by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a recap of yesterday’s White House summit between President Trump, Ukrainian President Zelensky, and top European leaders. We next review several other international and US developments with the potential to affect the financial markets today, including US success in forcing the UK to backtrack on a proposed new regulation against Apple and a reiteration of the US sovereign debt rating by S&P.

United States-Ukraine-Europe: In yesterday’s summit between President Trump, Ukrainian President Zelensky, and top European leaders, it appears that Trump offered to have the US act as a backstop to any direct security guarantees given by the European countries to Ukraine to help stop Russia’s invasion of the country. Trump also said he is trying to arrange a bilateral summit between Zelensky and Russian President Putin, to be followed by a trilateral summit including Trump himself.

• It isn’t clear how the US’s backstop security guarantee might look. Nevertheless, as we noted in our Comment yesterday, the offer from Trump marks a notable evolution in his foreign-policy understanding and adjustment. Implementing such a backstop guarantee would tilt Trump’s foreign policy back toward the US’s traditional global engagement, despite his apparent shift toward Putin’s position in other war issues, such as the need for land swaps.
• According to the Financial Times last night, the Ukrainian government has offered to buy $100 billion of US weapons, financed by European countries, to help secure the US security guarantees. Kyiv has also offered to provide the US with $50 billion in military drones, leveraging the expertise it has gained in the new technology in the heat of war.
• Of course, Trump will likely face some pushback against the idea of any US security guarantees from the more isolationist wing of his political base.

United States-United Kingdom: Under pressure from the Trump administration, the UK has reportedly agreed to rescind its January directive requiring US tech giant Apple to provide a “back door” to encrypted customer data for investigatory purposes. The incident is the latest example of the administration’s strong focus on protecting US digital services firms from burdensome taxation and regulation in foreign markets — a stance that likely will help maintain the US firms’ global market dominance going forward.

United States-Brazil: Finance Minister Haddad yesterday said Washington and Brasilia have reached an impasse over the US’s new 50% tariff against Brazil, given that the constitution bars the government from trying to force the supreme court to end its prosecution of former right-wing President Bolsonaro, as the US demands. If Haddad’s statement is true, it would suggest that Brazil could continue to face debilitating US tariffs for an extended period, likely weighing on the economy and Brazilian asset prices.

Canada: The Canadian Union of Public Employees this morning said it has struck a tentative labor deal with Air Canada, ending the strike against the airline by 10,000 of its flight attendants. As we mentioned in our Comment yesterday, the strike had threatened to disrupt air travel and freight shipments across North America and beyond. Reports indicate the flight attendants’ main gripe against Air Canada was low wages, but it isn’t clear how their compensation would be adjusted under the new labor contract.

US Fiscal Policy: S&P Global Ratings today said it is keeping its US sovereign credit rating on hold at AA+/A-1+, midway between its second- and third-highest ratings, reflecting recent resilience of the US economy and “credible, effective” monetary policy. Importantly, S&P said it expects the US administration’s new tariff revenues to largely offset the tax cuts and spending hikes in this summer’s “big, beautiful” budget bill. The steady rating will help maintain demand for US Treasury obligations and help keep bond yields in their recent trading range.

US Labor Market: Fresh analysis shows new entrants to the labor force (mostly high school and college graduates with no prior work experience) now make up 13.4% of all unemployed workers, the highest rate since 1988. The jump in the new entrants’ share of jobless workers largely reflects the difficulty that Generation Z is having in finding work, as factors such as policy change and artificial intelligence make businesses reluctant to hire. High unemployment among the young is likely one reason for weak buying among lower-income consumers.

US Pharmaceutical Market: Danish drug giant Novo Nordisk yesterday said it will halve the US price of its Ozempic weight-loss drug for people who can’t buy it with health insurance. The firm also said it will offer the drug for home delivery. The moves likely aim to stave off tough US tariffs and/or other trade barriers that President Trump has threatened as punishment for high imported drug costs. In response, Novo Nordisk’s US-listed share price jumped 3.7% yesterday, ending at a three-week high of $53.75.

US Semiconductor Industry: Semiconductor giant Intel late yesterday said it will sell a 2% stake in the company to Japanese technology investor SoftBank for $2 billion. Intel will sell new common stock to SoftBank at $23.00 per share, a slight discount to yesterday’s closing price of $23.66. The deal represents a vote of confidence in Intel as the Trump administration also mulls having the federal government buy a 10% stake in the struggling firm to bolster its domestic chip manufacturing. Indeed, SoftBank and the administration may have coordinated on the deal.

• In response, Intel share prices are up some 5.1% so far today, despite the risk that government ownership could eventually lead to political interference in company management.
• More broadly, the positive market response to the SoftBank deal and the potential federal stake highlight how investors have become comfortable with increasingly aggressive industrial policies, from subsidies under President Biden to outright government ownership under President Trump. One key question is whether investors will eventually get skittish about such policies and sell the associated stocks.

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