Market Report.
📈 The U.S. economy continues to demonstrate resilience despite global trade tensions and inflation anxieties, with June retail sales exceeding expectations and initial unemployment claims falling short of projections. Combined with encouraging early results from corporate earnings reports, this has fueled a surge in equity markets, propelling both the S&P 500 and Nasdaq composite to new all-time benchmarks.
⚠️ But 1 August is just around the corner, and tariffs could hit the global economy hard soon.
🌞 The Trump administration is increasing scrutiny of solar and wind projects that require federal permitting, with Interior Secretary Doug Burgum now having the final decision on whether they proceed on U.S.-owned lands. The Interior Department says it is “levelling the playing field” for coal and natural gas “after years of assault” by the Biden administration. This is the latest blow delivered to the renewable energy industry by the Trump administration and Republicans in Congress, including the termination of key tax incentives that have supported the growth of wind and solar projects.
📉 The ECB is running out of monetary ammunition. As we have already indicated in previous reports, if it continues to cut rates, it runs the risk of pushing Europe into negative interest rates, below inflation.
📊 The European Central Bank may prolong the timing of its concluding interest-rate reduction for the present cycle into December without triggering investor speculation that monetary easing has concluded, according to a recent poll of economic analysts. Most experts still anticipate the central bank’s closing 0.25 percentage-point deposit rate adjustment (targeting 1.75%) to occur in September, followed by a temporary hold on tightening, though this remains subject to potential shifts in the coming weeks.
💶 On numerous occasions, we have warned in these reports that the euro is unjustifiably strong given the dire political and economic situation in the EU, with its two main engines, Germany and France, mired in serious problems.
💱 Well, it seems that the winds are beginning to change, and we are no longer the only ones to notice this: Some U.S. companies are buying euro put options to protect their revenues from Europe, as they fear the euro may have strengthened too far against the dollar. The options market is signaling less conviction in further dollar weakness, leading some companies to buy euro put options to hedge against euro weakness. There has been a shift in demand from euro call options to euro put options.
💵 However, doubts are also emerging about the future of the dollar: The Bank of England has asked some lenders to test their resilience to potential U.S. dollar shocks, reflecting concerns about the stability of the U.S. dollar and the reliability of the Federal Reserve’s support. This comes as President Trump’s policies, such as on free trade and defense, have eroded trust in the U.S. as a bedrock of financial stability, forcing policymakers to re-evaluate the assumption that the Fed will provide emergency dollar funding.
🇯🇵 Japan’s core inflation slowed in June but remained above the Bank of Japan’s 2% target for over 3 years, highlighting lingering price pressures. The data underscores the challenge the BOJ faces in balancing inflationary pressure and risks to the fragile economy from U.S. tariffs, as it considers when to resume interest rate hikes. The core CPI rose 3.3% in June, down from 3.7% in May, but still above the 2% target for the 39th straight month.
🤝 Prime Minister Shigeru Ishiba is arranging to meet with U.S. Treasury Secretary Scott Bessent this Friday, as part of efforts to secure a trade agreement.
🇩🇪 Germany rejects the budget for the modernisation of Europe that we discussed in our previous report: Germany rapidly dismissed the €2 trillion funding proposal announced on Wednesday, arguing that the amount is excessively high amid a global focus on reducing public spending and stabilizing budgets. During his London address yesterday, Chancellor Friedrich Merz emphasized that the EU should prioritize optimizing its current financial resources instead of proposing new levies, opposing a suggested corporate tax hike. This stance has sparked potential tensions with European Commission President and fellow member of the German Christian Democratic Union, Ursula von der Leyen.
🏦 A few days ago, we discussed the European Commission’s interference in the Italian banking sector, attempting to block Unicredit’s acquisition of BPM. Today, the news is about a very similar case, but this time affecting the Spanish banking sector, with the European Commission putting pressure on BBVA over its acquisition of Banco Sabadell.
💼 The Commission is advocating for Spanish legislation to limit government control over banking transactions to serious societal threats, arguing that broad discretionary powers are unjustified restrictions on establishment and capital movement. In other words, they want to reduce the independence and sovereignty of the Spanish financial sector as a necessary step towards a centralised European financial sector.
📺 Netflix surpassed expectations in its quarterly earnings report, with revenue increasing by 16% in the second quarter of 2025. The company revised its full-year revenue projection upward, forecasting $44.8 billion to $45.2 billion (previously $43.5 billion to $44.5 billion), citing factors such as the weakening U.S. dollar, sustained subscriber expansion growth, and rising advertising revenue. This adjustment was outlined in a corporate statement.
Geopolitics:
🌍 Yesterday we indicated that Israel’s attacks on new jihadist Syrian forces, whom Israel had supported in defeating Al-Ashad, could be a strategy to expand its territory. It seems we were not so far off the mark. Netyanahu announced that Israel is going to occupy Southern Syria. He announced demilitarization and occupation of the region to south of Damascus, from the Golan Heights and to the Druze Mountain area.
⛪ Yesterday, Israel bombed the only Catholic church in the Gaza Strip. Four people were killed and several wounded. Argentine priest Gabriel Romanelli was wounded in the attack. IDF authorities said it was ‘by mistake.’ Pope Leo XIV calls for an immediate ceasefire in Gaza after the attack.
🚫 Slovenia declares Israeli ministers Itamar Ben-Gvir and Bezalel Smotrich persona non grata and imposes sanctions on them. Slovenia is the first European Union country to ban the entry of Israeli officials.
Market view:
📉 The markets continue to show optimism despite the proximity of 1 August, the date set for the introduction of tariffs. The Mini S&P 500 futures have broken record highs, reaching 6,355 points. Nasdaq futures have surpassed 23,300 points. The strong earnings reported by Netflix appear to have given a boost to the American market.
💹 The dollar remained relatively strong yesterday. The DXY index approached 99 points during the day and is currently holding above 98.50. The EUR/USD pair is recovering after falling towards the 1.1550 zone during yesterday’s session; it is now trading at 1.1620.
🇪🇺 European markets are also optimistic, with a recovery observed yesterday. DAX 40 futures are at 24,565 points, close to historical highs. Eurostoxx 50 futures have climbed above 5,400 points, attempting to recover the upward momentum witnessed at the start of the month when they approached 5,500 points.
🛢️ The crude oil market seems to be taking on a bullish tone, with Brent crude surpassing $70 per barrel, moving away from its $68 equilibrium price.
🏅 Gold futures fell yesterday to $3,315 per ounce but have since rebounded to the current $3,345 per ounce.
💻 Bitcoin is regaining strength and continues to climb, currently trading above $120,300.
