Stocks rise as traders weigh US inflation, Trump tariffs

Stocks climbed on Friday as investors digested a new tariff blitz by US President Donald Trump and data showing a key US inflation metric rose in line with expectations.

Wall Street opened higher after slumping for three straight sessions over concerns that the US Federal Reserve might reconsider more interest-rate cuts.

Official data showed that the Fed’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, reached 2.7 percent in August, up from 2.6 percent in July.

The figure is above the central bank’s two-percent inflation target.

But it was in line with analyst forecasts, giving investors “some relief ... that the Fed will remain on track to cut rates two more times this year”, said Bret Kenwell, US investment analyst at eToro trading platform.

The Fed must weigh between fighting inflation and propping up a weakening US jobs market, Kenwell said. “The Fed’s two percent inflation target seems to be a low priority right now,” he said.

Instead, he added, it is “trying to restore balance between the weakening labour market and rising inflation, hoping to find a happy medium on both sides of its dual mandate”.

Official data Thursday showing faster-than-expected US economic growth in the second quarter had slightly dampened expectations of a Fed cut next month, which would follow on from its September reduction, the first this year.

Investors were also digesting Trump’s latest tariffs move.

The US president announced Thursday steep new tariffs on pharmaceutical products, big-rig trucks, home renovation fixtures and furniture.

He said a 100-percent tariff would be imposed on “any branded or patented” pharmaceutical product from October 1, unless a company is building a manufacturing plant in the United States.

In reaction, share prices of Asian pharma firms largely fared worse compared with Western peers.

Shanghai Fosun shed around six percent and South Korea’s Daewoong was off more than three percent. Japan’s Daiichi Sankyo and Astellas Pharma were also well in the red.

Sydney-listed CSL shed nearly two percent, while Sun Pharmaceutical Industries was a major loser in India.

Key industry player India “could be spared” from the levies for now, however, according to MUFG bank analyst Michael Wan.

“It is still unclear how branded or patented pharmaceutical products will be defined, but our working assumption is that this will not incorporate generic drugs and pharmaceuticals shipped by the likes of India to the US,” he wrote in a client note.

Shares prices of British pharma giants GSK and AstraZeneca were both rising in London afternoon deals, with both companies having recently announced major investment plans in the United States.

US rivals Pfizer and Merck and France’s Sanofi were also in the green.

The European Union was quick to point out that its trade deal with Trump had capped tariffs on EU pharmaceutical goods at 15 percent.

Shares of some big drugmakers jumped ahead of broader indexes Friday as Wall Street started sorting out President Donald Trump’s latest tariff announcement.

The president said late Thursday that he would place 100% import taxes on pharmaceuticals starting Oct. 1, but those tariffs would not apply to companies building U.S. manufacturing plants. He defined that as either “breaking ground” or being “under construction.”

Several big drugmakers like Merck & Co. Inc., Eli Lilly and Co. and Johnson & Johnson have announced U.S. expansion plans.

Trump has talked about pharmaceutical tariffs for months, but he has said he would delay them for a year or a year and a half to give companies time to stockpile medicines here and shift manufacturing.

Analysts have said companies started stockpiling medicines in the U.S. earlier this year.

Jefferies analyst Akash Tewari said in a research note that Thursday’s announcement shouldn’t have a material impact on the big drugmakers, given their construction plans.

Brand-name drug companies also have fat profit margins that can provide some flexibility to make investments and absorb tariff costs. Manufacturers of cheaper generic drugs - which account for most U.S. prescriptions - do not. Researchers and patient advocates have worried about the impact of any tariffs on those companies.

David Risinger of Leerink Partners said smaller drugmakers also may be vulnerable to the new taxes, although he noted that it was hard to predict which ones.

Agencies