Market Report.
📈 Wall Street hits new highs and the good news keeps coming. Seems strange, doesn’t it?
🏛️ The White House has indicated that President Trump could extend the looming deadlines for reimposing steep tariffs on imports from most of the world’s countries. White House Press Secretary Karoline Leavitt stated that the July 8 and 9 deadlines “are not critical” and could potentially be extended, though the decision is up to the president.
🤝 Leavitt said that if any countries refuse to make a trade deal with the U.S. by the deadlines, “The president can simply provide these countries with a deal” and set a reciprocal tariff rate he deems advantageous for the U.S. White House Council of Economic Advisers chairman Stephen Miran indicated he expects the deadlines will be extended for countries engaged in “good faith” trade talks with the U.S.
🇺🇸 The administration has only struck trade agreements with China and the UK so far, despite suggesting it could reach 90 trade deals in 90 days when Trump temporarily pared back his reciprocal tariffs.
📦 The United States has reached an agreement with China on how to expedite rare earth shipments to the U.S., according to a White House official. As part of its retaliation against new U.S. tariffs, China had suspended exports of critical minerals and magnets, disrupting supply chains globally. Commerce Secretary Howard Lutnick was quoted as saying “They’re going to deliver rare earths to us” and once they do, “we’ll take down our countermeasures.” The agreement shows potential progress following months of trade uncertainty.
🔍 China has been vetting buyers carefully to ensure rare earth materials are not diverted to U.S. military uses, which has slowed down the licensing process.
💰 U.S. Treasury Secretary Scott Bessent has asked Republicans in Congress to remove a “retaliatory tax” proposal that targets foreign investors from their sweeping budget legislation. The retaliatory tax proposal, known as “Section 899”, would give President Trump new authority to impose taxes up to 20% on investors from countries that are found to impose “unfair” taxes on U.S. companies. This has stirred alarm on Wall Street.
📊 Investors believe that President Trump could appoint a new Fed chair by September or October, which would give the potential replacement a “shadow” role for the last six meetings of Powell’s tenure. However, investors warned that the Fed chair is only one of 12 voting members, and the new chair would still need to build consensus with the broader policy committee, making excessive reliance on the chair’s ability to deliver lower rates risky.
👔 Among the candidates is Treasury Secretary Scott Bessent, who is closely aligned with Trump, crypto-friendly, and a proponent of banking deregulation—in other words, a friend of Wall Street and ‘one of us.’
📉 The U.S. dollar is taking another beating as investors are unnerved by fresh signs of an erosion in the independence of the Federal Reserve. The dollar has fallen over 10% so far this year and is on track for its worst performance since 2003. Comments by a recently Trump-appointed Fed policymaker, Michelle Bowman, that the time to cut rates is getting nearer, have also weakened the dollar as rate-cut expectations rise.
🚗 Tesla CEO Elon Musk has fired Omead Afshar, the company’s vice president of manufacturing and operations, following declines in car sales in key markets this year. Afshar was the subject of an internal investigation at Tesla in 2022 regarding his orders of hard-to-get construction materials for a secretive project for Musk. He later worked for SpaceX but returned to Tesla and was promoted. Afshar’s termination follows the recent resignation of Milan Kovac, the former head of Tesla’s Optimus humanoid robotics program. Tesla’s stock price is down 19% this year, underperforming the Nasdaq, as the company faces declining car sales in Europe and brand/reputational damage linked to Musk’s political activities and rhetoric.
🚙 Shares of China’s Xiaomi surged over 5% to hit a record high on Friday, a day after the company unveiled its new electric car, the YU7 SUV. The car received over 200,000 orders within just 3 minutes of its launch, indicating strong customer demand. Xiaomi claims the YU7 beats Tesla’s Model Y on a range of metrics, except for driver assist features. The YU7 comes with advanced driver-assist software powered by Nvidia’s Thor chip. The early launch of the YU7 comes amid an intensifying electric car price war in China, as Xiaomi aims to undercut Tesla’s pricing and capitalize on the growing EV market.
🔥 Meanwhile, not everything is rosy with EVs. The Morning Midas, carrying more than 3,000 new cars from China to Mexico, sank in the Pacific after a fire caused by electric vehicle batteries. The accident occurred 770 km off Alaska, and the US Coast Guard is monitoring the area for possible spills.
Geopolitics:
💵 NATO allies have agreed to a new defense spending target of 5% of GDP, up from the previous 2% target. Germany would need significantly higher defense spending, potentially tens of billions of euros more per year. Financing this additional defense costs would likely require loans, potentially leading to distribution conflicts in Germany’s annual budget and potentially requiring spending cuts or tax increases. Experts are divided on the feasibility of the 5% target, with some suggesting it could be implemented in the short term but challenging in the long term.
📜 The President of the European Commission, Ursula von der Leyen, is facing a motion of censure brought by pro-sovereignty MEPs following the scandal over hidden messages with the CEO of Pfizer during the COVID-19 pandemic. Romanian MEP Gheorghe Piperea (ECR) has announced that he will table the motion on Thursday, claiming that it has already passed the minimum threshold of 72 signatures required. The trigger was the ruling by the General Court of the European Union that the Commission violated the principles of good administration by refusing to publish the messages between Von der Leyen and Pfizer’s Albert Bourla. Piperea accuses the Commission of ‘institutional abuse, democratic contempt and erosion of public trust’, and also includes in the motion a complaint of ‘abuse of procedure’ in issuing more debt to finance European rearmament without parliamentary control.
🎥 A video has gone viral showing Giorgia Meloni’s striking gestures during her dialogue with the press at the NATO summit. I recommend you look it up and you will understand why it went viral.
🛑 The Middle East conflict is reportedly ending, but Western arms shipments to Israel are increasing according to Russian media reports. An Israeli 747 cargo flight stopped in Cologne for 2 hours, loading 128 tons of military equipment, then flew to Nevatim Air Base, which has become the central hub for offloading and distributing new weapons.
🤝 The WSJ said Trump was a businessman negotiating peace. Well, according to CNN, Trump is considering offering Iran $30 billion and other benefits in exchange for renouncing its nuclear bomb programme. The proposal includes financing a civilian nuclear programme, easing sanctions and releasing billions in restricted Iranian funds, with a view to reducing tensions.
Market View:
📊 The Mini S&P 500 futures have reached all-time highs, currently trading above 6,200 points. The Nasdaq 100 futures are following suit, surpassing 22,700 points at this moment. Wall Street is exhibiting undeniable bullish optimism. We have explained the fundamental reasons in the News section.
💵 Meanwhile, the dollar continues to decline amid fears of a potential replacement of Powell by a Fed chair more inclined to print money and cut interest rates, which could, in itself, pressure Powell to make cuts. We have provided more details in the News section. The DXY dollar index is currently falling below 97.30 points, and all signs suggest it is trending towards the 95-point range. This is causing pairs like EUR/USD to surge, approaching even 1.1750 in recent hours before retreating to the current 1.17.
📈 In Europe, markets are advancing positively, albeit with greater concerns. Eurostoxx 50 futures are hovering around 5,300 points but remain below the levels achieved on Tuesday. The DAX 40 futures have managed to surpass last Tuesday’s highs, approaching 23,950 points, but are still below the levels reached during the first week of June when it hit all-time highs.
🛢️ Crude oil remains stagnant due to the directive not to raise prices, with Brent crude trading around $68 for the week so far.
📉 The apparent reduction in geopolitical risks has dragged gold futures down to the $3,300 per ounce mark.
🚀 General optimism has also propelled Bitcoin above $106,000, having surpassed $108,000 during yesterday’s session before retreating to the current $107,350.
