Market Report.
📉 The first macroeconomic data of the week show industrial production weakening in Japan, with growth of 0.5% in May compared to the 3.4% expected, although improving from the previous period’s -1.1% contraction.
📊 China’s manufacturing PMIs continue to indicate contraction, but with some improvement, reaching 49.7 in June compared to 49.5 in May.
🇬🇧 In the United Kingdom, GDP growth for the first quarter stood at 0.7%, with an annualised growth projection of 1.3%, both in line with expectations. Lastly, retail sales in Germany contracted by -1.6%, compared to the expected 0.5% growth.
📅 Given the holiday in the US on Friday, NFP and employment data will be released on Thursday. It is expected to show a moderate cooling in job growth compared to previous months. The labor market is showing signs of gradual cooling but remains resilient, consistent with the Federal Reserve’s recent cautious stance on interest rates.
⚠️ The Bank for International Settlements (BIS), the central bank umbrella body, warned that trade tensions and fractious geopolitics risk exposing deep fault lines in the global financial system. Outgoing BIS head Agustín Carstens said the U.S.-driven trade war and other policy shifts were fraying the long-established economic order, and the global economy was entering a “new era of heightened uncertainty and unpredictability.”
💵 The sharp fall in the U.S. dollar, down 10% since the start of the year, appears to be driven by “hedging” by non-U.S. investors holding Treasuries and other U.S. assets, though the BIS sees no evidence yet of a “great rotation” away from U.S. assets.
📉 The dollar has lost more value at this point in the year than it has since the United States switched to a free-floating exchange rate in 1973, according to Capital Economics analyst James Reilly.
🇺🇸 President Donald Trump said he doesn’t think he’ll need to extend the July 9 trade deadline he has imposed on countries to secure deals with the U.S. to avoid higher tariffs, though he added he could extend it if needed. Treasury Secretary Scott Bessent cast doubt on the timeline, saying the administration is in talks with many countries but may not be able to finalize all the important deals by the July 9 deadline.
🤝 Trump has suggested India is one nation that could be close to finalizing a deal, as a team of Indian trade officials held meetings in Washington last week.
⚖️ The outcome of the US-European negotiations is anticipated to be imbalanced, with some US duties—such as a baseline 10% tariff on EU exports—remaining. In such a situation, some European leaders are advocating for reprisal. As negotiations with the US continue this week, EU envoys will progress potential responses in the event that talks fail and discuss the current status of the negotiations.
⏳ President Trump has pushed for speed, demanding Congress deliver the bill by July 4, but meeting this deadline will be challenging as Senate Majority Leader John Thune, tries to navigate through opposition from about 8 Republican senators.
💸 The bill includes $4.5 trillion in tax cuts but also $1.2 trillion in spending cuts, which has created problems with moderate Republicans like Tillis, Susan Collins, and Lisa Murkowski, who are pushing to scale back Medicaid cuts and slow down renewable energy credit phaseouts.
🌏 China’s Premier Li stated that China is positioning itself to “cross cycles, move forward steadily, and continue to inject more stability and certainty into the world economy” through aggressive pro-growth policies. The US is putting pressure on China, Europe, and pretty much every other country to adopt more aggressive pro-growth policies as it moves across the global economy.
🌐 Trump is “returning the world to its historical state, one governed by the law of the jungle,” where nations will invest massively in critical infrastructure, including monetary infrastructure. The rise in gold prices is an early indicator of this process. Crypto infrastructure, built to operate without a central authority, is positioned to be the future of monetary infrastructure in this new “law of the jungle” world order.
🪙 Tether’s CEO Paolo Ardoino views the proposed “Genius Act” in the US as a positive step, as Tether created the stablecoin industry in 2014 and now has 450 million global customers and made $13.7 billion in profit last year. The GENIUS Act—officially titled the Guiding and Establishing National Innovation for US Stablecoins Act—is a major piece of U.S. legislation focused on creating the first federal regulatory framework for payment stablecoins.
🤖 Meta (Facebook) is planning to spend $64-$72 billion this year on AI initiatives, in a race with OpenAI, which is allegedly offering $100 million signing bonuses to top talent. This massive capital deployment is unique to the US.
Geopolitics:
⚛️ Iran has launched major new construction at its Fordow nuclear facility, just weeks after the U.S. claimed to have crippled Iran’s nuclear program through airstrikes. Satellite imagery confirms the large-scale construction at Fordow, contradicting the U.S. claims of significant damage. A US official admitted the Pentagon chose not to use bunker-busting bombs on Isfahan due to the site’s depth, making real damage unlikely based on a CNN report.
🛢️ Iran’s oil exports to China hit a record high of 1.83 million barrels per day in June, the highest on record. This high level of oil exports to China is occurring despite years of U.S.-led sanctions aimed at isolating Iran’s energy sector. The total trade volume between the BRICS countries (Brazil, Russia, India, China, and South Africa) has now surpassed $1 trillion, reflecting a deepening economic realignment away from the Western-dominated global order.
🇮🇱 According to the Israeli media Haaretz, President Trump threatened to withhold U.S. aid to Israel unless Prime Minister Netanyahu’s corruption trial was postponed. Israel immediately responded by postponing the legal proceedings against Netanyahu shortly after Trump’s threat.
Market View:
📈 We begin the week with United States futures at historic highs. The Mini S&P 500 futures are trading around the 6,250-point mark. The Nasdaq 100 futures are trading above 22,800 points, surging towards the 23,000-point level, all while awaiting Thursday’s U.S. employment data.
📉 As we predicted last week, the dollar continues its free fall. At the moment, it appears to be losing the 97-point level on its DXY index—levels not seen since February 2022.
💶 This has resulted in currency pairs such as EUR/USD continuing their upward trend, now approaching the 1.1750 zone.
📊 In Europe, equities are also showing signs of a bullish recovery, though not as optimistic as in the United States. DAX 40 futures have surpassed the 24,250-point mark but remain below their historic highs reached at the beginning of June. Similarly, Eurostoxx 50 futures have improved, climbing above 5,350 points, yet still falling short of their record highs.
🛢️ Once again, the crude oil market remains near $68 per barrel for Brent, exhibiting a clearly static or potentially manipulated behaviour.
📉 The reduction in risk factors has caused gold to continue its decline, with futures starting the week at lows below $3,300, although they have recovered slightly in recent hours.
💰 Bitcoin remains strong above $106,000, having risen overnight to nearly $108,500 before pulling back to $107,600 at the time of writing.
