Morning Note: Market News and updates from ASML and Richemont.

Market News

Donald Trump plans to impose tariffs on pharmaceuticals as early as the end of the month and said levies on semiconductors may come soon as well. Meanwhile, Indonesia will face a 19% tariff and buy 50 Boeing jets, while American exports won’t be taxed, Trump said.

Traders trimmed interest-rate cut bets by the Federal Reserve after US inflation data showed companies are beginning to pass some tariff-related costs to consumers. The yield on the 10-year Treasury trades at 4.48%, while the 30-year hovers around the 5%-mark. Gold nudged up to $3,340 an ounce.

US equities were mixed last night, with the broader S&P 500 trader 0.4% lower, while the tech-heavy Nasdaq rose by 0.2%. Nvidia hit a new high. A raft of banking results met with a mixed response – Citi (+4%, on a stock buyback plan), JPM (+1%), Wells Fargo (-5%). JPM said delinquency rates are in line with expectations, while Citi saw an improvement in net credit loss rates, both suggesting the consumer remains fine.

In Asia this morning, equities were little changed: Nikkei 225 (flat); Hang Seng (+0.2% to its highest close since February 2022); Shanghai Composite (-0.1%). Brent Crude trades at $69 a barrel

The FTSE 100 is currently unchanged at 8,941. The pound gained ($1.3410 and €1.1535), while the yield on 10-year Gilts ticked up to 4.63%, after UK inflation in June came in hotter than expected. Headline CPI was 3.6%, above the 3.4% forecast. This keeps some pressure on the Bank of England as it looks to continue dialling down interest rates.

Rachel Reeves pledged to reform post-crisis “ring-fencing rules” that separate retail and investment banking. The Chancellor also the cost of some new electric cars will soon be reduced by up to £3,750 under grants being introduced by the government to encourage drivers to move away from petrol and diesel vehicles.

Source: Bloomberg

Company News

ASML has released Q2 results which were better than market expectations. Although the long-term outlook for the business remains positive, in the near term the company warned tariff uncertainty was clouding the outlook and is unable to commit to growth in 2026. In response, the shares, which are listed in Amsterdam and on NASDAQ, are trading down 6% this morning.

ASML is a Dutch company that manufactures complex lithography systems critical to the production of semiconductors (or microchips). The systems allow light to be projected through patterns to make blueprints for manufacture of chips, without which semiconductor producers would not be able to develop the next generation of chips.

As the only global supplier of the latest generation of lithography machines, ASML is in a critical position in the production of new chips, which are key in all efficient electronic-based processes. Without ASML’s lithography, it would be near impossible to deliver increasing compute power on decreasing chip sizes at the pace required to meet ever expanding demand for connected devices. As a result, the company is well placed to benefit from structural disruptive trends such as AI, climate change, Internet of Things, and big data.

The company benefits from strong growth dynamics, while its near-monopolistic position drives high gross margins (50%+) and returns (20%+). The group aims to pay an annual dividend that will grow over time – the 2024 payout was increased by 5%. After paying dividends, ASML uses remaining free cash flow for share buybacks and is currently undertaking a programme of up to €12bn to be executed by the end of 2025.

The company provides chipmakers with everything they need – hardware, software and services – to mass produce patterns on silicon through lithography. Based on different market and lithography intensity scenarios, as presented during its Investor Day in November 2024, the company sees an opportunity to achieve 2030 annual revenue between €44bn and €60bn with a gross margin between 56% and 60%.

In Q2 2025, the company grew sales by 23% to €7.7bn, at the upper end of the company guidance of €7.2bn-€7.7bn and above the consensus expectation of €7.5bn. This was made up of New System sales of €5.6bn and Installed Base Management sales (i.e. net service and field option sales) of €2.1bn.

The group saw continued progress in litho intensity, particularly in DRAM, and the introduction of the TWINSCAN NXE:3800E reinforced that momentum. Meanwhile, EUV adoption advanced as planned, including High NA.

The number of new lithography systems and used lithography systems sold was 67 and 9, respectively. Net bookings were fairly flat at €5.5bn in the quarter, of which €2.3bn were extreme ultraviolet (EUV) lithography system.

The gross margin rose from 51.5% to 53.7%, above the top-end of the company’s guidance of 50%-53%, primarily driven by higher upgrade business and one-offs resulting in lower costs. Net income rose by 45% to €2.3bn, while EPS grew by 47% to €5.90, well above the market expectation of €5.20.

ASML has a strong balance sheet, with quarter-end cash and cash equivalents and short-term investments of €7.2bn. In the first quarter, the company purchased around €1.4bn worth of shares under the current 2022–2025 programme.

In the near term, sales in the current quarter are expected to be between €7.4bn and €7.9bn, with a gross margin between 50% and 52%. For the full year, the company now expects 2025 total net sales growth around 15%, which would only leave the result in the middle of the group guidance range of €30bn-€35bn. The gross margin target is now 52%, again in the middle of the 51%-53% previous guidance range.

Looking at 2026, the company says its AI customers’ fundamentals remain strong. However, management continue to see increasing uncertainty driven by macro-economic and geopolitical developments. Although the company is still prepared for growth in 2026, it cannot confirm it at this stage.

Source: Bloomberg

Richemont has this morning released an update on trading for the first quarter of its March 2026 financial year which highlighted a robust performance, particularly in the Jewellery division, against a volatile macroeconomic and geopolitical backdrop. In response, the shares have been marked up by 2% in early trading.

Richemont is a Switzerland-based luxury goods group which generates annual sales of around €21bn, split between retail, wholesale, and online distribution. The group owns a portfolio of leading international ‘Maisons’ which are recognised for their distinctive heritage, craftsmanship, and creativity. Jewellery Maisons include Buccellati, Cartier, and Van Cleef & Arpels. Specialist Watchmakers account for 16% of sales. Fashion & Accessories ‘Maisons’ (termed ‘Other’) include leather goods, clothing, and writing instruments, etc. This division now includes Watchfinder, a leading omni-channel platform for premium pre-owned timepieces. In April, the group completed the sale of its stake in YOOX Net-A-Porter (YNAP), the leading online luxury retailer.

The company’s products are discretionary purchases. Currency movements, and their impact on tourist flows, can also have an impact on sales at the regional level. As a result, sales which tend to be discretionary in nature were impacted by the pandemic and remain vulnerable to changes in the economic outlook.

In the three months to 30 June 2025, sales were up by 6% at constant exchange rates (CER) at €5.4bn, in line with the market forecast.

By distribution channel, Retail sales increased by 6% at CER, led by the Jewellery Maisons. Wholesale rose by 6%, as did Online Retail. By segment, the stand-out performer was Jewellery Maisons, up 11% at CER to €3.9bn. Specialist Watchmakers (-7%) saw a softer sequential rate of decline, while the Other division fell 1%.

The group achieved double-digit growth at CER in Europe (11%), the Americas (17%), and the Middle East & Africa (+17%). Sales were stable in Asia Pacific, while Japan (-15%) was down on higher comparatives versus the prior year.

As expected, today’s announcement was a sales update, with no disclosure on profitability. We note that the business generates a high gross margin, helpful to cushion against increased costs. The group did highlight a robust net cash position at 30 June of €7.4bn after accounting for the €426m cash outflow upon completion of the sale of YNAP.

Source: Bloomberg