match strategy. Indeed, Asda has continued to lose market share i

A report by the Office of National Statistics (ONS) showed that the headline consumer inflation jumped to 3.6% in July, continuing a trend that has been going on in the past few months.

Tesco benefits from high inflation because it helps it boost prices, increasing its margins. Its scale helps the company to negotiate prices with suppliers, ensuring that its prices are lower than those of its competitors.

The most recent results showed that Tesco’s business continued thriving in the 13 weeks to May 24th. These numbers showed that its sales rose by 4.6% to over £16.38 billion, with the Republic of Ireland (ROI) experiencing the most growth at 5.5%.

The UK revenue rose by 5.1% to £12 billion, while Booker and Central Europe rose by 2% and 4.1%, respectively.

Most importantly, the growing revenue has pushed the company to accelerate its shareholder returns. It is in the process of buying back shares worth over £1.45 billion, a move that will continue to shrink its outstanding shares. It ended last quarter with 6.7 billion outstanding shares, down from over 7.67 billion in 2021.

The ongoing share buyback and the increasing dividends have helped to push its annual yield to 3.17%, making it a top company for dividend investors.

Tesco share price technical analysis

The weekly timeframe chart shows that the TSCO stock price has been in a strong bull run in the past few months. It recently crossed the important resistance level at 387.3p, its highest point in February, invalidating the double-top pattern whose neckline is at 301p. 

The stock has remained above the 50-week and 100-week moving averages. Also, the Average Directional Index (ADX) has moved to 28, a sign that the momentum is continuing. 

Therefore, the stock will likely continue rising as investors target 500p in the coming week. A drop below the support at 387p will invalidate the bullish view.

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Asian markets closed mixed on Monday, with most indexes ending in the red after a tech selloff in the United States. It was one of those days when bad news from Wall Street just rippled across the region.

Japanese and South Korean chipmakers got hit particularly hard since they’re so tied to what happens with US tech companies. When American semiconductor stocks tank, it usually drags down their Asian suppliers and partners too.

China was a bit of a mixed bag, though. While the broader market was down, some of their tech companies actually did okay thanks to all the AI buzz.

Asian markets: Nikkei 225 hits 3-week low

Japan’s Nikkei 225 dropped to its lowest close in three weeks as investors got spooked about the AI competition heating up.

The index fell 1.24%, or about 530 points, to end at 42,188.79. At one point during the day, it was down more than 2% before recovering slightly.

The broader Topix index didn’t get hit quite as hard, falling 0.39% to 3,063.19, but it still reflects the overall cautious mood in Japanese markets.

Hong Kong had a much better day than most of Asia, with the Hang Seng Index jumping 2.15% to close at 25,617.42. That’s a solid gain when most other regional markets were struggling.

Chinese companies listed in Hong Kong did well too, with the China Enterprises Index up nearly 2% to 9,121.87. But the real standout was the Tech Index, which climbed 2.20% to 5,798.96.

Korean markets slip on tech sector worries

South Korea’s Kospi index plunged 1.35% to 3,142.93, and the smaller Kosdaq dropped even more at 1.49% to 785.

Korean markets have been particularly sensitive to tech sector worries lately, so the selloff there wasn’t too surprising.

Australia joined the decline too, though not as dramatically. The S&P/ASX 200 slipped 0.51% to 8,927.70, which is pretty mild compared to what we saw elsewhere in the region.

China’s CSI 300 remained flat on Monday as investors remained cautious about the overall volatility. The index surged 0.60% higher to close at 4,523.71 on Monday.

Sensex climbs 568 points

By the end of the day, Indian markets had a pretty solid session. The Sensex climbed 568 points to close at 80,377.74, up 0.71%, while the Nifty gained 198 points to finish at 24,625.10, up 0.81%.

The breadth was impressive too, as over 2,600 stocks went up compared to just 1,300 that fell.

Auto stocks were the big winners, with the Nifty Auto index jumping 2.7%. Consumer durables weren’t far behind at 2.2%. Even the smaller companies did well, with mid-caps up 2% and small-caps gaining 1.7%.

That’s a sign investors weren’t just buying the big names; they were feeling optimistic across the board.

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As the US imposes punitive tariffs on over $60 billion of Indian exports, investors are left grappling with the implications for their portfolios. 

In an interview with Invezz, Bill Mann, Chief Investment Strategist at Motley Fool Asset Management, outlined a proactive approach to navigating this turbulent landscape. 

“For investors, this isn’t a reason to panic-sell; it’s a reason to focus on resilience,” Mann said, emphasising the importance of investing in high-quality companies with pricing power. 

With critical sectors like textiles and gems facing potential export collapses of up to 70%, the stakes are high for India, which has become a focal point in US trade policy. 

A sought-after public speaker and commentator, Bill’s expertise spans a wide range of industries.

His deep understanding of corporate governance issues led him to testify as an expert witness before the US Senate Committee on Commerce, Science & Transportation, regarding the collapse of Enron.

Mann cautioned against overreacting to tariff-induced volatility, suggesting that opportunities exist in technology and energy infrastructure. 

“We’re seeing a surge in demand for power generation and transmission capacity,” he noted, highlighting sectors that could benefit from the ongoing energy buildout. 

The strained US-India relationship, marked by these tariffs, poses challenges for bilateral trade and investor confidence. However, Mann believes that companies capable of adapting to shifting trade flows will thrive. 

At Motley Fool Asset Management, we focus on companies that can compete globally, regardless of policy twists. 

As global GDP growth is projected to slow to around 3.0% in 2025, Mann’s insights offer a roadmap for investors looking to capitalise on resilient markets while navigating the complexities of international trade.

Edited excerpts:

Strained trade relation

Invezz: How will the US tariffs affect India’s GDP and critical sectors like textiles and gems?

Of more than $86 billion in goods exported from India to the US, more than $60 billion are now subject to punitive tariff rates. 

A New Delhi-based think tank called The Global Trade Research Initiative predicts that segments like textiles and gems could suffer as much as a 70% collapse in exports to the US, as these industries have not received any tariff waivers, unlike other segments such as pharmaceuticals.

Invezz: How might tying tariffs to India’s Russian oil purchases reshape global trade, especially for competitors like China or Vietnam?

China and Vietnam will remain highly interested in this outcome. India has been a favored destination as foreign companies have looked to both India and Vietnam as viable manufacturing alternatives to China.

Invezz: How might strained US–India ties influence investor confidence and bilateral relations?

Since the aftermath of “Liberation Day” in April, American investors have taken the threat of tariffs in stride. 

The Trump administration has pointed to trade imbalances being driven by policies that favor global competitiveness over domestic consumption.

It’s remarkable that it is India, rather than Russia or China, where the US has drawn the hardest line.

Investment strategies

Invezz: How should investors adjust portfolios to manage risks from the 50% US tariffs on $60 billion of Indian exports, especially in textiles and gems? Any recommended asset classes or regions?

Of the $86 billion in Indian exports to the US, $60 billion is now under tariffs, and industries like textiles and gems could see exports collapse by as much as 70%. 

We believe that, for investors, this isn’t a reason to panic-sell; it’s a reason to focus on resilience. 

Our philosophy is to stay invested in high-quality companies with pricing power. 

We’re cautious on tariff-sensitive consumer goods but see opportunities in technology, energy infrastructure, and companies positioned to benefit from AI-driven demand for power. 

We believe that volatility here is not something to fear; it’s where active managers can find value.

Invezz: With global GDP growth projected to slow to around 3.0% in 2025 due to trade tensions and policy uncertainty, how should investors position themselves to capitalise on resilient markets like India, despite the US tariffs impacting $60 billion of its exports?

You have to ask why India is a preferred soft target for US sanctions. 

For many reasons, the Indian economy is less export-oriented and more domestically focused than many other countries in Asia, especially China and Vietnam. 

Still, Standard Chartered suggests that if these tariffs remain, it could impact the Indian economy by as much as 1% of GDP. 

That’s a devastating contraction. 

Will India open up its agricultural market as the US is demanding? Will it choose to align itself with the US or with China and Russia? 

For better or for worse, the Indian stock market, writ large, hasn’t really overreacted. 

Our preferred way to invest in the growth of countries around the world is through companies that have the opportunity to capitalise on trends that we believe should be more immune to macroeconomics.

US technology leaders like Microsoft offer high-quality opportunities to benefit from growth in India, with its cloud services arm, Azure, growing at a 34% annual rate.

Energy and trade

Invezz: Energy Market Impact: With tariffs tied to India’s Russian oil purchases potentially spiking Brent crude prices, how might this affect investor sentiment in energy-intensive sectors or create opportunities for US energy firms?

The tariffs are closely tied to India’s Russian oil purchases, which highlights how energy remains at the center of global trade tensions. 

While this creates uncertainty for energy-intensive industries like transport and manufacturing, it also reinforces the opportunity for US energy and infrastructure companies. 

We’re seeing a surge in demand for power generation and transmission capacity, with equipment backlogs stretching years and pricing power firmly in suppliers’ hands. 

At Motley Fool Asset Management, we view these bottlenecks not as risks to avoid, but as catalysts for companies positioned on the right side of the energy buildout.

Invezz: How will targeting India with tariffs impact its competitiveness versus Vietnam, and what does this mean for US-India trade talks?

These tariffs deliberately hit Indian industries without waivers, leaving pharmaceuticals untouched while weakening sectors like textiles. That opens the door for Vietnam and China to capture market share. 

At Motley Fool Asset Management, we don’t try to guess every policy twist; instead, we focus on companies that can adapt and compete globally, regardless of shifting trade flows.

Inflation

Invezz: Given forecasts of uneven global inflation and rising bond yields in 2025, how can investors navigate tariff-induced price pressures and market volatility to identify opportunities in sectors like technology or sustainable energy?

Why are we presuming that tariffs will be inflationary? 

There is a long history of trade protection in countries like India through the 1990s and Japan up until a few years ago that suggests the exact opposite is just as likely. 

The US tariff regime is in place to reorder global trade, which, as a direct byproduct, could mean that massive amounts of capital resources will be stranded, particularly in China, which has the largest concentration of manufacturing assets on the planet. 

Stranded or poorly returning capital assets of a sufficient scale are deflationary in nature. 

Couple that with the OPEC unwind of more than 2 million barrels per day of voluntary production cuts, and it is possible that these dynamics do not support inflation. 

Our philosophy at Motley Fool Asset Management isn’t really about navigating pressures that may or may not come to pass; rather, it’s about finding companies that have characteristics that should help them succeed regardless. 

For example, we have very little exposure to sustainable energy because our questions around the long-term profitability of the space are too substantial.

Instead, we’ve focused on construction and services companies that specialise in energy infrastructure.

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Dow futures showed some modest strength on Monday, staying in a pretty tight trading range. It’s the kind of cautious optimism you get when investors are trying to feel their way through uncertain times.

After all the recent market choppiness, especially with tech stocks getting beaten up, the Dow’s relative stability is notable.

While growth stocks and semiconductors have been all over the place, the more traditional blue-chip companies that make up the Dow seem to be holding their ground better.

Traders are basically in a wait-and-see mode right now. There’s a bunch of economic data coming out this week that could move markets, plus everyone’s still trying to figure out what all the global volatility means for US companies.

5 key signs from Wall Street today

1. Pre-market trading is showing some big moves that could set the tone for the day. Top KingWin took a serious hit, dropping 11.11% as investors seem to be losing confidence over some financial concerns.

On the flip side, NeoGenomics and Affirm Holdings are both moving higher, which shows it’s not all doom and gloom out there.

Affirm has been on a roll lately after their strong earnings, so that momentum seems to be carrying over into pre-market.

These early moves give you a pretty good sense of what traders are thinking before the real action starts.

2. The world economy is still on pretty unstable ground, and a lot of that has to do with what’s going on in Asia right now. Most Asian markets ended the day in the red because US tariffs are really hurting manufacturing activity throughout the region.

When Asian factories start slowing down, it doesn’t take long for that to mess with supply chains and trade patterns everywhere else.

3. The technical picture on Wall Street is sending some mixed signals right now. Both the S&P 500 and Nasdaq are bumping up against some important support levels after all the recent choppiness, which has the chart watchers paying close attention.

Technical analysts are basically saying the moving averages and RSI readings suggest we could see a bounce, but it’s not guaranteed to stick.

4. Tech stocks are still the main event, but it’s getting pretty complicated in that space.

The semiconductor and AI sectors are going through some major shifts right now, with investors trying to figure out who the real winners and losers are going to be.

There are still bright spots, especially among companies that are actually making money from AI rather than just talking about it.

5. The geopolitical situation isn’t making things any easier for investors right now. Asia-Pacific tensions and all those ongoing trade talks are keeping everyone on edge, and it’s definitely showing up in market sentiment.

Political drama in China, Indonesia, and Thailand is creating uncertainty that’s rippling beyond just those local markets.

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British bank stocks recovered modestly on Monday after sharp losses last week, with analysts arguing that fears of new taxes on the sector may be overstated.

NatWest (NWG) shares, which fell 4.9% on Friday, and Lloyds (LLOY), which dropped 3.4%, were both trading in the green at market open on Monday.

The declines followed calls from a think-tank for an additional levy on banks and a Financial Times report suggesting industry leaders were concerned the government could raise revenue by targeting lenders.

However, several analysts believe the scale of the selloff was excessive given the uncertainty surrounding any potential tax measures.

Analysts dismiss scale of selloff

Jonathan Pierce, analyst at Jefferies, said in a Reuters report that the recent market reaction did not match the likelihood of the proposal being enacted.

“If it were genuine flag-flying by HMT (the British Treasury), one might expect a modest selloff. But a 5% hit to domestic banks on the back of yet another think tank highlighting potential reserve-remuneration-related benefits is not justified in our view,” Pierce noted.

He added that while an extra bank tax might be introduced, it was unlikely to take the form currently suggested.

The think-tank proposal targeted the interest banks earn on the hundreds of billions of pounds they hold in reserves at the Bank of England, a legacy of the central bank’s quantitative easing programme.

These balances are now being gradually reduced.

Likely alternatives to a reserve tax

Bank of America (BofA) analysts also downplayed the likelihood of the suggested reserve-based tax.

Instead, they argued that if the government did seek additional revenue from the sector, the most probable route would be through the Banking Surcharge.

The surcharge was cut from 8% to 3% in 2023, coinciding with the increase in UK Corporation Tax from 19% to 25%.

Raising this surcharge, BofA suggested, would provide a more straightforward mechanism for boosting tax contributions from lenders.

Such a move would have uneven effects across the sector. According to BofA, Lloyds and NatWest would be more exposed due to their domestic focus, facing an estimated 3% reduction in profits by 2026.

By contrast, Barclays, with its broader international operations, would see a smaller impact of around 1.5%.

Economic growth considerations

Beyond the immediate effect on bank earnings, some market observers highlighted the potential economic consequences of increasing the tax burden on financial institutions.

Rory McPherson, Chief Investment Officer at Wren Sterling, said it was important for the government to take account of the wider business environment before introducing new measures.

“We would hope the government has looked at the impact of implicit taxes on business, like the rise in interest rates and national insurance contributions and the impact of those on UK economic growth,” McPherson said.

With UK banks still adjusting to a higher interest rate environment and a weaker economic outlook, additional taxes could weigh further on profitability and lending capacity.

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Wall Street ended the week on a cautious note as markets dipped, tech stocks faltered, and investors braced for fresh inflation data. 

Beyond the markets, political and corporate drama dominated headlines from Trump’s unprecedented attempt to oust a Fed governor and a court ruling against his tariffs, to Nvidia’s blockbuster earnings and Elon Musk’s latest clash with regulators.

A glance at the biggest stories that captured attention this week. 

Tech drags as investors play safe

Wall Street had a crazy week, with mixed signals making things a bit uncertain. The main indexes were all down: the Dow Jones fell 92 points, the S&P 500 slipped 0.6%, and the Nasdaq dropped 1.2%. 

The tech sector took the biggest hit, with big names like Nvidia, Super Micro Computer, and Broadcom pulling things down as investors got a bit defensive before new inflation numbers came out.

Instead of big tech, investors seemed to prefer safer bets. 

Consumer staples and value stocks did better, a clear sign of the cautious mood as the market heads into September, which is often a tough month.

There were some interesting individual movers, too. Keurig Dr Pepper took a big hit after announcing an acquisition, while Deckers Outdoor had a good week thanks to some new product launches. 

Regional banks and chipmakers had a mixed performance, with investors trying to balance the good news from Fed Chair Jerome Powell’s dovish comments against. 

Trump vs. the Fed

The Fed vs White House showdown climbed to a different level this week as US President Donald Trump ordered the removal of Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud as the reason for her dismissal. 

This marked the first time a sitting president has attempted to remove a Federal Reserve governor in the institution’s 112-year history. 

Trump claimed he had constitutional authority to act, accusing Cook of making misleading statements regarding mortgage agreements. 

Cook denied the allegations and pushed back against Trump. She filed a lawsuit seeking to block her termination while claiming that the President doesn’t have the legal authority to remove her.

The lawsuit argues her firing violates federal law, which requires “cause” for removal, a standard generally interpreted as serious misconduct. 

The case threatens to challenge longstanding Federal Reserve independence and could reach the Supreme Court, potentially revisiting a historic 1935 decision protecting independent agencies. 

Trump’s move is seen as an attempt to increase control over the central bank, intensifying political tensions. 

The White House defended the firing, while economists and officials caution that such interference risks economic stability. Cook remains on the board pending court proceedings. Read full report here

AI demand powers Nvidia’s record quarter

Nvidia had a fantastic second quarter, blowing past expectations with $46.7 billion in revenue. That’s a huge jump, up 56% from this time last year and 6% from the last quarter.

The company’s earnings per share (EPS) were also strong at $1.04, beating the $1.01 forecast. 

The real story here is the data center business, which saw a massive 56% growth. This is Nvidia’s bread and butter right now, thanks to the soaring demand for AI infrastructure.

The company’s gross margin held strong at 72.4%. CEO Jensen Huang pointed to the rapid adoption of their new Blackwell AI platform as a key driver behind the AI boom.

Despite all the good news, some analysts were expecting even more from the data center revenue, which caused a slight dip in the stock after hours.

Looking ahead, Nvidia is optimistic, forecasting about $54 billion in revenue for the third quarter. 

However, this doesn’t include potential shipments of their H20 chips to China, a situation complicated by ongoing regulations. Read full report here

SEC accuses Musk of late Twitter disclosure

In another Musk vs US administration saga, Elon Musk is pushing back against the SEC. 

On Thursday, his legal team filed a motion to dismiss a lawsuit from the US Securities and Exchange Commission, which claims he was late in reporting his stake in Twitter back in 2022.

The SEC alleges Musk waited 11 extra days to reveal his initial 5% ownership, allowing him to snap up more shares at a lower price and pocket $150 million.

Musk’s lawyers argue the delay was simply a mistake and was fixed quickly. 

They insist there was no intent to mislead anyone or harm investors. His filing goes even further, accusing the SEC of overstepping its authority and unfairly targeting him, calling the lawsuit a waste of the court’s time. 

Ultimately, Musk is asking the court to throw the case out entirely.

Court curbs Trump’s tariff powers

In the latest blow to President Donald Trump, a US appeals court on Friday ruled that most of his tariffs are illegal. 

In a 7-4 decision, the court said Trump overstepped his authority under a law meant for emergency economic powers, arguing that the power to impose tariffs belongs to Congress, not the President.

The ruling strikes down the “reciprocal” tariffs he had placed on many countries, including a 10% blanket tariff on nearly all U.S. trading partners.

While the ruling is a significant setback, the tariffs won’t disappear immediately. 

The court has given the Trump administration until October 14 to appeal to the Supreme Court. 

Trump has already vowed to fight the decision and says he expects the Supreme Court to rule in his favor. Read full report here

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