Market Report.
📉 The global economy is navigating a delicate balance between tariff-driven inflationary pressures and cooling consumer demand, with central banks closely monitoring the situation.
🤝 Former President Trump has continued to feud with Federal Reserve Chair Jerome Powell, saying it would be “a great thing” if Powell stepped down – even though Trump himself nominated Powell to the role 8 years ago. White House economic adviser Kevin Hassett has suggested Trump may have grounds to fire Powell due to cost overruns on renovations at the Fed’s Washington headquarters.
💼 Multiple sources have reported that Federal Reserve Chair Jerome Powell is considering resigning amid escalating political and public pressure. The speculation was fueled by statements from William J. Pulte, Chairman of Fannie Mae and Freddie Mac, who publicly expressed support for Powell’s resignation and cited “reports” of Powell contemplating stepping down.
📉 Trump-appointed Fed chief would likely try to aggressively cut interest rates, though it’s uncertain whether the rest of the Federal Open Market Committee would go along with such a policy.
🛒 Retail sales figures on Thursday are expected to show only a modest increase in June after two months of declines, reflecting more cautious consumer spending amid a cooling job market. Federal Reserve officials have held off on lowering interest rates, concerned that higher tariffs will ultimately cause inflation to accelerate. They next meet on July 29-30.
💬 Donald Trump threatened to impose a 30% tax on the EU the next month if new arrangements could not be achieved.
🇩🇪 German Finance Minister Lars Klingbeil said the European Union must take firm action against the United States if tariff negotiations fail to ease the escalating global trade conflict. Klingbeil stated that if a fair negotiated solution is not reached, the EU must take decisive countermeasures to protect jobs and companies in Europe. Higher U.S. tariffs pose a particular challenge for Germany, as the United States is its largest export market, with Germany running a trade surplus of nearly 70 billion euros with the U.S.
🇪🇺 European Commission President Ursula von der Leyen said the EU favors a negotiated solution and will extend the suspension of its countermeasures to U.S. tariffs until early August. The EU is seeking to strengthen commercial ties with India and other Asia-Pacific nations as it prepares for US tariffs.
📦 Tariff threats against China improve their numbers by sacrificing future demand, increasing orders for their current products before new tariffs come into effect.
🇲🇽 Mexico will also be subject to the 30% sanctions imposed by the United States. This can be considered crazy and unfair to the Mexican economy, which is mainly focused on the consumption of American products, accounting for more than 40% of its trade balance.
🚢 China’s exports regained some momentum in June, with outbound shipments rising 5.8% year-on-year, beating forecasts and May’s growth. Imports also rebounded, increasing 1.1% after declining 3.4% in May, as firms rushed to capitalize on a fragile tariff truce between China and the U.S. ahead of a looming August deadline. Freight rates for China-bound shipments to the U.S. have started to decline.
⚠️ China could be indirectly hurt by U.S. pressure on third countries used heavily for transhipments of Chinese goods, such as the 40% tariff on U.S.-bound transhipments through Vietnam. The U.S. has also threatened a 10% charge on imports from BRICS countries, which could further impact China, and tensions with the European Union have intensified as well. China faces an August 12 deadline to reach a durable trade deal with the White House.
🌍 Geopolitics:
For the second time this year, the U.S. Treasury Secretary will skip the G20 finance ministers meeting in South Africa, continuing a boycott by top U.S. officials over the country’s G20 presidency.
🇩🇪 Germany is seeking ways to persuade and implore the US not to impose tariffs on the EU, where Germany is the main exporter. German Defence Minister Boris Pistorius will be in the US today to meet with his counterpart Pete Hegseth, as Germany hopes to secure Patriot air defence systems for Ukraine. In other words, Trump will maintain aid to Ukraine financed by European spending. Is this an attempt to avoid ‘Trump’s wrath’?
🪖 US Senator Lindsey Graham announced he expects record deliveries of weapons to Ukraine. New sanctions against Russia. He claims that Putin has made a mistake by not taking advantage of the opportunity to negotiate. He has also threatened those who support Russia, saying that the days when China bought oil from Russia without consequences are over. This is the same person who said that the money spent on the Ukraine war was fine if, with it, Russians had died. Or that the Ukraine war would continue “until the last Ukrainian.”
🌏 The Pentagon is encouraging Japan and Australia to clearly define the roles they would assume in the event of a conflict between the U.S. and China over Taiwan, according to a report by The Financial Times.
📊 Market View:
While markets seem to ignore Trump’s threats of new tariffs, Bitcoin soars and reaches new records. This is interesting, as it could be anticipating the next move in equities.
📈 S&P 500 futures opened below Friday’s closing levels but remain within last week’s support ranges and close to all-time highs, currently trading at 6,265 points. A similar movement is observed in Nasdaq 100 futures, which are currently trading at 22,840 points.
💵 The US Dollar Index (DXY) continues its ascent, reaching 98 points at present, a level lost at the end of June. This has caused bearish movements against the dollar to persist, with the EUR/USD pair currently trading at 1.1665. Even more striking is the movement of the GBP/USD pair, which has fallen to 1.3455, nearly 2.5% down since the start of the month.
📉 In Europe, markets opened lower, with DAX 40 futures falling to 24,110 points from the highs reached last week. Similarly, Eurostoxx 50 futures have lost support and are now trading at 5,350 points.
💡 It seems we were right when we suggested that Europe’s gains during the first week of July were overly optimistic and that any shift in the narrative of Trump’s trade war could derail that optimism.
🛢️ Crude oil continues its steady climb, with Brent crude currently priced at $70.55 per barrel.
🥇 Gold futures have also risen, approaching $3,400 per ounce overnight before retreating to their current level of $3,375 per ounce.
🚀 The movement of Bitcoin has been spectacular. After reaching a high of $118,000 on Friday, it consolidated sideways until yesterday, when it began another upward surge that has pushed it above $122,000. It is currently trading at $122,110.
